Transport Secretary wins Supreme Court appeal over determinations on certificates of appropriate alternative development

The Supreme Court has allowed an appeal by the Secretary of State for Transport over the way in which compensation is calculated for land compulsory purchased for Birmingham’s Curzon Street HS2 station.

There had been the prospect of land owners receiving excessive compensation had an earlier Court of Appeal ruling stood, the Secretary of State claimed.

In Secretary of State for Transport v Curzon Park Ltd & Ors [2023] UKSC 30 Lord Kitchin, Lord Sales, Lord Hamblen, Lord Leggatt and Lady Rose were unanimous in their decision.

They explained that when land is compulsorily purchased, the landowner is entitled to compensation under the Land Compensation Act 1961 based on the open market value of land and enhancement of the land’s value resulting from actual or prospective planning permission for its development.

Account may be taken of planning permission in force, the prospect of it being granted and the 'appropriate alternative development' of the land.

‘Appropriate alternative development' arises if planning permission for the development could reasonably have been expected to be granted on or after the compulsory purchase valuation date.

In this situation, a landowner may apply to the local planning authority for a certificate of appropriate alternative development (CAAD).

The Supreme Court said the issue before it was whether, in determining a CAAD application the decision maker may take into account CAAD applications or decisions concerning other land.

Four neighbouring sites were compulsorily purchased for Curzon Street from land owners Curzon Park, Quintain City Park Gate Birmingham, The Eastside Partnership Nominee Company and Birmingham City University.

Each of them applied for and was granted a CAAD for their site and Birmingham City Council considered each application in isolation, rejecting the Secretary of State's contention that the cumulative impacts of all the applications for CAADs should be considered.

The Secretary of State appealed to the Upper Tribunal, which held that it was for the decision maker to give other CAAD applications or decisions relating to other land such evidential weight as they thought appropriate.

It rejected the Secretary of State's arguments that CAAD applications for other sites should be treated as notional applications for planning permission and that each of the respondents was liable to be over-compensated unless the cumulative effect of development was taken into account.

After losing at the Upper Tribunal, the Secretary of State went to the Court of Appeal, which held that the decision maker was not entitled to take into account other CAAD applications or decisions relating to the development of other land. The Secretary of State then appealed to the Supreme Court.

Justices said the declaration made by the Upper Tribunal should be restored.The Supreme Court said that, contrary to the Court of Appeal's judgment, the argument that other CAAD applications or decisions cannot be taken into account due to the ‘cancellation assumption' must be rejected.

It said compensation depended on circumstances known to the market at the relevant valuation date and “no restriction is placed on the evidence which can or cannot be used other than that it must be circumstances known to the market.

“If it is, then any relevant real world evidence may be relied upon, including for example a CAAD application or decision that may have been made in relation to land other than the land in issue prior to the valuation date.”

The Supreme Court said: “It would be odd to say that evidence which happens to exist in the real world which is capable of providing relevant assistance in answering the questions to be addressed in constructing the counterfactual cancelled scheme world under the Act should be ignored.

“It would require clear statutory language to produce such an effect, and there is none in the Act. So if CAAD applications or decisions are capable of being a source of relevant evidence, the Act does not preclude reference being made to them.”

Richard Flenley, Partner at law firm Charles Russell Speechlys, said: “This decision will come as a blow to the landowners and could have far reaching consequences not only in respect of HS2 but other compulsory acquisition schemes.

“The judgment will come as a relief to HS2 as compensation for landowners may well be reduced, with doubt now being cast as to what the outcome of the Upper Tribunal’s review of the alternative appropriate development applications will be. This comes at the same time that the government is seeking to review and potentially reform the current system for compensation for the compulsory acquisition of land.

“This case challenges the current approach that is taken when assessing development potential of land subject to compulsory acquisition, and we will now await to see if the decision will lead to any legislative change in this area of compensation and planning law.”“

Mark Smulian