Listing ACVs and compensation

Ruth Stockley analyses the first Upper Tribunal decision on compensation provisions relating to assets of community value.

The Upper Tribunal has refused a significant appeal against the First-tier Tribunal’s decision that the appellant was not entitled to compensation for losses due to the listing of a public house as an asset of community value (“ACV”) claimed against Harrogate Borough Council in the sum of £711,000. As the first occasion on which the compensation provisions have been considered by the Upper Tribunal, the decision in David Fielder v Harrogate Borough Council [2020] UKUT 288(AAC) makes some extremely noteworthy findings, particularly in relation to time limits for bringing such compensation claims which a potential claimant ignores at his peril.

Facts

The appellant owned a public house and applied for planning permission to demolish it and erect four dwellings, which was refused and his subsequent appeal dismissed on the primary ground of the resulting loss of a village pub. He then sought to exercise his permitted development rights to change the use of the pub (Class A4) to an estate agents (Class A2) with the objective of “de-risking” a future planning application for residential development which would no longer involve the loss of a village pub. However, due to changes in the planning legislation, the appellant lost his ability to rely upon such permitted development rights when the premises were listed as an ACV on 29 June 2017. The listing was upheld on review on 26 September 2017 and the appellant was notified of that decision on 5 October 2017. He duly made a claim on 19 January 2018 for compensation from the Council due to the listing, namely for loss of profits which would have flowed from obtaining planning permission for residential development or, in the alternative, for the diminution in value of the pub. The Council refused the claim, which refusal was upheld on review and was the subject of the appeal. It was directed that the issue as to “whether compensation can/should be paid (i.e. liability) and, if so, under what heads” be determined as a preliminary issue.

In refusing the appeal, Upper Tribunal Judge Poynter made four significant rulings.

Diminution in value is a valid head of compensation

Firstly, and noting the conflicting decisions on the point in the First-tier Tribunal, he found that, as a matter of principle, a consequential diminution in value of a listed property is a valid head of compensation. He adopted the reasoning of Tribunal Judge Simon Bird QC in St John Ambulance v Teignbridge District Council [2018] UKFTT CR-2018-0003 (GRC) in so finding.

Once and for all loss or continuing loss

Secondly, he determined that the appellant’s loss, whether claimed as loss of profits or as diminution in value, was a “once-and-for-all” loss incurred when the listing occurred and not a continuing loss. Regulation 14 of the Assets of Community Value (England) Regulations 2012 deals with compensation, and the specific provision at the heart of the appeal was regulation 14(5) which provides:

“A claim for compensation must-

(a) be made in writing to the responsible authority;

(b) be made before the end of thirteen weeks after the loss or expense was incurred or (as the case may be) finished being incurred;

(c) state the amount of compensation sought for each part of the claim; and

(d) be accompanied by supporting evidence for each part of the claim.”

It is therefore to be noted that by virtue of regulation 14(5)(b), a claim for compensation must be made within 13 weeks of the loss being incurred or having finished being incurred.

It was contended by the appellant that the loss was a continuing loss as it was the continued status of the premises as a listed ACV which deprived him of his ability to exercise his permitted development rights and thereafter to obtain residential planning permission. Only when the listing came to an end would that loss finish being incurred. However, the Upper Tribunal found that any diminution in value was incurred when the listing took place. Further, any loss of profits was not an ongoing loss which continued to accrue over time due to the listing; instead, the loss was incurred at the date of listing and did not continue to accrue. They were not continuing losses merely because they continued to exist.

Time limit runs from date of listing unless a continuing loss

­Thirdly, and very significantly, the Upper Tribunal determined when the 13 week time limit for a compensation claim began to run. Regulation 14(5)(b) states that it runs from when the loss was incurred or finished being incurred. As the loss was incurred at the date of listing, the Upper Tribunal found that the 13 week time period accordingly commenced on the date of the Council’s initial decision to list.

It was argued that time should only begin to run after the time period to appeal against a listing review decision had expired, in which case the appellant’s compensation claim was made in time. Until the expiry of that appeal period, the loss had not crystallised as it could still be overturned on appeal.

Nonetheless, despite recognising that it may be more convenient if the ACV compensation system operated in that way, the Upper Tribunal Judge found that such was not what regulation 14(5)(b) actually says. The time limit for making a compensation claim runs from the date of listing, even though it may well expire prior to the appeal process against the listing having been completed.

Legitimate expectation cannot be relied upon to require an authority to do that which it has no power to do

Fourthly, it was argued that the appellant had a legitimate expectation that his claim for compensation could be made on or before 4 April 2018 arising from the contents of an e-mail to that effect sent to him from the Council. Without determining whether the statement had resulted in such a legitimate expectation arising, the Upper Tribunal found that no legitimate expectation that may have arisen could require the Council to do something which it had no legal power to do. As the Council had no power to pay compensation pursuant to a claim made outside the 13 week time limit by virtue of section 99(2)(b) of the Localism Act 2011 which made the requirements in Regulation 14(5) statutory conditions to which any entitlement to compensation was subject, such a legitimate expectation could not be relied upon because the legislation prevented the Council from satisfying it.

Conclusion

The decision therefore provides useful authority on the compensation provisions which had previously been lacking. Most significantly, it makes it clear that the 13 week time period to make a claim commences from the initial date of listing, unless the loss can properly be regarded as a continuing loss in the sense that it is continuing to accrue and not merely continuing to exist. Consequently, at a time when a potential claimant may be focused on seeking to overturn the listing decision rather than making a compensation claim, it is vital not to overlook that the clock is continuing to tick and that a compensation claim must be made within that particularly short 13 week window.

Ruth Stockley is a barrister at Kings Chambers who appeared in the Upper Tribunal on behalf of Harrogate Borough Council