Electricity Wayleave compensation included reduced value caused by loss of residential development contract

The Court of Appeal case of National Grid Electricity Transmission Plc v Arnold White Estates Ltd [2014] will make power utilities think twice about holding onto the existing routes of their power lines where these impede development.

The respondent had contracted to sell two parcels of land for residential development.

One of these related to a strip and was conditional on the removal of an overhead power line. Due to indexation the price had risen to £5.82m.

When the respondent gave notice terminating the current wayleave, the appellant electricity company applied for and got a statutory wayleave to retain the power line so the conditional contract lapsed.

Planning permission had been got for the land but the conditions precluded development with the power lines still there.

The sole issue was how much compensation was payable to the respondent under para 7 of Schedule 4 to the Electricity Act 1989.

The respondent said it ought to be the value of the land under the contract at the date of the new wayleave notionally free of the new wayleave minus the nominal value of the land at the date of the new wayleave as it actually was i.e. encumbered by that new wayleave.

The date was critical as by 2010 the value of residential land was much less than the contract had provided for.

The Court of Appeal, held that the respondent had been correct in the basis upon which it had claimed compensation.

AWE had crystallised the development value by the two sale contracts made in July 2007, by reference to development values then prevailing.

Nothing in paragraph 7 of schedule 4, precluded compensation for the loss of contractual rights caused by the grant of a wayleave from the compensation afforded by the 1989 Act. In fact, the right to compensation under paragraph 7(1) was conferred in the most general terms.

The only limitation was that the loss claimed for must be loss suffered by the claimant in his capacity as owner or occupier of the land, rather than in some wholly unrelated capacity.

So there would be no compensation for loss suffered betting on the outcome of an application to the Secretary of State under paragraph 6 for the grant of a wayleave, even if the bet was placed and lost by the owner or occupier of the land.

The loss of this contractual right to proceeds of the sale under a conditional contract for the sale of the land, where the contract lapsed because of the grant of the wayleave, was a loss suffered by AWE in its capacity as owner of the land.

It was a right inseparable from the seller’s status as owner of the land in question.

Compensation was to be based upon the special value of the land to the owner rather than its objective market value.

The court commented that future tribunals would be astute to detect and defeat any collusive attempts to manufacture artificially high land contract prices ahead of the grant of wayleaves for the purposes of generating an inflated level of compensation.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.