Compulsory Purchase (Compensation)

Prayers – in the House of Commons at 12:52 pm on 5th April 1995.

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Photo of Mr Michael Alison Mr Michael Alison , Selby

I am glad to have this brief opportunity to raise the matter of statutory compensation for individuals whose land has been taken, used or damaged and whose entitlement to compensation arises from some provision in law. The scope of my concern includes the taking of land for highway works, the use of land for pipelines and cables, and damage to land caused by coalmining. A number of my constituents have concerns and interests in those categories, and there can be few Members of Parliament who do not have constituents affected by those matters.

I am glad to see my hon. Friend the Under-Secretary of State for the Environment in his place. Although I shall touch on matters that concern both the Department of Transport and the Department of Trade and Industry, the responsibility for administering the compulsory purchase procedure rests with the Department of the Environment.

My concern is not on this occasion about the use of compulsory powers. I am focusing on the right of those affected to be paid proper compensation and, where there is any dispute, to secure a just and proper settlement. It is contrary to the intention of the law and to natural justice for claimants to be exposed to excessive delay and considerable costs in order to secure payment where they reasonably believe that the compensation offered is inadequate.

Where a claim arises, the parties normally seek to settle the amount of compensation by negotiation; where they cannot reach agreement, there is a right to refer the matter to the Lands Tribunal. That tribunal is a division of the High Court, and it has the duty to resolve disputed valuations that arise in a wide range of circumstances.

Appeals to the High Court can he made relatively easily by way of case stated by the tribunal. For many, that arrangement works perfectly well, but it takes a considerable time for a case to be brought before the Lands Tribunal, and the costs involved are invariably substantial. I make no criticisms of the Lands Tribunal, but its provision is not enough to secure justice for those who are entitled to, but lack, compensation.

The tribunal is not a suitable remedy, because many of the sums in dispute amount to only a few thousand pounds. Not many people will assume the risk of instructing counsel, their solicitor, their chartered surveyor and, where necessary, other experts, to prepare a case for the Lands Tribunal to pursue a claim of perhaps only £5,000. The cost of those advisers will be considerable, and the fees will be payable as the case progresses—spanning perhaps two, and often more, years.

Sustaining the case, evaluating the arguments and attending to all matters without knowing the outcome places considerable stress on all those involved. Farmers are usually naturally isolated in their business, and the stress involved can have a damaging effect on their health and viability. The risk of being faced with the costs of the other party to the dispute is a further major deterrent to going to the tribunal.

The incidence of delay and risk, and the need for constant reappraisal, is a normal, necessary and unavoidable part of going to law. But it must be remembered that the claim that I am discussing arises because the claimant has had his land taken, used or abused by the other party, usually under the provision of statutory powers, for a particular purpose. The claimant sometimes has no choice but to go to law. But that approach can effectively deny him the right to his due compensation.

I can illustrate my concern by reference to three scenarios. The first involves the taking of land by the Department of Transport—now the Highways Agency—for a new road scheme. Many property owners suffer loss during the construction period, for which they should be paid compensation. In a paper sent to the Department of Transport on 18 February 1994, the Country Landowners Association set out 23 cases of serious loss to landowners.

The cases ranged from cows that had died after eating hay in a field into which noxious dust had blown, the loss of production in a factory after a drain became blocked by silt and the building was flooded, and the loss of water from a metered farm water supply pipe that had to be diverted, but was faultily reinstated. All those losses arose as a direct result of the construction works for which the claimants' land was acquired. The losses were undeniable, but liability for the claims was denied by the Department of Transport and, in the case of the dead cows, the contractor had gone out of business.

Settlements are made on the basis of third-party claims, but they are made at a low level, without admission of liability. The claimants feel, rightly, that they are entitled to compensation for their true loss. They decide, however, that the difference between the offer that they may receive and their full loss—or their full loss when no offer is made—is too little to justify a reference to the Lands Tribunal. As a result, they feel—and are, in truth—let down and cheated by the system.

Secondly, the right of water companies to serve notice on owners and occupiers, and subsequently to enter on to land to carry out work, can create difficulties. The claimant is left to make a claim on the water company after the works have started, and he will still be seeking payment for the whole or part of his claim for loss of value and disturbance when the works are finished, and sometimes long after. That allows the water companies, which are now in the private sector and aim to maximise profits for their shareholders, to use their powerful position to oblige the claimant to come chasing after them for compensation.

I know that water companies claim that they do not abuse their powers and, from their perspective, they may be right in most cases. But for the landowner and occupier, the position is different. The right to use the land must, without demur, be made available to the water company, and it is then a matter of trying to settle the proper basis for compensation. That is akin to a stern chase—trying to catch up a departing body from behind.

The problems for claimants include disputes over the basic value of the land, the cost to the business caused by the works themselves and the reinstatement costs of works to the surface, to land drains and to non-agricultural properties. Where the claim is not agreed—the negotiations are often difficult—the owner has the option of accepting the water company's offer, having already suffered the works, or of taking the matter to the Lands Tribunal.

Few people have taken water companies to the tribunal, because the disputed sums are usually too small for it to be worth while. Water companies know better than anyone else that the cost and risk of a reference encourages, if not obliges, the claimant to accept their usually inadequate offer.

The third scenario is the worst to come to my notice. It concerns one of my constituents, who is currently awaiting the outcome of arbitration with British Coal following subsidence damage to his property. My constituent could not settle the claims for compensation by agreement and was obliged, because of the severity of his problems, to take the matter further. Rather than refer his problems to the Lands Tribunal—a draconian step, for the reasons that I have already given—my constituent opted for the alternative of arbitration.

The latest Government advisory leaflet applicable in such circumstances states: you have the right to take the matter to the Lands Tribunal. However, in the majority of cases arbitration offers a cheaper, quicker and less formal way of resolving disputes. You have the right to choose arbitration as an alternative to the Lands Tribunal. In the event, however, recourse to arbitration for my constituent has proved to be something of a nightmare, and the very negation of cheapness or informality. In that context, I hasten to add that I make no comments on the merits of the case before the arbitrator, which is still under consideration. Nor do I make any criticism of the part played by British Coal in the unresolved claims subject to arbitration.

My criticisms are directed at the official advice given to claimants who may hesitate to go to the Lands Tribunal. In the case of my constituent, which is now subject to arbitration, British Coal judged that the issues involved and the possible consequences in terms of wider compensation claims flowing from the outturn of the case, made it prudent for it to take steps—which naturally British Coal could afford—to protect itself.

British Coal duly instructed counsel, and it was necessary and prudent for my constituent to do the same. Many issues were raised during the arbitration hearings which required the involvement of many advisers, who prepared expert evidence and attended the arbitration. I could not attend any of the 25 days of the arbitration hearing, which were spread over 12 months, but the costs in the matter for a private citizen have been unimaginable. My constituent will have committed more than £100,000 in pursuing his case by the time the arbitrator gives his decision.

That is not low cost. It is not informal. Whatever the merits of the case—that, I repeat, is for the arbitrator alone to consider, and I make no comments on it—the route suggested by the official Government guidance is misleading. It has resulted in financial and emotional strain on my constituent, which cannot have been the objective of arbitration as propounded in the official guidance. It comes much closer to a Lands Tribunal hearing.

I should therefore like to propose two changes to the existing procedures to provide for greater fairness and accessibility. First, the claimant should have a right to require a dispute to be referred to mediation. That is an established yet informal basis for settling matters between two parties. It involves an independent assessor who is trained in the discussion and resolution of disputes. He hears the case of each side, with each party normally attending in person with the assistance of an adviser such as a surveyor, lawyer or other expert.

The mediator talks with the parties to try to ensure a shared and compatible understanding of the issues and arguments involved in the circumstances, and to facilitate the acceptance of a settlement which recognises the strengths and weaknesses, or rights and wrongs, of each side. That is an informal process with separate discussions at the outset and, often, a round table discussion as matters progress. That process has proved effective in other spheres, and it has been used extensively to good effect in other areas of dispute, particularly in the construction industry. It is cheap and quick.

Mediation can do much to ensure the payment of proper compensation to claimants. If they are unhappy about a settlement, they can seek mediation and have their arguments heard and debated with the other side. Often that opportunity will be enough to resolve the claims on a basis acceptable to both sides. More than 80 per cent. of cases referred to mediation in other areas of dispute are resolved by agreement, such is the benefit of structured discussion between the parties.

The party in the dispute which enjoys the benefit of rights given by Parliament should be obliged to agree to the process where the claimant seeks mediation. However, the process is not, and cannot be, binding, and the ultimate right to refer a matter to the Lands Tribunal should remain. The process should be monitored, and an independent person should be appointed to supervise the process and to make recommendations to fetter the power of any party where that party consistently fails to reach agreement or accept the outcome of the mediation process.

My second proposal is aimed at those instances where a point of law or clarification arises. Mediation will not be appropriate where a matter of principle affecting the compensation code is involved. In such cases, a direct reference to the Lands Tribunal can be made, but again, the claimant may be deterred from pursuing what he considers to be a just entitlement to a higher payment than the offer he has received.

In such circumstances, the party liable to pay the compensation under statute should pay the costs of the reference to the Lands Tribunal to establish the point of law. When that has been determined, the parties should negotiate again and, in the absence of agreement, should seek mediation or go to the Lands Tribunal. That choice should again be for the claimant to decide.

In order to ensure that injustice is removed from the process of assessing compensation, which I have only illustrated, I hope that the House will support me, and that the Government will accept the need to make the resolution of disputes over proper compensation truly accessible, informal and low-cost.

Photo of Paul Beresford Paul Beresford Parliamentary Under-Secretary (Department of Environment) 1:16 pm, 5th April 1995

I thank my right hon. Friend the Member for Selby (Mr. Alison) for bringing this important subject to the attention of the House. He has explained most eloquently the concerns of his constituents, and he will probably find that those concerns are shared by many constituents of other right hon. and hon. Members.

As my right hon. Friend acknowledged, he has touched on several areas that are primarily the responsibility of other Ministers, particulary those in the Department of Transport, the Department of Trade and Industry and the Lord Chancellor's Department. I trust that he will forgive me, then, if I am a little cautious about trespassing into their territory and refrain from addressing directly the details of the cases to which he referred. I believe that my right hon Friend accepts my difficulties in that regard.

My Department has overall responsibility for setting the legislative framework in which compulsory purchase orders are made and under which the compensation code for such orders is applied. My right hon. Friend may rest assured that there is no shortage of advice as to how we could improve the system, and the issues he has raised are among those to which our attention has often been drawn.

I fully appreciate the distress that can be caused to people when confronted with a compulsory purchase order. The Government are keen to ensure that such distress is minimised for all concerned—ensuring prompt settlement of compensation claims is just one element in that process. I am sure everyone would agree that claimants should not be subject to excessive delay, and should not have to meet additional costs in order to secure the compensation which is rightly theirs.

Equally, however, there will always be occasions when it is impossible to reach agreement on the level of compensation to be paid, or where there is a dispute about some point of law. What we seek is the most efficient means of settling such disputes. My right hon. Friend has suggested one way of dealing with them, and his ideas are interesting and extremely valuable.

However, I think it may be worth while spending a few minutes explaining how the Lands Tribunal came into being. It was set up by Act of Parliament in 1949 to replace a system which provided for disputes to be decided by official arbitrators appointed from a panel. The president and members of the tribunal are appointed by the Lord Chancellor, who, in consultation with the Council on Tribunals, has a general responsibility for the statutory provisions that apply to tribunals and other forms of arbitration.

It is clear to me that there are two principal reasons for going to the Lands Tribunal—and I note that my right hon. Friend acknowledged those reasons. The first reason is to reach agreement on the amount of compensation, and the second is to resolve some point of law. In the latter case, I think that there can be no argument that the role of the Lands Tribunal must be maintained. It has had the key role in interpreting the statutory framework of the compensation code and establishing how the provisions work in practice. It would be foolish to do away with that body of experience and knowledge, and I acknowledge that that is far from being what my right hon. Friend suggested.

It has become almost proverbial wisdom to say that the delay and costs of Lands Tribunal hearings are a deterrent. However, I suspect that some of the criticisms levelled at the tribunal are, on closer inspection, a little harsh. The worries about delay are twofold; first, the time it takes to secure a hearing, and secondly, the procedures adopted during the hearing itself.

However, the parties to the dispute can both help to ensure delays are minimised, and I believe that my right hon. Friend will accept that fact. The delay in securing a hearing date often arises from the conduct of the parties themselves, and when the case is heard, it proceeds at a pace largely determined by the parties.

For example, the tribunal will normally permit adjournments where active negotiation is taking place, and will normally meet the wishes of counsel, solicitors and expert witnesses so far as is reasonable. It is also possible—at the discretion of the tribunal, and if all parties agree—to determine the case on the basis of written representations.

Furthermore, there is much concern about costs. The general principle of the compensation code is that the costs of a claim are regarded as part of the consequential costs of the compulsory acquisition. As such, they will normally be reimbursed by the acquiring authority. In addition, it is possible to adopt a "sealed offer" procedure similar to a payment into court, which allows either party to ensure that costs do not go beyond what they can afford.

Even so, there have been from time to time calls for a new system to replace or work alongside the Lands Tribunal. Various reports have suggested a more informal procedure for settling disputes—usually, something akin to the small claims court.

My right hon. Friend will be aware that the Country Landowners Association has recently prepared a draft policy paper on "Compulsory Acquisition and Payment" which suggests, among other things, the introduction of a non-binding mediation process to resolve some cases without the need to go to the Lands Tribunal. We are still considering the many suggestions in the paper. We are also aware that the mediation proposal has support from other respected bodies, including the Royal Institute of Chartered Surveyors and the National Farmers Union.

I know that there is always a concern that such papers will be warmly welcomed by Ministers, and then studiously ignored. I hope that I can assure my right hon. Friend that, this time at least, that will not be the case. Indeed, senior officials from my Department are meeting representatives from the CLA next week to discuss the ideas in the policy paper. My right hon. Friend will understand that I cannot comment in detail on the CLA's proposals at present, but we shall set out the Government's response to them in due course.

Instead, I shall address some of the points that my right hon. Friend raised. He suggested that, where a compensation claim gives rise to consideration of a point of law, a direct reference to the Lands Tribunal should be made before returning to mediation, and that, in such circumstances, the acquiring authority should pay the costs of the reference to the Lands Tribunal.

In fact, I understand that that may already be possible under the current statutory arrangements. Under the Lands Tribunal rules of 1975, the tribunal has the power to order any preliminary point of law to be disposed of at a preliminary hearing. That power is frequently invoked, and has the advantage that the parties need not incur the costs of compiling evidence on valuation until the preliminary issue, which may determine liability, has been decided. Where the preliminary issue is of general significance in other cases, it would, I agree, seem reasonable that the acquiring authority rather than the claimant should bear the costs.

However, for straightforward matters of disagreement over compensation, I can see a case for seeking alternative methods of resolving disputes. Indeed, there are already other options available. It is open to the acquiring authority and the claimant to put their case to informal arbitration without the need to refer to the Lands Tribunal.

I acknowledge that that does not address my right hon. Friend's argument that a statutory right for claimants should exist. However, although I do not entirely rule that out, I am sure that he will appreciate that such a scheme would need careful consideration, not least because we would need to be clear about its precise relationship with the Lands Tribunal. It must not be forgotten that, in most cases, compensation is settled by direct negotiation involving professionals and experts engaged by the parties, so the costs of such arrangements may not in practice be less than a reference to the Lands Tribunal.

I freely admit that, in any assessment of the current arrangements for compulsory purchase and compensation, we are hampered by the lack of recent research and information to support the arguments one way or the other about how the system operates, and its impact on those affected. To fill that gap, my Department has signalled the intention to fund a research project to consider, among other things, how existing compulsory purchase order procedures could be improved, and how those at the sharp end feel about the system.

My right hon. Friend and the CLA may rest assured that we shall use their valuable contributions to inform and direct that research. When the results are available, we shall be in a much better position to assess how the current system operates in practice, and to pinpoint exactly what room there is for improvement.

I started by expressing my unwillingness to wander into areas for which my Department does not have direct responsibility. However, I do not wish to leave the subject without making some brief general observations on the points that my right hon. Friend raised about third-party claims, about British Coal and about water companies' rights of entry. He will appreciate that I cannot speak in detail on the cases he mentioned, but they raise some issues of general interest that I am sure that he would like me to address.

My right hon. Friend spoke about the paper presented to the Highways Agency by the Country Landowners Association. That must be a matter for the two bodies to discuss between themselves, and I hope that it will be possible to make progress soon. However, I understand that the agency does not consider that the paper properly reflects the legal and contractual position.

In most cases involving damage to property during construction, liability is clear, and the claims are dealt with by the contractor's insurers and loss adjusters, or by the district valuer acting on behalf of the agency. The burden of proof of the validity and the amount of claims is essentially the same. In only a handful of cases is liability in dispute, and it is those cases that cause real difficulty.

The Highways Agency is currently discussing with construction industry representatives ways in which the delays in dealing with such claims might be overcome, but I am sure that there can be no disagreement with the principle that we must do what we can to avoid a situation in which genuine claimants are unduly penalised because of a dispute between other parties as to liability.

My right hon. Friend raises a particular concern about the powers available to privatised water companies, but the broad issue is one that applies and has applied to all statutory undertakers, both before and after privatisation. Such bodies have a statutory responsibility to provide a public service, and Parliament has consistently recognised their need for powers to acquire land compulsorily and to enter on to land in order to discharge that responsibility.

My right hon. Friend will be aware that the issue of compensation for the laying of sewers and water pipes was considered in the Water Industries Act 1991. That provides that, where pipe-laying work leads to depreciation in the value of land, the claimant may receive compensation for the loss in the value of his interest, and for any damage caused in the same way, as if there had been a compulsory acquisition. Resolution of disputes over compensation are dealt with by the Lands Tribunal, which applies the normal compensation rules.

The issue, then, is the suitability of the Lands Tribunal to decide such cases—a point that I have already addressed. However, I must make it clear that there would be no question of utilities' using such powers to maximise profits; the compulsory powers remaining with nationalised industries after privatisation relate only to the statutory functions of those industries, and cannot be used to acquire or to enter on to land not needed for those functions.

As for subsidence, my right hon. Friend will appreciate that it would not be appropriate for me to discuss the particular case here and now, as the arbitrator has yet to reach his conclusions. However, it is important to recognise that the statutory framework in relation to coal-mining subsidence is significantly different from that connected with the use of compulsory purchase powers or compulsory access rights.

The primary obligation in the relevant legislation is to repair any damage attributable to coal-mining subsidence. Compensation arises only where repairs are not practicable or effective, and is paid in lieu of the primary obligation to repair. The basic obligation, then, is not to compensate but to repair.

Of course disputes arise from time to time. As my right hon. Friend said, the subsidence legislation already provides a means of resolving them. For householders, there is a special low-cost arbitration scheme, which in the vast majority of cases provides a quick and inexpensive solution to disputes. The costs of the scheme are generally borne by the public purse and by the industry, so the claimant normally has to contribute only a modest fee. Apart from the costs of the scheme, each party bears its own costs.

For more complex cases, a general arbitration scheme is available. That is based on the normal principles of arbitration—that each party bears its own costs during the proceedings, and that, in his findings, the arbitrator may ultimately rule that one party shall meet some or all of the costs of the other party. Similarly, where cases go to the Lands Tribunal, the tribunal has powers to award costs at its discretion.

I reiterate that I have considerable sympathy with the concerns that my right hon. Friend has expressed and, like him, I wish to see a system in place that will enable swift and fair compensation for those affected by development undertaken for the general good of the community. I cannot offer any commitments about how the Government will tackle that, but I can assure my right hon. Friend and those whom he represents that the Government are actively considering the ideas that he and the Country Landowners Association have put forward. Clearly, however, we must avoid rushing to replace a tried and tested system with one that might prove less satisfactory in the longer term.