Compensation – Public Works – Flood prevention works – Measure of compensation – depreciation of the value of an interest in land or damage by being disturbed in enjoyment of land – Repair or reinstatement costs – Flood Prevention (Scotland) Act 1961, Section 11(1) – European Convention on Human Rights, First Protocol, Article 1

McEwan v East Dunbartonshire Council
5 October 2004

The Flood Prevention (Scotland) Act 1961 authorises local authorities to carry out flood prevention works. In relation to compensation, Section 11(1) provides inter alia:-

“11(1). Where on a claim being made under this section it is shown that … the value of an interest in land has been depreciated, or that any person has suffered damage by being disturbed in his enjoyment of land, in consequence of the carrying out of any flood prevention operations, the local authority by whom, or on whose behalf, the operations were carried out shall pay to the person whose interest has been depreciated or who has suffered the damage compensation equal to the amount of the depreciation or damage.”

Two industrial workshop units on a site close to a river bend were admittedly damaged by flood prevention works. The claimants alleged that one of the units required to be demolished, and claimed compensation in three parts: rebuilding costs of that unit; repair/reinstatement costs of the other unit; and loss of rental income, upset and inconvenience and incidentals. The respondents disputed the basis of assessment of losses, and had made an alternative offer based on open market valuation. The respondents did not dispute the basis of the third part of the claim, and also accepted that such items of disturbance could be claimed in addition to claims for depreciation in market value. The parties requested a legal debate on the correct basis for valuing compensation. There was said to be no authority which directly bore on the question.

The respondents submitted that Section 11(1) was to be construed giving the words their ordinary natural meaning. The two heads of compensation – one relating to depreciation in value, and the other to damage by being disturbed – were clear. An analogy was drawn with Section 12 of the Land Compensation (Scotland) Act: there was no equivalent of Rule 5 in this legislation. The Act did not allow for cases in which rebuilding costs exceeded market values.

The applicants contended for a distinction between depreciation in the sense of ‘obvious, intentional’ loss which might arise from a scheme itself, and damage, which came under the second head and included accidental damage as well as ‘pure’ disturbance. Damage by being disturbed included the cost of repair. The situation was different from compulsory purchase, because a claimant under this legislation might want to carry out repairs and stay where he was. Compensation based on depreciation would not put the claimants back in the position they were. There should be no difference from the approach in a conventional claim for damages. Further, if there was any doubt about the correct interpretation, the provision should be read so as to be compatible with the rights contained in Article 1 of the First Protocol of the Convention.

Held, the costs of repair or reinstatement, while not irrelevant to the assessment of compensation, could not be recovered directly, and the claimants would require to amend their application. It was not possible to give the extended meaning for which the claimants contended to the expression, ‘damage by being disturbed in his enjoyment of land’. The concept of disturbance in possession was well recognised and distinct from questions of actual damage to property. There might be damage without disturbance. The meaning was so clear that if there was any apparent hardship it must be taken to have been intended by Parliament in the light of the statutory purpose.

Damage might, or might not, produce a depreciation in value. The cost of repair or rebuilding could be relevant to the assessment of depreciation in value. Provided fair notice of the formulation of the claim was given, evidence of repair or reinstatement costs, along with other considerations including market value evidence, might be considered. It might also be relevant that the wording of this provision, ‘value of an interest of any person in land has been depreciated’, differed from Rule 2 in Section 12 of the 1963 Act, which refers in terms to open market value.

While it might be correct that Article 1 of the First Protocol covered disturbance as well as complete deprivation of property, on any view this provision did compensate for disturbance. Given the margin of appreciation in providing a fair balance and proportionality, it could not be found on the material available that this compensation scheme, as interpreted by the Tribunal, produced a measure of compensation which did not bear a reasonable proportion to the aim sought to be realised.

Authorities referred to:-

Hutchison v Davidson 1945 SC 395
Re Coast Protection Act 1949 (1955) 106 Law Journal 108 (Lands Tribunal)
European Convention on Human Rights, First Protocol, Article 1
Land Compensation (Scotland) Act 1963, Section 12
James v U.K.(1986) 8 E.H.R.R. 123
Pressos Campania Naviera SA v Belgium(1995) 21 E.H.R.R. 301
Human Rights Act 1998, Section 3

See full decision:  LTS/COMP/2004/3