Lands Tribunal for Scotland

OPINION

William Duncan Wyness (Applicant)
against
Scottish Hydro Electric Power Distribution plc (Respondents)

Application for determination of a question of disputed compensation
Land at Meikle Camaloun Farm, Fyvie, Turriff, Aberdeenshire.

Introduction

[1] The applicant seeks compensation under paragraph 7(1) of Schedule 4 to the Electricity Act 1989. He is owner of Meikle Camaloun Farm. A 500 kW wind turbine has been erected there. Adjacent lies South Camaloun Farm which belongs to a Mr Bruce Smart. A similar turbine has been constructed there a short distance from the Meikle Camaloun turbine. They are connected to the electricity grid via an 11kV cable. The cable runs from Fyvie Substation, across the Fyvie Estate, through part of Meikle Camaloun Farm, where it makes a short loop to South Camaloun and the turbine there and proceeds back to Meikle Camaloun to connect to the Meikle Camaloun turbine. The cable was subject to a voluntary wayleave agreement between the applicant and the respondents. The applicant has however terminated the voluntary wayleave and the respondents thereupon applied for a statutory necessary wayleave under the Electricity Act 1989. Scottish Ministers granted the application. As a consequence the applicant contends that he has lost his legal right to require the respondents to remove their equipment from his land. It is submitted that this was a valuable right since his land contained a “golden key” or ransom strip in respect of the operation of the South Camaloun turbine. This is on the contention there were no reasonable alternative routes to export the South Camaloun electricity other than through Meikle Camaloun. Scenarios are presented in which the value of the ransom strip is assessed with regard to the commercial value of the South Camaloun wind turbine.

Procedure

[2] The case was appointed to debate following a procedural hearing on 25 September 2019. At the procedural hearing there were two applicants in which the second applicants comprised a farming partnership. The respondents had objected to the second applicants being in the process on the basis that they had no title or interest. We were advised that this was no longer to be an issue and by the time of the debate the second applicants had been deleted from the application and the respondents had deleted averments of no title to sue.

[3] The case proceeded to debate on the basis that the respondents intended to argue that the claims were irrelevant and lacking in specification. Certain adjustments followed the procedural hearing which included the deletion of two ancillary claims, one relating to the effect of a delay on the statutory valuation date and the other relating to certain professional and legal costs, thereby leaving only the claim for loss of key value. The respondents seek dismissal of the remaining claim, failing which the deletion of certain averments.

[4] At the debate on 16 and 22 January 2020 the applicant was represented by Mr James Findlay QC. The respondents were represented by Ms Ailsa Wilson QC.

Legislation

The Electricity Act 1989 (“the 1989 Act”) provides:

4.— Prohibition on unlicensed supply etc.

(1) A person who—

(a) generates electricity for the purpose of giving a supply to any premises or enabling a supply to be so given;

(b) participates in the transmission of electricity for that purpose;

(bb) distributes electricity for that purpose;

shall be guilty of an offence unless he is authorised to do so by a licence.

6.— Licences authorising supply, etc.

(1) The Authority may grant any of the following licences–

(c) a licence authorising a person to distribute electricity for that purpose (“a distribution licence”);…

10.— Powers etc. of licence holders.

(1) Subject to subsection (2) below, Schedule 3 to this Act (which provides for the compulsory acquisition of land) and Schedule 4 to this Act (which confers other powers and makes other provision) shall have effect—

(b) to the extent that his licence so provides, in relation to an electricity distributor or any other licence holder;

and references in those Schedules to a licence holder shall be construed accordingly.”

Schedule 4 provides-

“6 (1) This paragraph applies where—

(a) for any purpose connected with the carrying on of the activities which he is authorised by his licence to carry on, it is necessary or expedient for a licence holder to instal and keep installed an electric line on, under or over any land; and

(b) the owner or occupier of the land, having been given a notice requiring him to give the necessary wayleave within a period (not being less than 21 days) specified in the notice—

(i) has failed to give the wayleave before the end of that period; or

(ii) has given the wayleave subject to terms and conditions to which the licence holder objects;

and in this paragraph as it so applies “the necessary wayleave” means consent for the licence holder to instal and keep installed the electric line on, under or over the land and to have access to the land for the purpose of inspecting, maintaining, adjusting, repairing, altering, replacing or removing the electric line.

(2) This paragraph also applies where—

(a) for any purpose connected with the carrying on of the activities which he is authorised by his licence to carry on, it is necessary or expedient for a licence holder to keep an electric line installed on, under or over any land; and

(b) the owner or occupier of the land has given notice to the licence holder under paragraph 8(2) below requiring him to remove the electric line;

and in this paragraph as it so applies “the necessary wayleave” means consent for the licence holder to keep the electric line installed on, under or over the land and to have access to the land for the purpose of inspecting, maintaining, adjusting, repairing, altering, replacing or removing the electric line.

(3) Subject to sub-paragraphs (4) and (5) below, the Secretary of State may, on the application of the licence holder, himself grant the necessary wayleave subject to such terms and conditions as he thinks fit; and a necessary wayleave so granted shall, unless previously terminated in accordance with a term contained in the wayleave, continue in force for such period as may be specified in the wayleave.

(5) Before granting the necessary wayleave, the Secretary of State shall afford—

(a) the occupier of the land; and

(b) where the occupier is not also the owner of the land, the owner, an opportunity of being heard by a person appointed by the Secretary of State.

(6) A necessary wayleave granted under this paragraph—

(a) shall not be subject to the provisions of any enactment requiring the registration of interests in, charges over or other obligations affecting land; but

(b) shall bind any person who is at any time the owner or occupier of the land.

7(1) Where a wayleave is granted to a licence holder under paragraph 6 above—

(a) the occupier of the land; and

(b) where the occupier is not also the owner of the land, the owner, may recover from the licence holder compensation in respect of the grant.

(2) Where in the exercise of any right conferred by such a wayleave any damage is caused to land or to moveables, any person interested in the land or moveables may recover from the licence holder compensation in respect of that damage; and where in consequence of the exercise of such a right a person is disturbed in his enjoyment of any land or moveables he may recover from the licence holder compensation in respect of that disturbance.

8(1) This paragraph applies where at any time such a wayleave as is mentioned in paragraph 6 above (whether granted under that paragraph or by agreement between the parties)—

(a) is determined by the expiration of a period specified in the wayleave;

(b) is terminated by the owner or occupier of the land in accordance with a term contained in the wayleave; or

(c) by reason of a change in the ownership or occupation of the land after the granting of the wayleave, ceases to be binding on the owner or occupier of the land.

(2) The owner or occupier of the land may—

(a) in a case falling within paragraph (a) of sub-paragraph (1) above, at any time after or within three months before the end of the period specified in the wayleave;

(b) in a case falling within paragraph (b) of that sub-paragraph, at any time after the wayleave has been terminated by him; or

(c) in a case falling within paragraph (c) of that sub-paragraph, at any time after becoming the owner or occupier of the land by virtue of such a change in the ownership or occupation of the land as is mentioned in that paragraph, give to the licence holder a notice requiring him to remove the electric line from the land; but the licence holder shall not be obliged to comply with such a notice except in the circumstances and to the extent provided by the following provisions of this paragraph.

(3) Where within the period of three months beginning with the date of the notice under sub-paragraph (2) above the licence holder makes neither—

(a) an application for the grant of the necessary wayleave under paragraph 6 above; nor

(b) an order authorising the compulsory purchase of the land made by virtue of paragraph 1 of Schedule 3 to this Act,

the licence holder shall comply with the notice at the end of that period.

(4) Where—

(a) within the period mentioned in sub-paragraph (3) above the licence holder makes an application for the grant of the necessary wayleave under paragraph 6 above; and

(b) that application is refused by the Secretary of State,

the licence holder shall comply with the notice under sub-paragraph (2) above at the end of the period of one month beginning with the date of the Secretary of State's decision or such longer period as the Secretary of State may specify.”

Cases

Horn v Sunderland Corporation [1941] 2 K.B.26
Pointe Gourde Quarrying and Transport Company Limited v Sub-Intendent of Crown Lands [1947] AC 565
Stokes v Cambridge Corporation (1962) 13 P. &C. R. 77
Mercury Communications Ltd v London and India Dock Investments Ltd (1995) 69 P & CR 135
Wards Construction (Medway) Limited v Barclays Bank plc [1994] 68 P. & C.R. 391
Director of Buildings and Lands v Shun Fung Ironworks Limited [1995] 2 A.C. 111
Waters v Welsh Development Agency [2004] 1 WLR 1304; [2003] Env. L. R. 15
Welford v EDF Energy Networks (LPN) plc [2007] 2 P. & C. R. 15
Transport for London v Spirerose Ltd [2009] 1 WLR 1797
Bocardo SA v Star Energy UK Onshore Ltd [2010] UKSC 35
Hutchison 3G (UK) Ltd and Others v Assessor for Renfrewshire Valuation Joint Board LTS/VA/2008/441 (sub nom Assessor for Tayside Valuation Joint Board and Others v Hutchison 3G (UK) Ltd and Others [2014] CSIH 40.)
Stynes v Western Power (East Midlands) plc [2013] UKUT 0214 (LC)
Arnold White Estates Limited v National Grid Electricity Transmission plc [2014] EWCA Civ 216 McKibben v Northern Ireland Electricity Limited [2014] 10 WLUK 316
William Tracey Limited v SP Transmission plc [2016] CSOH 14
William Tracey Ltd. v The Scottish Ministers [2016] CSOH 131
Scottish Hydro Electric Transmission plc v Auquhirie Land Company Limited [2017] CSIH 39
SSE Telecommunications Ltd v Millar [2018] SAC (Civ) 14

Textbook

Compulsory Purchase and Compensation: The Law in Scotland (3rd ed), Professor Rowan Robinson and Farquharson-Black

Background facts and circumstances

[5] The application avers that in 2014 separate planning permissions were granted for the erection of each of the turbines. The applicant’s son had secured certain rights across the Fyvie Estate to export electricity to the grid at the substation there from both of the turbines. Mr Smart had not wished cables to be installed on his land save as absolutely necessary and had refused to enter into a wayleave agreement with the respondents, so a route was chosen with only a short loop over South Camaloun Farm terminating at Meikle Camaloun turbine. The applicant employed an independent connection provider (an “ICP”) and the respondents approved the cable route. The cabling and associated works were installed by a contractor instructed by the applicant’s son, and an agreed proportion of the costs were paid by Mr Smart and the applicant’s son.

[6] The averments continue that because of Mr Smart’s reluctance to have cabling across his land beyond what was necessary, and to allow time for negotiations with Mr Smart for rights over the applicant’s property, a voluntary wayleave was entered into between the applicant and respondents dated 3 and 25 June 2015 (“the first voluntary wayleave”). This is said to have covered both turbines for the export of electricity. It is averred that the respondents were made aware of the background to the agreement for the voluntary wayleave, although this is disputed by the respondents. We were advised by the respondents that a separate wayleave agreement at or about the same time was entered into between the respondents and Mr Smart, although this has not been produced and we can say no more about it here.

[7] The respondents are a licensed electricity distributor and have certain duties and powers in terms of the 1989 Act. The cable and associated equipment were duly adopted by them under an agreement, which we understood had the effect of transferring ownership of the cable and equipment to the respondents themselves. We were advised that the effect of the adoption also meant that the cable and associated equipment became part of the respondents’ distribution network. The adoption agreement has not been produced.

[8] The connection was energised on 22 September 2015 and the South Camaloun turbine became operational by about October 2015. Negotiations between Mr Smart and the applicant failed. The first voluntary wayleave between the applicant and respondents was terminated by notice on behalf of the applicant dated 19 October 2016. This triggered a statutory timetable in terms of Schedule 4 to the 1989 Act. The respondents timeously applied to Scottish Ministers on 13 January 2017 for the grant of a statutory necessary wayleave in terms of paragraphs 6(2) and (3) of Schedule 4 to keep installed the electric underground cable and associated apparatus on the Meikle Camaloun land. This had the effect, in terms of paragraphs 8(2) and (3), of preventing the applicant’s notice from taking effect. In the meantime another voluntary wayleave was entered into between the applicant and respondents dated 8 and 12 December 2016 (“the second voluntary wayleave”) which related to the Meikle Camaloun turbine only and without any connection to the South Camaloun turbine. This was accepted to be based on something of a hypothetical scenario since, as we understood it, the loop still in fact existed and served the South Camaloun turbine under the now statutory process.

[9] A reporter appointed by Scottish Ministers determined the application for the necessary wayleave following written submissions by, amongst others, the present applicant and respondents, and undertook a site visit. He recommended the grant of a necessary wayleave applying a test of necessity and expediency specified in paragraph 6(2) of Schedule 4. Amongst other things he concluded that alternative routes to Mr Smart’s land would be more expensive than retaining the existing route. Scottish Ministers agreed with the reporter’s report and on 14 August 2017 granted a necessary wayleave for a period of 30 years under paragraph 6(3). The necessary wayleave provides for the respondents to install and keep installed an underground electric line and associated apparatus at Meikle Camaloun and includes ancillary rights of access for the purpose of maintenance etc. The necessary wayleave, it is concluded, allows for the export of electricity from the South Camaloun turbine via the applicant’s property to the local grid network.

[10] As a consequence, the applicant contends that he has lost his legal right to determine the respondents’ licence to keep equipment on his property and to require the respondents to remove the equipment from his property, other than from that covered by the second voluntary wayleave. It is contended that the applicant’s land should be considered as providing a “golden key” or ransom strip for the South Camaloun turbine and that compensation should be assessed in line with Stokes v Cambridge Corporation. Reference is made to a detailed valuation report by Mr Ian Thornton-Kemsley MRICS ACIArb dated December 2018. The report discusses potential alternative routes and considers that these would also involve a ransom situation. Compensation is assessed on the basis of the commercial value of the South Camaloun windfarm in which a value of £1,712,000 is sought on the basis of 50% of the commercial value of the turbine located there. An alternative valuation of £1,123,000 is made on the assumption that allowance should be made for the development costs of the affected turbine. The applicant avers that he has suffered this loss in his capacity as owner of the property and represents the diminution in the value of his property as a result of the grant of the necessary wayleave.

Submissions for respondents

[11] The respondents submitted that there were inconsistencies between the pleadings and the applicant’s expert report. The claim in terms of the pleadings was based upon diminution in value of the applicant’s land, but in terms of the expert report it related to an alleged loss of opportunity to obtain a ransom payment for the provision of the South Camaloun grid connection to the Fyvie substation. The valuation report relied upon the case of Welford v EDF Energy but this was not referred to in the applicant’s note of argument and was not in point. The averments relating to diminution in value should be deleted.

[12] It was submitted that the statutory scheme for the grant of necessary wayleaves existed to ensure that network operators are not held to ransom over the grant of rights to retain existing parts of the electricity network. In William Tracey Ltd v SP Transmission plc Lord Brodie accepted at paragraph [23] that the 1989 Act set out a statutory regime which regulates the respective rights and interests of landowners, occupiers and licence holders all in the general interest of the public which requires an uninterrupted supply of electricity.

[13] It was submitted that the grant of the necessary wayleave did not result in the loss of contractual rights akin to Arnold White Estates Ltd v National Grid Electricity Transmission plc. The necessary wayleave did not cause the applicant’s lost opportunity to negotiate with his neighbour since the applicant had no legal entitlement to grant access to a cable that formed part of the respondents’ distribution network at the relevant time. In terms of sections 4 and 6 of the 1989 Act the respondents were licenced distributors of electricity. It would be an offence for an unlicensed party such as the applicant to attempt to perform this function. While the landowner might be able to prevent access and construction of equipment on his land prior to its becoming part of the respondents’ distribution system, he could not do so once the system was energised. This was the case prior to the grant of the necessary wayleave. The necessary wayleave was made for the purposes of maintaining an existing part of the distribution network in accordance with the statutory scheme. Any opportunity which the applicant may have had to negotiate with the proprietor of South Camaloun had passed prior to the service of the notice to remove and the coming into effect of the necessary wayleave. In terms of s.9 of the 1989 Act the respondents had a duty to develop and maintain an efficient, coordinated and economical system of electricity distribution and the applicant’s claim would interfere with that once the cable had become part of the distribution system. By the time of the necessary wayleave being granted the South Camaloun operator had a connection agreement with the respondents which provided for the export of electricity to the grid through the latter’s distribution system. There could be no “golden key” since following upon the first voluntary wayleave the South Camaloun turbine had become operational and connected to the grid.

[14] It was submitted that if on the applicant’s hypothesis the cable had been required to be removed in the absence of the necessary wayleave, the applicant would not have a power of veto over another route. The reporter’s report made clear that if the necessary wayleave had not been granted, the recommended time for removal would have been 12 months (cf paragraph 8(4) of Schedule 4) to effect an alternative connection. It was thus clear that an alternative connection was possible.

[15] It was separately pointed out that the land was not being used for access. All the case law concerning ransom strips related to physical access, and here Mr Smart had not required to take access to the applicant’s land. The landowner, the applicant, had no entitlement to give third party access to the cable which was now part of the respondent’s distribution operation.

[16] Reference was made to the opinion of Lord Glennie in William Tracey Ltd v The Scottish Ministers where at paragraph [29] he considered that s.9 could be regarded as the legislative aim behind the provisions of the Act. Reference was also made to SSE Telecommunications v Millar which involved rights under the 1984 Telecommunications Code. These rights were akin to wayleaves under the Electricity Act 1989 and it was clear that under the 1984 Code the wider consumer benefit of an electronic communications network was a matter of some significance: paragraph [31] of Sheriff Appeal Court.

[17] Reference was made to Horn v Sunderland Corporation for the principle of equivalence. Reference was also made to Director of Buildings and Lands v Shun Fung Ironworks Ltd for the three conditions, namely that it was a prerequisite to an award of compensation that there must be a causal connection between the resumption or acquisition and the loss in question; secondly that losses must not be too remote, and thirdly claimants were expected to behave reasonably in matters of mitigation. These conditions had been referred to by the Court of Appeal in Arnold White which was a paragraph 7(1) case. Here no causal connection had been averred between the granting of the necessary wayleave and the loss of the right to negotiate with the third party. The inference of the submission was that it was not known what the applicant might have done in the absence of the necessary wayleave. The claim was hypothetical. This could be contrasted with the situation in Arnold White where the claimants had demonstrably sustained a contractual loss on account of the necessary wayleave. The claim in the present case was also too remote.

[18] Finally, it was submitted that the applicant’s approach offended against the well-established principle that the amount of statutory compensation must exclude increases in value entirely due to the statutory scheme which underlies the compulsory acquisition of rights. Reference was made to Pointe Gourde Quarrying and Transport Company Ltd v Sub-Intendant of Crown Lands and Waters v Welsh Development Agency, in particular the speech of Lord Nicholls in the House of Lords and the opinion of Carnwath LJ (as he then was) in the Court of Appeal. Lord Carnwath adopted the proposition that a landowner could not claim compensation to the extent that the value of his land is increased by the very scheme of which the compulsory acquisition forms an integral part. The general principles of compulsory purchase should be applied to Schedule 4 claims for compensation. The Court of Appeal had applied the principle of equivalence in Arnold White and had applied general principles in Welford. In this context reference was made to SSE Telecoms Ltd v Millar where the Sheriff Appeal Court had applied the no-scheme rule to analogous rights granted under the Telecoms Code. In the present case, and unlike Millar, there was no doubt that Parliament was intending only “compensation” to be granted on compulsory purchase principles.

[19] In the present case it was clear that the statutory scheme involved the equipment comprising that part of the distribution network connecting the turbines to the grid. The acquisition of rights was for the maintenance of this scheme, which was one of the purposes under the 1989 Act. Had there not been the installation of the cable which permitted the construction and operation of the turbines there would have been no potential to treat the affected land as though it were a ransom strip. It was emphasised that it was the access to the cable which was of value. As a matter of law the “scheme” could not include the turbines themselves since the respondents were not licenced generators of electricity, they were distributors.

[20] There was no reason not to apply the Pointe Gourde rule on the argument there was no acquisition of land as such. On any view rights were being acquired against the will of the owner involving an interference with his property rights.

[21] In this case there may have been a pre-existing right of the applicant to negotiate with the landowner prior to the cable being installed, but that right had been lost following upon adoption of the cable as part of the distribution network.

[22] The respondents also argued that certain averments should not be admitted to proof on grounds of relevancy and specification. These related to the entering into of the second voluntary wayleave with the applicant and the fact that the respondents had not themselves carried out the installation works at the respective properties. There was also a challenge to a passage in the application:

“Further esto the Tribunal consider that compensation should be assessed otherwise than on the bases set out at paragraphs 3.12 and 3.13 above, the Applicant claims such sum as the Tribunal consider appropriate.”

Paragraphs 3.12 and 3.13 refer to the loss of opportunity to come to a commercial settlement with those having an interest in the South Camaloun turbine, and a diminution in value in the applicant’s property.

Submissions for applicant

[23] By way of background it was explained that there was now no issue regarding the identity of the “correct” applicant.

[24] It was submitted that the respondents’ position was flawed in that they had assumed that the cable would remain in situ. On the contrary the basis of the case was that but for the necessary wayleave, the cable would have had to be removed. It was also incorrect for the respondents to suggest that the applicant’s loss was merely hypothetical. Just because a value may not be immediately ascertained did not preclude a claim for compensation; for example the amount of hope value in a suitable case might require to be ascertained by the Tribunal. Thirdly, the respondents were suggesting that no ransom position had been established. However, taking the case on the pleadings it was fairly apparent that the applicant was offering to establish that a ransom position had been established which but for the necessary wayleave would have been of considerable value.

[25] Reference was made to a guidance note for ICPs produced by Scottish & Southern Electricity Networks which stressed the importance of signature of “all land rights/wayleave documents” prior to the adoption by the respondents of relevant assets. Here appropriate consents had not been in place prior to the cable being adopted by the respondents. There had been no agreement between the landowners and this would have been regarded as an unreasonable position had any land lender been wishing to secure a route to market. The respondents’ implied floodgates argument was unlikely to arise since in most cases the land rights would be established prior to adoption of the cable.

[26] Essentially the claim could be described as the difference in value of the applicant’s land with the necessary wayleave in place or not in place and with the cable removed. The respondents had placed undue emphasis on Mr Thornton-Kemsley’s understanding of the applicable law stated in his report; he is a surveyor not a lawyer. That report had considered the value of the rights to a third party. This was the correct approach in considering open market value.

[27] A significant part of the background to the case was that the respondents had adopted the cable in the knowledge that the respective landowners were still in negotiation about land rights. It should also be borne in mind that the infrastructure had in fact been provided and paid for by the applicant and his son, not the respondents, and this had been the case prior to the grant of the necessary wayleave.

[28] Reference was made to Arnold White Estates Ltd v National Grid Electricity Transmission plc where at paragraph [11] Briggs LJ distinguished between the compulsory purchase powers provided by Schedule 3 and the acquisition of wayleaves provided for by Schedule 4, noting that the grant of a wayleave involves no outright acquisition of land, compulsory or otherwise, and therefore Schedule 4 makes “bespoke” provision for compensation. These comments were endorsed by Lord Glennie in William Tracey Ltd v The Scottish Ministers at paragraph [30].

[29] Counsel also took from Arnold White that the valuation date is the date of the grant of the necessary wayleave; the principle of equivalence applies; there was a “sharp” contrast to compulsory purchase of land in that no land or interest is acquired under Schedule 4 since a wayleave comes into existence for the first time by virtue of the statutory grant; i.e., there is no compulsory acquisition of rights already vested in the owner; the right to compensation is conferred in the most general terms; there is no need to show some effect upon the land itself of the grant of the wayleave; and any impact upon development value is recoverable. In the circumstances of that case the grant of the necessary wayleave “put it out of the ability of the owner to turn his interest in the pylon land into money.” It is the value to owner which is important not, if different, objective market value: see opinion of Briggs LJ at paragraphs, [13], [14], [22], [23], [25] and [26].

[30] Guidance as to the distinction from compulsory purchase is provided in Stynes v Western Power (East Midlands) plc by the Lands Chamber President, Sir Keith Lindblom (as he then was). He recognised a clear distinction between the provisions of Schedule 3 and Schedule 4; a necessary wayleave under paragraph 6 “does not amount to an acquisition of land, or any right over or interest in land” (paragraph 39). General principles of compensation apply in paragraph 7 cases (paragraph 51).

[31] Schedule 4 did not make specific provision for betterment or the Pointe Gourde rule. The provisions were described as “bespoke”. Counsel acknowledged that in Bocardo SA v Star Energy UK Onshore Ltd the Supreme Court had applied to the Pointe Gourde principle as a matter of statutory construction. The case could be distinguished because it concerned specific rights in land unlike necessary wayleaves which involved personal rights. It was difficult to identify the “scheme” in order to apply the no scheme rule and this was in any event a factual matter for which evidence would be required. The “scheme” as postulated by the respondents did not include the erection of the South Camaloun turbine, at its highest the scheme related only to the cabling which was fatal to the Pointe Gourde rule applying to the turbine.

[32] The court could take account of the potential of the land, including its development potential: Scottish Hydro Electric Transmission plc v Auquhirie Land Company Limited. In McKibben v Northern Ireland Electricity Limited compensation for diminution in market value caused by the grant of a necessary wayleave was assessed as the difference between the “unencumbered” value and the “encumbered” value.

[33] Reference was made to the “pointers” for identifying the extent of the scheme to which the Pointe Gourde principle may apply: Waters v Welsh Development Agency, Lord Nicholls at paragraph 63. It was difficult to identify “the project” envisaged by his Lordship at paragraph 58, involving works for certain purposes. It was in any event clear from the passage at paragraph 65 that if premium value was pre-existent to the scheme then regard must be had to that value. Reference was made to Wards Construction (Medway) Limited v Barclays Bank as an example of a premium value having accrued independently of the scheme.

[34] Under the foregoing background if the equipment were to be removed from the applicant’s land there would be no connection to the turbine on the neighbouring land or the ability to export the electricity. The applicant’s land not being subject to the necessary wayleave would acquire a premium value based on the need for someone to connect the South Camaloun turbine to the grid, thus leading to the need to negotiate for the right to export electricity via the claimant’s land, with the other options being too expensive. This was the basis of the applicant’s case and it fell within the terms of paragraph 7(1). It was submitted that what was sought was the difference in value of the applicant’s property before and after the equipment was removed. The difference between the encumbered value and unencumbered value was an ascertainable and demonstrable loss. It was not a hypothetical loss. It was not too remote in terms of the facts, or unreasonable.

[35] Even if the Pointe Gourde principle applied in principle to Schedule 4 cases, it was not possible to apply it in the particular circumstances since there was no scheme or equivalent thereof. The respondent had not explained how the scheme could be applied. There was no obvious “project” since the works had not been carried out by the respondents. Even if the principle did apply, it was open to the applicant to show that his land had pre-existing potential value if unencumbered by the necessary wayleave. The applicant’s land value was not inflated due to any scheme but due to the absence of alternative cost-effective routes available to South Camaloun.

[36] Counsel referred to Mercury Communications Ltd v London and India Dock Investments Ltd. This was a case under the 1984 Telecommunications Code where it was held that what was “fair and reasonable” required to be determined without regard to compulsory purchase principles, including the Pointe Gourde principle. It was pointed out at p157 that the court found the premium value of the right to lay cable ducts was pre-existent to the acquisition of the right in any event. Later on the court applied an analogy to a “wayleave rent” in which the owner of the land being crossed effectively charges a toll for the right to transport material by reference to the value or amount of material transported. It was also submitted that the Sheriff Appeal Court had erred in SSE Telecommunications Ltd v Millar. The rights they were dealing with were not “wayleaves” as the case report rubric suggests, and the Inner House had rejected the concept that telecommunication rights were wayleaves in Assessor for Tayside and others v Hutchison 3G Ltd and others.

[37] The statutory provisions concerning the respondents’ powers and duties did not assist them. The considerations applied by the reporter could not be applied to the paragraph 7(1) compensation provisions. The respondents should have applied the normal position of only accepting turbines on the grid where rights had previously been acquired from landowners.

[38] Turning to the averments subject to criticism for want of relevancy and specification, it was submitted that the tribunal should consider the full background of the case in order to consider the Pointe Gourde principle. The second voluntary wayleave and the fact that the respondents had not carried out the work of installation were part of the background. The point concerning an alternative method of valuation was to preserve the possibility that the tribunal might take its own view as to how to approach valuation, as they had done in previous cases. There was no intention to advance a different claim but the tribunal might take a different view based upon the facts which emerged.

Discussion

[39] The question at this stage is whether the applicant has made a sufficient case to justify proceeding to a full hearing. We would propose to apply the usual test, i.e. whether the applicant’s case is bound to fail while reading his pleadings and other material at their highest in his favour.

[40] We would deal firstly with the analysis of the nature of the applicant’s case. In terms of paragraph 7(1) of Schedule 4 to the 1989 Act he is entitled as landowner to recover “compensation in respect of the grant” of the necessary wayleave. In this respect we are attracted to the analysis adopted by the Lands Tribunal for Northern Ireland in McKibben v Northern Ireland Electricity Limited at paragraphs 14-17. There the approach was for the measurement of loss as the diminution in market value of the claimant’s lands; that is the difference in market value with the equipment removed (“un-encumbered”) and the equipment in place (“encumbered”). In our view the applicant’s application and documents fairly set out a case for “compensation in respect of the grant,” namely the difference between the unencumbered and encumbered values of his land. This is in the sense that he offers to prove that the encumbered value is diminished on account of the loss of opportunity to negotiate with those behind the operation of the South Camaloun turbine.

[41] We turn to the main issue for the debate. In essence the applicant’s position is that following upon termination of the first voluntary wayleave, and but for the application and grant of the necessary wayleave, the respondents would have been required to remove at least part of the cable from his land. Only by operation of the statutory timetable in paragraph 8 of Schedule 4 to the 1989 Act, by which the right to retain the cable was protected for the duration of the statutory process, and by the subsequent grant of the necessary wayleave, were the respondents prevented from being required to remove the cable. But for the statutory process, the cable would no longer be subject to any wayleave. The voluntary wayleave having been terminated, and assuming there was no grant of necessary wayleave, it seems to us that the retention of the cable would fall to be governed by common law. In that event, we cannot avoid the conclusion that its retention would amount to an actionable encroachment: see opinion of Lord Brodie in William Tracey Limited v SP Transmission plc at paragraph [22]. On the hypotheses that the cable would have been required to be removed, and that there were no reasonable alternative routes, those behind the operation of the South Camaloun turbine would have been forced to negotiate with the applicant as holder of the key for access to the electricity grid. This opportunity has been lost since the grant of the necessary wayleave has had the effect of removing the key from the applicant’s hands. In these circumstances we do not think it can be said that the loss is hypothetical or incapable of being ascertained. Nor do we think it can be said, at least at this stage of the case, that there is no causal connection between the grant of necessary wayleave and the loss, or that the loss is too remote.

[42] The respondents’ main point, it seemed to us, was that the applicant having granted the voluntary wayleave to the respondents, and the respondents having adopted the cable as part of their distribution network, had put out of his hands the ability to deny any other person access to the cable. They contend only the respondents as licensed distributors of electricity had access to the cable, and not the applicant. However we think this argument cannot withstand the relentless logic of the applicant’s position. The applicant’s position supposes that the distribution network post-adoption would or could have been lawfully dismantled. There is no suggestion that the first voluntary wayleave was anything other than lawfully terminated. The relevant cable (or part of it) would have to be removed. Notwithstanding the respondents’ statutory powers and duties, they would have faced losing this part of the network. In that event there was, the applicant says, no underlying agreement between him and Mr Smart which would have entitled Mr Smart to continue using Meikle Camaloun Farm for the export of electricity or to replace the “to be removed” cable. Mr Smart and anyone behind him would have been forced to negotiate. In short, subject to what we say below, we were pointed to nothing in the respondents’ statutory powers and duties which afford immunity to the normal consequences of property law. We think it follows on this assumed background that the applicant has set out a case sufficient to merit further enquiry.

[43] We now turn to the “value to the owner” principle or the “no-scheme rule” known as the Pointe Gourde principle. In summary, this principle means that the pressing need of an acquiring authority for the subject land as part of a scheme should be disregarded when assessing its value for compensation purposes. Any premium value of the land “entirely due to the scheme underlying the acquisition” or “due to the very scheme of which the acquisition forms an integral part” falls to be disregarded: Bocardo SA v Star Energy, Lord Brown of Eaton-Under-Heywood, quotations at paragraph 81.

[44] Had the respondents acquired land or an interest in land under Schedule 3 to the 1989 Act, then in terms of paragraph 29 of that Schedule “the enactments in force in Scotland with respect to compensation for the compulsory purchase of land” shall apply. The Land Compensation (Scotland) Act 1963 thus applies to acquisitions under Schedule 3. A number of provisions in the 1963 Act in turn embody the Pointe Gourde principle in various sections and in various ways concerning the compulsory acquisition of land and rights in land. We need not repeat them here. But this is not the case for necessary wayleaves granted under paragraph 6 of Schedule 4 to the 1989 Act. Nowhere in Schedule 4 are the Compensation Acts adopted. As was commented upon by the Court of Appeal in Arnold White Estates Limited v National Grid Electricity Transmission plc at paragraph 11, Schedule 4 makes “bespoke” provision for compensation.

[45] In cases concerning acquisition of land or rights over land, the courts have been prepared to apply the Pointe Gourde principle where there is a “gaping lacuna in the code to be applied”: speech of Lord Nicholls at paragraphs 53-54 in Waters v Welsh Development Agency. As he put it, the courts have found themselves driven to conclude that the statutory code is not exhaustive. The conclusion that in many instances the statutory provisions are otiose is less repugnant as an interpretation of the legislation than the alternative. Subsequently in Transport for London v Spirerose Ltd Lord Walker of Gestingthorpe said at paragraph 11:

“In this appeal there has been a good deal of debate about what the Pointe Gourde principle is, and whether it is relevant to the determination of the appeal. In my opinion it is an imprecise principle, in the nature of a rebuttable presumption, adopted by the court in the interpretation of statutes concerned with compensation for the compulsory acquisition of land. It can be stated at different levels of generality … It is only if the principle is stated at a fairly high level of generality (that the court approaches the statute expecting Parliament to intend compensation to be assessed on a ‘no scheme’ basis) that it has much to do with the determination of this appeal.”

The Appellate Committee proceeded to distance themselves somewhat from the “lacuna theory”: Lord Walker at paragraph 26 and Lord Collins at paragraph 126.

[46] More recently, in Bocardo, the Supreme Court by a majority applied the Pointe Gourde principle where the specific statutes, namely the Petroleum (Production) Act 1934 and the Mines (Working Facilities and Support) Act 1966, had failed to make express provision adopting the general compensation statutes. The case involved a statutory form of underground wayleave for pipelines to minerals. A close analysis of the specific statutes yielded the view that Parliament must have intended compensation “to be assessed on similar principles to the assessment of compensation under other compulsory purchase legislation…”: Lord Brown paragraphs 71-75. The construction exercise was more with reference to statutory context than to a particular word or phrase.Thus it can be observed that the Supreme Court applied the Pointe Gourde principle at a fairly high level of generality.

[47] The applicant sought to distance himself from the Pointe Gourde principle on the basis that the decided cases had concerned interests in land and not, as necessary wayleaves have been described, as a form of statutory license or consent: Stynes v Western Power (East Midlands) plc paragraph 47. While that may be so, we do not see in principle why such a distinction should have the effect of removing a wayleave case from the Pointe Gourde principle where the principle should otherwise be applied. It is no doubt the case that most of the case law on the subject involves cases of acquisition of land or acquisition of rights in land. That, it seems to us, is happenstance. And in any event the present necessary wayleave cannot be wholly divorced from principles of landownership since for its duration it will bind successors in title: see Schedule 4 paragraph 6(6) and opinion of Lord Brodie in William Tracey Limited at paragraph [25].

[48] In Arnold White Estates it is clear that the court considered the “value to owner” principle to be applicable in the context of a paragraph 7(1) claim for compensation for the statutory grant of an electricity wayleave: Briggs LJ at paragraphs 26 and 28. “Value to owner” is, of course, an aspect of a “no scheme” approach: Lord Nicholls at paragraph 41 in Waters. We also note that in Welford the Court of Appeal applied paragraph 7(1) with regard to the “general principles” applicable to payment of compensation for compulsory acquisition: cf paragraph 14. And Bocardo was a statutory wayleave case where the principle was held to apply.

[49] The respondents sought to derive further support to their position from SSE Telecommunications Ltd v Millar. The case dealt with two issues, only the second of which is relevant for present purposes. In dealing with the second issue, the Sheriff Appeal Court applied the Pointe Gourde principle to the acquisition of rights granted under Schedule 2 of the Telecommunications Act 1984 (“the 1984 Telecoms Code”). In summary the Sheriff Appeal Court took the view at [49]:

“It follows in construing para 7 (of the 1984 Telecoms Code), and in particular the words ‘fair and reasonable’, the principles of compulsory purchase acquisition, including Pointe Gourde, must be applied, and the consideration payable must be assessed by reference to value to the defender, as owner rather than to the pursuer. As was the case in Bocardo, what is ‘fair and reasonable’ must then be assessed against the background that should agreement not be reached there is a right of compulsory acquisition … [50] … it may be more accurate to say that Bocardo is binding as to the approach to be taken to the construction of a statute which provides the compulsory acquisition of rights in land …”

[50] We have to point out that we consider the result in Millar appears questionable in the context of the 1984 Telecoms Code. Our view of the matter can only be explained by a close examination of the details. The leading authority for the proposition that the Pointe Gourde rule did not apply to the 1984 Code is the longstanding decision in Mercury Communications Ltd v London and India Dock Investments Ltd (conclusion at p156). Paragraph 7(1)(a) of the 1984 Telecoms Code made provision for “payment of consideration … as it appears to the court would have been fair and reasonable …” Separate provision was made in sub-para (b) for ensuring relevant persons are “adequately compensated.” This dual formulation including both “fair and reasonable … consideration” and “compensation” had led to Code rights being negotiated against a “with scheme” background. An example of how the industry worked is to be found in Hutchison 3G (UK) Ltd v Assessor for Renfrewshire where telecoms sites were assessed for rates. The open market value of telecoms sites during 2002 and 2003, based on a survey of 636 site rents in Scotland, produced for example “greenfield” site rents of £4,000 per annum (para 40). Rentals at this level could only represent a “with scheme” sum well above the sort of existing use values achievable on a strict “no scheme” or “value to owner” basis. We intend no criticism for Hutchison 3G not being drawn to the Sheriffs’ attention, which report will only be found in specialist databases, but their decision to the contrary would have represented a considerable surprise to the property industry. It appears that counsel for the defender in Millar expressly disavowed reliance upon Mercury Communications. Although the report does not say so we infer this could only have been for tactical reasons. But it follows that the merits of Mercury Communications are not discussed at all in Millar, and nor was the industry practice which coincided with that decision.

[51] In Bocardo there was a passing similarity to the Telecoms Code because the relevant legislation provided:

“compensation or consideration in respect of any right … shall be assessed by the court on the basis of what would be fair and reasonable between a willing grantor and a willing grantee.”

But it went on:

“In determining the amount of any compensation to be paid in respect of the grant of any right, an additional allowance of not less than 10% shall be made on account of the acquisition of the right being compulsory.”

One of the reasons why Lord Brown, who was in the majority in Bocardo, did apply the Pointe Gourde principle was because the legislation contained the above passage. The “10% uplift” is a provision sometimes found in old statutory compensation statutes and is, accordingly, to be associated with cases where compensation principles do apply. As he put it at paragraph 71:

“And to my mind such a supposition becomes more bizarre still when one recognises that Parliament expressly stipulated for not less than a 10% uplift in statutory compensation payable on account of the landowner being powerless to deny the license holder the ancillary right he requires. Why would Parliament both allow him to exploit his bargaining position for all the world as if parties’ negotiation was taking place in a routine commercial context beyond the reach of legislation and then upwards of 10% simply because he cannot at the end of the day refuse to grant the ancillary right required and is unable to charge for it more than is fair and reasonable?”

[52] The Telecoms Code subject to the Millar decision did not contain the “10% uplift.” Accordingly there was persuasive ground for distinguishing Bocardo from the position under the 1984 Telecoms Code, but this potential ground of distinction does not feature in the SAC’s discussion.

[53] But leaving Millar aside it is clear that the legislation in the present case provides only for “compensation” and not “consideration” in the more valuable sense. The weight of authority, particularly Arnold White Estates and Bocardo, strongly suggests that the Pointe Gourde principle is, in an appropriate case, applicable to claims under paragraph 7(1) of Schedule 4 to the 1989 Act. It then becomes necessary to establish whether a “scheme” in fact exists, and to identify the extent of that scheme. As Lord Nicholls said in Waters:

“58. I turn, then, to the question of how the extent of a scheme should be identified in today’s conditions. A scheme essentially consists of a project to carry out certain works for a particular purpose or purposes. If the compulsory acquisition of the subject land is an integral part of such a scheme, the Pointe Gourde principle will apply accordingly. Both elements of a project, the proposed works and the purpose for which they are being carried out, are material when deciding which works should be regarded as a single scheme when applying the Pointe Gourde principle to the subject land.

59. The extent of a scheme is often said to be a question of fact. Certainly identifying the background events leading up to a compulsory purchase order may give rise to purely factual issues of a conventional character. But selecting from these background facts those of key importance for determining the ambit of the scheme is not a process of fact-finding as ordinarily understood.”

His Lordship at paragraph 63 proceeded to provide specific “pointers” as to assist in applying the principle.

[54] If there is an identified scheme, there is also the issue as to whether any key value was “pre-existent” to the scheme. As adopted at paragraph 65:

“If a premium value is ‘entirely due to the scheme underlying acquisition’ then it must be disregarded. If it was pre-existent to the (scheme) it must in my judgement be regarded. To ignore the pre-existent value would be to expropriate it without compensation and would be to contravene the fundamental principle of equivalence …”

[55] It is the applicant’s position that there is no “scheme” in this case, but if one can be satisfactorily identified, then in any event his rights in question pre-existed or were independent of the scheme. It seems to us that in the light of the above passages, the whole matter of the Pointe Gourde principle is somewhat fact-sensitive. It will require an examination of the background facts, the statutory purpose of the acquisition and the relevant rights and obligations of the parties. Although both parties made submissions on the matter, inevitably the full background has not been explored or established. The principle will no doubt have to be adapted to fit, if possible, the present circumstances of wayleaves within an electrical distribution network. So we do not think it would be right for us to comment at this stage on the potential application of the principle to the facts of the case. We are clear that we should not seek to restrict the evidence to be led as to the background facts and circumstances. For these reasons we are not prepared to accede to the respondent’s motion for dismissal, or to restrict the evidence to be led on the background factors.

[56] Finally there is also the fall-back position which the applicant makes in his pleadings as to the method of valuation. We are content with the explanation provided by the applicant’s counsel to the effect that the plea in question is merely to reserve the right to the Tribunal to produce its own differing assessment of compensation to the assessment led by parties, should the evidence led justify such a differing approach. This is consistent with the view that the Tribunal has what has been described as an investigatory role in assessing compensation: Compulsory Purchase and Compensation: The Law in Scotland (3rd ed), Professor Rowan Robinson and Farquharson-Black, paragraph 12-26 n220.

Conclusion

[57] We shall allow the case to proceed as accords.

[58] For the avoidance of doubt this Opinion is intended to be a decision for the purposes of the Tribunal and Inquiries Act 1992.

Addendum

[59] Once parties have considered their positions we would request that they contact the Tribunal Clerk in order to agree a suitable timetable for a full hearing. This will need to take account of the current restrictions with regard to scheduling evidential hearings. The timetable should include timescales for the lodging of any further documents, reports, lists of comparables as well as lists of witnesses, witness statements and lists of authority. Parties should provide an estimate for the length of the hearing.