Crichel Down Rules – recent case law on ‘material change’ and ‘threat of compulsion’

The recent High Court case of R (Charlesworth) v Crossrail Ltd and another [2018] EWHC 915 (Admin) considers the application of the Crichel Down rules (“Rules”) in the context of Crossrail.

The Court considered the application of the Rules alongside the C10 Land Disposal Policy (“C10 Policy”), which is specific to the Crossrail project, however the decision provides some interesting guidance for any disposing organisation applying the Rules.

Facts

Mr Charlesworth (“Former Tenant”) had a 999-year underlease of business premises on the affected land. At the time, the London Development Agency (“LDA”) owned the freehold to the site.

The freehold of the land (as part of a larger site) was purchased by a housing developer (“Developer”) from LDA at a time when compulsory acquisition was imminent. The Developer then sold part of that site, including the affected land, to TfL as a compulsory acquisition just four days later for construction of Crossrail.

The properties were then demolished for the construction of an underground station and the railway line. Once construction had been completed, the surface of the land was no longer required by TfL.

Crossrail Ltd (acting on behalf of TfL) decided to offer the land for sale at market value, as a development site for a proposed scheme of 394 residential units plus 734 square metres of non-residential floor space.

The disposal was governed by the Rules, supplemented by the C10 policy

In application of the Rules (as supplemented by the C10 Policy), Crossrail Ltd offered the development site to six holders of qualifying interests, which included both the Former Tenant and the Developer.

Both the Former Tenant and the Developer expressed an interest in acquiring an interest in the site.

On the basis that Crossrail Ltd had received competing bids from holders of qualifying interest, it decided to offer the site for sale on the open market.

The decision was challenged by the Former Tenant, who sought a judicial review on the following basis:

• The Former Tenant had been deprived of his rights as a dispossessed property owner by the application of the Rules (as supplemented by the C10 Policy); and
• The Developer had collaborated with Crossrail Ltd in order to obtain a qualifying interest in the site. The acquisition by the Developer had not occurred “by or under threat of compulsion” and “the land was publicly or privately offered for sale immediately before the negotiations for acquisition”.

The Former Tenant therefore did not believe that the Developer did hold a qualifying interest.

High Court Decision

The High Court held that the Former Tenant did have a qualifying interest and was entitled to compensation for the loss of this interest.

The Court went on to state that because the properties on the land had been demolished and ventilation fans and access points installed for the underground station as part of the construction, there had been a material change in the character pf the land. The Former Tenant was therefore not entitled to be offered the first opportunity to purchase the land back.

As to the second limb of the Former Tenant’s argument, the Court reviewed the Rules alongside the C10 Policy and noted that both limited the application of the policy to cases where the interest in the site had been acquired compulsorily or under the threat of compulsory purchase.

The Court held that neither the Rules nor the C10 Policy excluded a person who had recently acquired a freehold interest in land that was already under threat of compulsory acquisition, with a view to selling it to the acquiring authority. The Court made it clear that such a transaction was not contrary to the underlying purpose of the Rules or the C10 policy.

The site fell within the compulsory purchase powers of the Crossrail Act 2008 and was required for the construction of the station and railway. On this basis, TfL had the power to compulsorily acquire the site where agreement was not reached with the landowner.

The sale to TfL had been negotiated in the context that those compulsory purchase powers would be exercised where agreement for sale was not reached. The agreement for sale between the Developer and the acquiring authority did not exclude the transaction from the application of the Rules (or the C10 Policy). The acquisition could still be classed as having taken place under the threat of compulsion.

There is an exception under the Rules which excludes from the effect of the Rules any voluntary sale to an acquiring authority before negotiations for compulsory acquisition take place. However on the facts of this case, the exception did not apply because compulsory acquisition was already imminent by the time the Developer sold the land to TfL.

The case provides confirmation that the Rules will apply in a situation where a developer purchases an interest in land under threat of compulsory acquisition, with a view to sell that land to the acquiring authority. This is notwithstanding that the motivation behind such a transaction is to further the developer’s commercial interests.