Committee Reports > List of Committees > Joint > 1985 > Committee on Building Land > Report - Building Land

Appendix 9

Counsel’s Opinion* on Aspects of the Compulsory Purchase Code

Introduction

Compulsory acquisition of land has been recognised as an inherent right of the sovereign power since very early times. The right acquired increasing importance as a result of the Industrial Revolution and of the acceptance by the State of growing responsibility for the provision of public services and amenities.

The first growth in the application of powers of compulsory acquisition accompanied the expansion of railways in the early part of the nineteenth century. Railways were particularly susceptible to extortion by owners of land along proposed routes. Compulsory acquisition powers were essential to the development of the railway system. Similarly, the development of water, sewerage, gas and electricity undertakings required powers of compulsory purchase in order to develop.

Prior to 1845, compulsory powers of acquisition were embodied in the special Act empowering the particular acquisition. In 1845, the first Land Clauses Consolidation Act set forth a more unified acquisition procedure and a unified code of compensation. The Act was amended on a number of occassions and the Acts when read together contained provisions dealing with the acquisition of the necessary land, the ascertainment and payment of the purchase money, the use of the land to be acquired and its ultimate disposal.

The general effect of the Act of 1845, as judicially interpreted, was to provide (a) compensation for the land taken on the basis of its value to the owner though including any potential use which might enhance its value to a purchaser, plus a 10 per cent solatium in recognition of the compulsory nature of the purchase and the vendor’s consequent lack of option, (b) compensation for damage caused to other land in the same ownership as a result of severance from the land taken or other injurious affection resulting from the compulsory acquisition, (c) compensation for injurious affection to other neighbouring land provided that the damage affects the land itself and not merely some personal right and (d) compensation for disturbance.

The Land Clauses Consolidation Acts remained the basis for the payment of compensation for land taken compulsorily until the passage of the Acquisition of Land (Assessment of Compensation) Act 1919.

In Ireland, the principal functions of Local Government up to 1878 were exercised by Grand Juries in relation to the building and repair of roads and bridges and the Boards of Guardians and the Superintendents of the Work Houses. The Public Health Legislation of that year gave new powers to Urban and Rural Sanitary Authorities. Section 203 of the Public Health (Ireland) Act, 1878, enabled the Sanitary Authorities to acquire land compulsorily. The Labourers’ Act of 1883 and the Housing of the Working Classes’ Act, 1890, conferred fresh powers of compulsory acquisition on Local Authorities as did the Local Government Act of 1898.

The modern legislation which deals with the powers of Local Authorities to compulsorily acquire land is to be found principally in the provisions of the Housing Act, 1966, as amended.

Whilst the principal Statutory authority for the compulsory acquisition of land is to be found in the Housing Acts, the modern Statutory basis of compensation is to be found in the Acquisition of Land (Assessment of Compensation) Act, 1919, and the Local Government (Planning and Development) Act, 1963.

The rationale underlying the Statutory provisions is to the effect that the owner of the land which is compulsorily acquired should get precisely what it was worth to him in money terms immediately before the acquisition.

The dictum of Fletcher Moulton L.J., in Re Lucas and Chesterfield Gas and Water Board (1909 1 Kings Bench 16) is regarded as the authoritative statement of the law on the subject of compensation. He said:-

“The principle upon which compensation is assessed when land is taken under compulsory powers is well settled. The owner receives for the lands he gives up their equivalent, i.e. that which they were worth to him in money. His property is, therefore, not diminished in amount, but to that extent, it is compulsorily changed in form. But the equivalent is estimated on the value to him, and not on the value to the purchaser, and hence it has from the first been recognised as an absolute rule that this value is to be estimated as it stood before the grant of the compulsory powers. The owner is only to receive compensation based upon the market value of his lands as they stood before the scheme was authorised by which they are put to public uses. Subject to that, he is entitled to be paid the full price for his lands, and any and every element of value which they possess must be taken into consideration insofar as they increase the value to him.”

Section 2 of the Act of 1919 sets forth a series of rules which were to be applied when assessing compensation to the owner of compulsorily acquired lands. These rules which were six in number have now been augmented by ten additional rules which are inserted by the 1963 Local Government (Planning and Development) Act, 1963. These ten additional rules for the most part set out matters which are either to be regarded or disregarded in assessing compensation.

The Principal Rule

There can be no doubt but that Rule 2 of the rules prescribed by the Act of 1919 is the cardinal one. It is as follows:-

“The value of the land shall, subject as is hereinafter provided, be taken to be the amount which the land as sold in the open market by a willing seller might be expected to realise: provided always that the arbitrator shall be entitled to consider all returns and assessments of capital value for taxation made or acquiesced in by the claimant.”

It emerges from this rule that the value must be the market value. That is to be ascertained by fixing the price which a willing vendor might reasonably expect to obtain from a willing purchaser. Lord Romer expressed the following view in relation to the matter:-

“The compensation must be determind, therefore, by reference to the price which a willing vendor might reasonably expect to obtain from a willing purchaser. The disinclination of the vendor to part with his land and the urgent necessity of the purchaser to buy must alike be disregarded. Neither must be regarded as acting under compulsion.” (1939 Appeal cases 302 at 312).

In the absence of agreement between the acquiring authority and the landowner, the measure of compensation is fixed by an arbitrator. Normally, evidence is adduced before him of prices paid for comparable property in the neighbourhood of the land which is sought to be acquired. In addition, expert opinion is adduced based on such comparable sales as to the market value of the property.

The Recommendation

The Joint Committee proposes a change in the basis on which compensation is to be assessed so as to ensure:-

•that any valuation of the land should reflect its true development potential on the understanding that development would be completed within a reasonable timescale and would take into account the market demand for such development together with the potential supply from other sources.

•The elimination of the effect which ill-founded expectations on the part of the landowner or any purchaser might have on land prices.

•the elimination of the effect of land being held for asset purposes.

These recommendations, if implemented, would undoubtedly bring about a change in the basis on which compensation is asessed. It is hoped that they would modify the application of Rule 2 of the 1919 Rules in the interests of the common good. The question then arises as to whether such a modification would infringe Constitutional entitlements.

The Constitution

The fundamental rights provisions of the Irish Consitituion are contained in Articles 40 — 44. Two particular Articles fall to be considered. They are Articles 40.3 and Article 43. They recite as follows:-

“Article 40.3.1. The State guarantees in its laws to respect, and, as far as practicable, by its laws to defend and vindicate the personal rights of the citizen.

“Article 40.3.2. The State shall, in particular, by its laws, protect as, best it may from unjust attack, and, in the case of injustice done, vindicate the life, person, good name, and the property rights of every citizen.

“Article 43.1. The State acknowledges that man, in virtue of his rational being, has the natural right, antecedent to positive law, to the private ownership of external goods.

“Article 43.1.2. The State accordingly guarantees to pass no law attempting to abolish the right of private ownership or the general right to transfer, bequeath, and inherit property.

“Article 43.2.1. The State recognises, however, that the exercise of the rights mentioned in the foregoing provisions of this Article ought, in civil society, to be regulated by the principles of social justice.

“Article 43.2.2. The State, accordingly, may as occasion requires, delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good.”

The relationship between the two Articles cited above gave rise to a considerable amount of judicial controversy for a long number of years. Inconsistent and indeed contradictory judgements were handed down by the Supreme Court over a period of years but that controversy need no longer be of concern since the Supreme Court in Blake. V. Attorney General (1982), Irish Reports 117, answered the question authoritatively. The Supreme Court said as follows:-

“Article 43 is headed by the words ‘Private Property’. It defines the attitude of the State to the concept of the private ownership of external goods and contains the State’s acknowledgement that a natural right to such exists, antecedent to positive law, and that the State will not attempt to abolish this right or the associated right to transfer, bequeath and inherit property. The Article does, however, recognise that the State ‘may as occasion requires delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good’. It is an Article which prohibits the abolition of private property as an Institution but at the same time permits, in particular circumstances, the regulation of the exercise of that right and the general right to transfer, bequeath and inherit property. In short, it is an Article directed to the State and to its attitude to these rights which are declared to be antecedent to positive law. It does not deal with the citizen’s right to a particular item of property (such as a house affected by the Rent Control Laws). Such rights are dealt with in Article 40 under the heading ‘personal rights’ and are specifically designated among the personal rights of citizens. Under this Article the State is bound, in its laws, to respect in as far as practicable to defend and vindicate the personal rights of citizens.

“There exists, therefore, a double protection for the property rights of a citizen. As far as he is concerned, the State cannot abolish or attempt to abolish the right of private ownership as an Institution or a general right to transfer, bequeath and inherit property. In addition he has the further protection under Article 40 as to the exercise by him of his own property rights in particular items of property.”

Having regard to the above quotation, it appears to me that an examination of the question which is posed for me in this Opinion does not require a consideration of Article 43 of the Constitution. The reason for that is that an amendment to Rule 2 of the 1919 Act would not purport or attempt to abolish private property as an Institution. Such an amendment does, however, fall to be considered under the provisions of Article 40.3, so as to ascertain whether or not it is an unjust attack on the landowner’s property rights.

In the Blake case (Supra) the Supreme Court found that the Rent Control legislation was an unjust attack on the plaintiff’s property rights as protected under Article 40.3 The reduction of the value in the landlord’s interest in such property was achieved arbitrarily and without compensation. The attempt by the legislature to fill the vacuum created by the striking down of the Rent Control legislation was equally ineffective. Giving the judgement of the Supreme Court in Inre Article 26 and the Housing (Private Rented Dwellings) Bill 1981, O’Higgins C. J. said:-

“The effect of the rebate permitted by Section 9 is that, for a period of five years after the passing of the Bill, Landlords are to receive an amount which will be substantially less than the just and proper rent payable in respect of their property. In the absence of any Constitutionally permitted justification this clearly constitutes an unjust attack upon their property rights. The Bill offers no such justification for depriving the landlord of part of his or her just rent for the period specified in the Bill. This Court has already held that the pre-existing rent control constituted an unjust attack upon property rights. In such circumstances, to impose different but no less unjust deprivation upon landlords cannot but be unjust having regard to the provision of the Constitution.”

What amounts to an unjust attack has to be considered in the light of the particular facts of any case. Decisions of the High and Supreme Court can be found on either side of the line and there is not a great deal to be achieved by citing the facts of individual cases and attempting to extract principles from them. What is clear is that a Statutory provision which attacks property rights in an arbitrary or irrational manner and which does not provide for the payment of compensation will be extremely susceptible to Constitutional attack. (See for example, Brennan. V. Attorney General (1983) Irish Law Reports Monthly 449, and Director of Public Prosecutions. V. McDonald (1983) Irish Law Reports Monthly 213.)

It does not appear to me that the amendment proposed in respect of Rule 2 of the Compensation Rules could be regarded as either irrational or arbitrary and the matter which then has to be considered is whether or not the dilution in the compensation payable would constitute an unjust attack.

There is at this stage a substantial body of case law in which plaintiffs have attempted to set aside the rights of various Bodies to compulsorily acquire land. See for example, O’Callaghan. V. Commissioner of Public Works (1983, Irish Reports Monthly 391), E.S.B. V. Gormley (29th July 1983), O’Brien. V. Bord Na Mona (1983 Irish Reports 256) and Private Motorists Provident Society. V. Attorney General, (1983 Irish Reports 339). In all of these cases, the Court was satisfied that there was nothing unconstitutional in the various powers of expropriation which were given to the Bodies in question. Indeed, in the PMPS case the Supreme Court said:-

“The Oireachtas was bound to legislate having regard to the requirements of the common good. It is clear from the conclusions of the learned trial Judge on the evidence she heard that the regulation and control effected by the legislation was reasonable and was in accordance with the public interest and with the requirements of the common good. It cannot, therefore, be regarded as unjust attack on property rights.” (It is interesting to note that in that case there was no compensation payable in respect of the property rights which were allegedly being interfered with).

Having regard to the Body of Law cited above, there can be little doubt but that the present entitlement on the part of Local Authorities to compulsorily acquire, on payment of full market value compensation, is Constitutionally sound. If the recommendation of the Joint Committee were to be implemented, less than full market value in the present accepted sense of that phrase would be payable to the landowner. Would this consitute an unjust attack on the Constitutional right to property?

From an examination of the cases which deal with Statutory entitlements of various Bodies to compulsorily acquire land, it does not appear that there is any settled law on the Constitutional status of compensation. Some cases provide for simple expropriation, others for partial compenssation at less than market value, and others full market value.

In Central Dublin Development Association. V. Attorney General (109 Irish Law Times Report 69), Kenny J. said:-

“The State has pledged itself by Article 40.3 by its laws to protect as best it may from unjust attack the property rights of every citizen: and while some restrictions on the exercise of some of the rights which together constitute ownership do not call for compensation because the restriction is not an unjust attack, the acquisition by the State of all the rights which together make up ownership without compensation would in almost all cases be such an attack.”

Part 6 of the Planning Act of 1963 which was being challenged provided that in several different sets of circumstances no compensation was to be payable in respect of interference by the Planning Authority with what would be property rights.

The Judge held all these exclusions of compensation to be Constitutional. In the most recent case in which this question fell to be considered by the Supreme Court, namely, Dreher. V. Irish Land Commission, the plaintiff attacked the provisions of the Land Acts which provided that on compulsory acquisition of his lands, he was to be paid in land bonds with the nominal value with which his land had been assessed. The actual cash value of these bonds was less than the nominal value. He complained that the legislation had deprived him of the admitted value of his land and was, he said, unconstitutional. Walsh J. in the Supreme Court took the view that the provision was not patently inconsistent with the Constitution, and that as the relevant section required the land bonds to be issued at a rate which made them as near as could be reasonably achieved equal in actual value to the price fixed, it could not be read as creating any reasonably avoidable injustice or indeed, any real injustice. The judgement is important, however, from certain statements which are made at the beginning. The Judge said in relation to the question of compensation relative to compulsory acquisition:-

“It may well be that in some particular cases social justice may not require the payment of any compensation upon a compulsory acquisition that can be justified by the State as being required by the exigencies of the common good. It is not suggested that the present case is one such, nor is it in dispute that in the present case the appellant was entitled to just compensation for the land compulsorily acquired from him. It does not necessarily follow that the market value of lands of any given time is the equivalent of just compensation as there may be circumstances where it could be considerably less than just compensation and others where it might in fact be greater than just compensation. The market value of any property whether it be land or chattels or bonds may be affected in one way or another by current economic trends or other transient conditions of society.”

In that case, therefore, the Supreme Court appeared to be taking the view that the true measure of compensation which is permissible is not by any means necessarily the market value of the property which is being acquired.

In these circumstances, and having considered the authorities, I take the view that the amendment which is proposed to Rule 2 of the Compensation Rules does not and will not constitute an unjust attack upon the property rights of the landowner whose land is being acquired. The Courts have admitted the entitlement of the State to compulsorily acquire land provided that it is necessary in the common good so to do. It is self-evident that in the case of a Local Authority such a power is necessary and has been in existence for a very long time. But the Courts have gone further. They have indicated that the measure of compensation payable upon a compulsory acquisition is not necessarily the market value of the land. Indeed, as Walsh J. has indicated, no compensation at all may be payable in some circumstances if such is required by the exigencies of the common good. The dilution in the quantum of compensation payable which will be brought about as a result of the implementation of the proposal appears to me to be one which is capable of being defended as reasonable, rational and in the interest of the common good. I am, therefore, of the view that any Constitutional attack which might be made upon the proposal when implemented would be unlikely to succeed. It does not appear to me that the proposal could be regarded as an unjust attack upon the property rights of the landowner. A change in the basis of compensation can, in my view, be justified as being in accordance with the public interest and with the requirements of the common good.

I, therefore, answer the first question in the affirmative, i.e. that the State can modify the application of the market value principle contained in Rule 2 in the interests of the common good and of what may be considered fair and reasonable on the grounds specified.

As a subsidiary to the first question I was asked to make a comment on the proposal that arbitrators in determining the compensation to be payable to a landowner should be required to publish the reasoning, arguments, etc., on which their valuations are based. This does not raise any Constitutional question. The idea of the proposal would be that over a period of time, a corpus of arbitrators’ decisions would be built up which could be used in future cases as a reference although it is not apparently envisaged that one arbitrator’s decision would be binding upon another. Whilst there is something to be said for this proposal, it appears to me that the disadvantages of it far outweigh the advantages which might be achieved. As it is not intended that any formal binding precedent should be created by an arbitrator’s decision, the recording of it and the necessity for reasons to be stated cannot be of any great value. The disadvantages, however, are, in my view, legion. Under the present discipline, an arbitrator is not required to state reasons. The rights of appeal or of judicial review are very limited. If the arbitrator is required to state reasons, then it is, in my view, inevitable that the number of appeals to the High Court or applications for judicial review will increase enormously. In other words, a whole new area of case law will be built up by people attacking the findings of arbitrators in the Courts. This in turn will lead to even further delay in an area where attempts should be made to minimise rather than increase the already slow and cumbersome procedures. From a practical point of view, therefore, I would be against requiring arbitrators to set forth the reasoning on which their valuations are based.

Basic Compensation Rules

In assessing compensation, the arbitrator is bound by certain statutory rules. The six basic rules are contained in Section 2 of the Acquisition of Land (Assessment of Compensation) Act, 1919 and are summarised below:-

1.No allowance shall be made on account of the acquisition being compulsory.

2.Subject to the following rules, the value of the land shall be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise; the arbitrator may, however, consider all returns and assessments of capital value for taxation made or acquiesced in by the claimant.

3.The special suitability or adaptability of the land for any purpose shall not be taken into account if that purpose is a purpose to which it could be applied only in pursuance of statutory powers, or for which there is no market apart from the special needs of a particular purchaser or the requirements of a Government Department or any local or public authority.

4.Any value attributable to the land or any premises on the land being used in an manner which could be restrained by any court, or which is contrary to law, or detrimental to the health of the inmates or to public health, shall not be taken into account.

5.Where the land is, and, but for the compulsory acquisition, would continue to be devoted to a purpose of such a nature that there is no general demand or market for land for that purpose, the compensation may, if the arbitrator is satisfied that reinstatement in some other place is bona fide intended, be assessed on the basis of the reasonable cost of equivalent reinstatement.

6.The provisions of Rule 2 shall not affect the assessment of compensation for disturbance or any other matter not directly based on the value of land.

Additional Rules were added by the Local Government (Planning and Development) Act, 1963, on the following lines:-

7.In the case of buildings, the reference in Rule 5 to the cost of equivalent reinstatement is to be taken as that cost not exceeding the estimated cost of buildings such as would be capable of serving an equivalent purpose over the same period of time as the buildings acquired would have done, having regard to any structural depreciation of those buildings.

8.The value of the land shall be calculated with due regard to any restrictive covenant entered into by the acquirer when the land is acquired.

9.Regard shall be had to any restriction on the development of the land in respect of which compensation has been paid under the Local Government (Planning and Development) Act, 1963.

10.Regard shall be had to any restriction on the development of the land which could, without conferring a right to compensation, be imposed under any Act or under any order, regulation, rule or bye-law made under any Act.

11.Regard shall not be had to any depreciation or increase in value attributable to (i) the land, or any land in the vicinity being reserved for a particular purpose in a development plan, or (ii) inclusion of the land in a special amenity area order.

12.No account shall be taken of any value attributable to any unauthorised structure or unauthorised use.

13.No account shall be taken of the existence of proposals for development of the land or other land by a local authority or possibility or probability of the land or other land becoming subject to a scheme of development undertaken by a local authority.

14.Regard shall be had to any contribution which a planning authority would have required as a condition precedent to the development of the land.

15.Definitions explaining terms used in the preceding Rules (“development plan”, etc.).

16.In the case of land incapable of reasonably beneficial use which is purchased by a planning authority under Section 29 of the 1963 Act, the compensation is to be the value of the land exclusive of any allowance for disturbance or severance.

In addition to the foregoing 16 Rules, the arbitrator is restricted by other legal provisions contained in the Third and Fourth Schedules to the Housing Act, 1966:

(i)He cannot take into account any interest in the land created after the date on which notice of the making of the CPO was served.

(ii)The value of any building erected or any improvement or alteration made after that date must be disregarded if he is of opinion that the erection of the building or the making of the improvement or alteration was not reasonably necessary and was carried out with a view to obtaining or increasing compensation.

(iii)In the case of land consisting of a house which is unfit for human habitation and not capable of being rendered fit at reasonable expense, the compensation to be paid must be the value of the land, including the buildings on it, as a site cleared of buildings and available for development in accordance with current building bye-laws or building regulations, less the estimated cost of clearance. (There are, however, special safeguards for the owner. The house must be described in the Compulsory Purchase Order as being unfit for human habitation at and not capable of being rendered fit for human habitation at reasonable expense and the acquiring authority must be able to prove that it is so. The Minister must also be satisfied as to this before he can confirm a CPO which includes a house described as unfit).

(iv)As regards property other than property covered by (iii) above, if the arbitrator is satisfied that the premises are in a state of defective sanitation or are not in reasonably good repair the compensation is to be the estimated value of the premises if put into a sanitary condition or reasonably good repair, less the estimated cost of doing so.

* Mr. Peter Kelly, Barrister-at-Law.