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United Kingdom Upper Tribunal (Lands Chamber)
You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> MWH Associates Ltd v Wrexham County Borough Council [2011] UKUT 269 (LC) (19 July 2011)
URL: http://www.bailii.org/uk/cases/UKUT/LC/2011/269.html
Cite as: [2011] RVR 263, [2011] UKUT 269 (LC)

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UPPER TRIBUNAL (LANDS CHAMBER)

 

 

UT Neutral citation number: [2011] UKUT 269 (LC)

LT Case Number: LCA/59/2009

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

COMPENSATION – modification order – review of mineral planning permission under Environment Act 1995 – basis of claim – whether depreciation of the value of land or loss of profits – Habitats Regulations 1994 – proposed use contrary to law – insufficient evidence to establish depreciation of value of land – whether loss directly attributable to modification order – claimant not intending to work the land – derogation licence to translocate great crested newts would not have been granted in absence of modification order – no compensation payable

 

 

IN THE MATTER OF A NOTICE OF REFERENCE

 

 

BETWEEN MWH ASSOCIATES LIMITED Claimant

and

 

WREXHAM COUNTY BOROUGH COUNCIL Compensating

Authority

 

Re:  Hafod Quarry and Landfill Site

Bangor Road

Johnstown

Wrexham

LL14 6ET

 

 

Before: The President and A J Trott FRICS

 

 

Sitting at Manchester Employment Tribunal, Alexandra House, 14-22 The Parsonage, Manchester M3 2JA

on 10-12 January 2011

 

 

Rhodri Price Lewis QC, instructed by DLA Piper UK LLP, for the claimant

Stephen Sauvain QC and Eric Owen, instructed by Geldards LLP, for the compensating authority

 

 

 

 

 

 

The following cases are referred to in this decision:

 

Bond and Others v Dorset County Council [2011] RVR 119

R (on the application of JHM Newsum) v Welsh Assembly Government [2004] EWCA Civ 1565

Commission v United Kingdom (case C-6/04) [2006] Env LR 29

Morge v Hampshire County Council [2011] UKSC 2

The following case was referred to in argument:

 

R (Fisher) v English Nature (CA) [2005] 1 WLR 147

 

 

 

 

 

 

DECISION

Introduction

1.           The claimant in this reference, MWH Associates Limited, is a waste management company that acquired ownership in February 2005 of a substantially excavated quarry known as Hafod Quarry and Landfill Site, Johnstown, near Wrexham, as a site for the disposal of waste.  The quarry and areas adjacent to it contain a population of great crested newts (GCN), a European protected species under Council Directive 92/43/EEC of 21 May 1992 on the Conservation of Natural Habitats and of Wild Fauna and Flora (the Habitats Directive).  Part of the quarry and adjacent areas were designated as a Site of Special Scientific Interest (SSSI) in June 2001 and a Special Area of Conservation (SAC) in December 2004.

2.           The quarry had been worked under a planning permission granted in October 1988.  The Environment Act 1995 required the periodic review of mineral planning permissions and, where necessary, the imposition of revised planning conditions.  The compensating authority, Wrexham County Borough Council (WCBC), as the mineral planning authority (MPA) approved revised conditions in respect of the 1988 permission on 4 September 2006.  Condition 4 of the revised conditions required the claimant to submit details showing that no mineral extraction would take place within any area notified as a SSSI/SAC or within any adjacent area where the integrity of the SSSI/SAC’s ecological features would be affected.

3.           Under the 1995 Act a restriction of working rights under conditions imposed under the review procedure has effect as if a modification order under section 97 of the Town and Country Planning Act 1990 had been made; and under section 107 of the 1990 Act a person interested in the land affected by a modification order is entitled to compensation in respect of any loss or damage which is directly attributable to the modification.  The claimant claimed compensation under this provision for expenditure, loss and damage incurred as a result of being unable to win and work minerals from the area of the site affected by the new condition 4 and, as a direct result thereof, for the expenditure, loss and damage incurred as a result of losing void space for landfill.

4.           The compensating authority resist the claim for compensation on two principal grounds.  They say, firstly, that the claimant did not in fact intend to work the minerals in the land or to use the void space for landfill; and, secondly, that it would in any event have failed to obtain the necessary derogation licence to permit the translocation of the GCN living on the land, so that it could not lawfully have worked the minerals.

5.           There is agreement on the amount of the compensation, on the assumption that the council fails in both these contentions, except that the cost of relocation of the GCN is dependent upon the date chosen to assess the size of the GCN population.  As at the valuation date of 4 September 2006 the agreed compensation is:

On the basis of the 1994 GCN population: £4,266,992

On the basis of the 2000 GCN population: £4,371,992

On the basis of the 2006 GCN population: £4,231,992

6.           Mr Rhodri Price Lewis QC appeared for the claimant and called as expert witnesses Ms Janet Irene Wilkinson BSc, a director of Wilkinson Associates Environmental Consultants and Mr Nicholas John Davies BSc MRICS, Managing Director of Stratus Environmental Limited.  Mr Stuart Jeffries BSc MRICS MIQ, a partner in Matthews & Son, Chartered Surveyors, produced expert valuation and rebuttal reports but he was not called to give evidence in view of the agreement between the parties about valuation issues.

7.           Mr Stephen Sauvain QC and Mr Eric Owen appeared for the compensating authority and called as expert witnesses Mr Robert Arnold Dewey BA MBA DipTP MRTPI, formerly the Planning Control Manager for Wrexham County Borough Council (now retired); Mr Matthew Arthur Robert Ellis BSc, Regional Species Officer in the North Region of the Countryside Council for Wales; and Dr Elizabeth Anne Howe, the Species Team Leader and Herpetologist in the Terrestrial Sciences Group of the Countryside Council for Wales.  Mr Paul John Malam BSC, MRICS, FIQ, a partner in Carter Jonas LLP, Property Consultants, produced an expert valuation report but he was not called to give evidence.

Facts

The site

8.           Hafod Quarry is located approximately 5km south west of Wrexham town centre and adjoins the eastern boundary of the village of Johnstown.  It is separated from the village by the Chester-Wrexham-Shrewsbury railway line.  The northern boundary of the site is formed by Bangor Road (B5426); the eastern boundary is New Hall Road which leads to New Hall Farm to the south.  The entrance to the site is from Bangor Road, approximately 300m west of its junction with the A483.

9.           The quarry has an area of approximately 33ha and has been worked for many years as a source of clay for use in tile manufacture.  Other mineral types, including sand and gravel, are found within the quarry.  The void created by the extraction of clay has subsequently been developed as an active landfill site accepting a variety of waste types.

10.        The claim area is located in the south west of the quarry site where no mineral extraction or land filling has taken place.  It appears to be formed from colliery spoil from the former Vauxhall Colliery which closed in 1928.  Several historic Ordnance Survey maps show that the area had been used as a tip from the colliery.  The valuers agreed that the claimant would have had to incur “extraordinary costs” before working the claim area, such costs including mine shaft capping and the removal of overburden.

Chronology

11.        The parties produced an agreed chronology of events.  From this and the evidence we determine the following facts.

(i) Ownership

12.        For the purposes of this reference the original owner of the claim area was Shropshire Waste Management Ltd (SWML), a subsidiary company of SITA UK Limited.

13.        In May 2001 Mersey Waste Holdings Limited (MWHL) instructed AIG Engineering Group Ltd to undertake an environmental due diligence exercise to verify the information on which it had based a valuation and offer to acquire Hafod Quarry from SWML.  The acquisition was to be effected through the purchase by MWHL of the shares in Hafod Quarries Ltd, a wholly owned subsidiary of SWML.  The due diligence report, prepared by AIG Consultants Limited, was issued in April 2002.

14.        MWHL acquired the entire issued share capital of Hafod Quarries Ltd on 18 February 2005 for £4,592,000.  The principal asset of the company was Hafod Quarry.  The site was operated by MWH Associates Ltd (the claimant), a wholly owned subsidiary of MWHL. (The principal and subsidiary companies are, unless the context otherwise requires, both referred to as MWH in this decision.)

15.        The claimant sold Hafod Quarry as an operational landfill site to Cory Environmental (Central) Ltd on 29 August 2008 for £12,073,000 but retained the rights to any compensation due to it from the compensating authority.

(ii) Planning

16.        On 25 October 1988 Clwyd County Council granted planning permission for the extraction of clay, sand and gravel at Hafod Quarry (the “1988 Mineral Permission”).  The permission was subject to 27 conditions and expired on 31 December 2048.  The proposed phasing of the clay extraction was amended by a planning permission dated 24 February 1992.

17.        On 6 December 1990 a planning application was made for the infilling and restoration to agriculture and amenity use of the quarry.  The application was refused by Clwyd County Council on 13 November 1991.  The applicant successfully appealed and the Secretary of State granted planning permission on 10 July 1995 (“The 1995 Landfill Permission”).  Planning permission to extend the period for the consideration of reserved matters was granted on 17 September 1998 (“The 1998 Landfill Permission).

18.        On 23 October 2003 a planning application was submitted for the review of the 1988 Mineral Permission (“the ROMP application”) in accordance with section 96 and Schedule 14 of the Environment Act 1995.  The application included a proposed condition (No.10) under which no extraction of sand and gravel would take place in Phase A (the claim area) until a detailed scheme of working had been submitted to and approved by the MPA.  Notice would then be served on the Countryside Council for Wales (CCW) notifying them of the intent to carry out operations within the SSSI, namely Phase A (the claim area).

19.        On the 28 October 2003 duplicate planning applications were submitted for the variation of the phasing and restoration schemes permitted under the 1995/1998 Landfill Permissions.  The purpose of the applications was to ensure that the Landfill Permissions were “congruent” with the phasing and restoration schedule shown in the claimant’s application under the Pollution, Prevention and Control (England and Wales) Regulations 2000 (the PPC Regulations) - see paragraphs 38 and 67 to 68 below.  Consistency between the planning and PPC regimes would assist with the achievement of the “best available techniques” for the development and operation of the site.

20.        One of the two applications was appealed for non-determination in January 2004; the other was refused by the council on 5 April 2004.  The appeal was allowed by the inspector on 26 August 2004 but his decision was subsequently quashed by the High Court on 28 June 2005.

21.        An environmental statement and environmental impact assessment were submitted in support of the ROMP application in September 2005.

22.        Following earlier correspondence in November 2005 and April 2006 the compensating authority wrote to the claimant on 25 May 2006 expressing “significant concerns” regarding possible clay extraction from the claim area (which was by then designated as a SSSI and SAC – see below).  They suggested that a voluntary agreement be entered into to ensure that no excavation work would take place within this area.  Subsequently, on 6 June 2006, the compensating authority proposed that consideration be given to entering into a section 106 agreement under which the protected (claim) area would be excluded from any development.

23.        The claimant wrote to the compensating authority on 10 July 2006 suggesting that both the 1988 Mineral Permission and the 1995/1998 Landfill Permissions should be modified to prevent any mineral extraction or tipping of waste in the SAC.

24.        The compensating authority’s planning committee resolved on 4 September 2006 to make modification orders in respect of the 1988 Mineral Permission and the 1995/1998 Landfill Permissions.  Three modification orders were made.  Those relating to the 1988 Mineral Permission and the 1995 Landfill Permission were made on 2 May 2007.  That relating to the 1998 Landfill Permission was made on 28 November 2007.  The modification orders excluded the SSSI/SAC from both mineral extraction and infilling.

(iii) Environmental

25.        The 1995 Landfill Permission was subject to a condition that before development commenced a survey of the quarry site would be carried out to establish the numbers of GCN present on the land.  A rescue programme for the relocation of the GCN had to be submitted to, and approved by, the MPA.  The GCN were a protected species under The Conservation (Natural Habitats, &c.) Regulations 1994 (the Habitats Regulations).

26.        A translocation report was prepared by Ecological Services Ltd in February 1999.  This proposed a phased relocation of the GCN population commencing with the eastern half of the site and thereafter relocating from the south western corner of the site (including the claim area) and then the north western area.  It was anticipated that the translocation would be completed in three phases over three years.  The receptor site was a new purpose built habitat with an area of 4ha located adjacent to the quarry site to the north of Bangor Road.  It had ten ponds and numerous purpose built hibernacula and suitable terrestrial habitat.  It was to be managed specifically for GCN.  This receptor site is referred to as site R1.

27.        On 4 March 1999 CCW granted a licence under the Habitats Regulations (a “derogation licence”) to Janet Wilkinson for the purpose of translocating the GCN from Hafod Quarry to R1.  On 11 March 1999 WCBC approved the details of the translocation scheme as a reserved matter under the 1995 Landfill Permission.  The phase 1 translocation was completed in October 1999.

28.        An application for a derogation licence for the second phase of the translocation was submitted by Janet Wilkinson (now of Young Associates) on 6 March 2000.  This application included the following note:

“(6) N.B.  The area marked orange on the attached plan [the claim area] is not now to be cleared of newts, but it is proposed that it is retained and a management plan prepared (subject to planning permission).  This area contains one pond and terrestrial habitat including scrub and grassland.  It is proposed to manage the area for the benefit of amphibians.”

29.        The second derogation licence was granted by CCW on 29 March 2000 and related to capturing previously translocated newts that had returned to the quarry and to translocating GCN from the environs of the Colomendy Lagoon extension area at the north-west of the quarry.  The second phase of translocation was completed in June 2000.

30.        While the second phase of the translocation was in progress CCW met with SWML on 25 May 2000 “to informally discuss the notification of Hafod as part of the Stryt Las & Hafod SSSI”.  The minutes of that meeting (as prepared by Matthew Ellis of CCW) record that “ME and CM [Christopher Male of SWML] confirmed the boundary of land at the landfill site that would not be worked.”

31.        On 5 July 2000 SWML wrote to CCW and referred to a meeting that it had held with Deeside Urban Wildlife Group “to discuss the long term management options for the receptor site and the area of the quarry not included in the translocation, both of which are being put forward for SSSI status.”

32.        The possibility of the claim area (referred to as “the old Vauxhall Colliery Tip”) being excluded from extraction and landfill works was referred to in a letter from WCBC to SWML dated 23 October 2000 in which the planning department said that “the principle of exclusion in the interests of nature conservation is likely to be acceptable”.

33.        Also on 23 October 2000 the Welsh Assembly recommended 29 sites as possible candidates for designation as SACs, including the “Johnstown Newt Sites”.  CCW notified SWML of this recommendation on 9 November 2000 and at the same time notified it of the proposed designation of the Stryt Las a’r Hafod SSSI.  SWML objected to the proposed SSSI on 26 February 2001 but stated that:

“However, it is our intention to submit an application seeking to amalgamate and vary the existing planning permissions to move the boundary of the landfill site further eastwards away from the proposed SSSI.  Hopefully relinquishing land for the purposes of nature conservation in line with your proposal (sic).”

34.        SITA, on behalf of SWML, wrote to WCBC on 9 March 2001 about the claim area:

“I can confirm that Shropshire Waste Management are now liaising with the Countryside Council for Wales.  We are considering moving the scheme away from the western boundary to provide for a possible nature conservation area….”

35.        The third phase of the translocation was implemented under a third derogation licence dated 19 April 2001 issued by The National Assembly for Wales (NAW) under regulation 44(2)(e) rather than by CCW under regulation 44(2)(c).  In the application for the licence the claim area is shown as a “reserve area”.

36.        On 9 April 2001 CCW informed WCBC that the Johnstown Newt Sites had been included in the list of candidate sites for designation as SACs in Wales.

37.        On 6 June 2001 CCW approved the confirmation of the notification of the Stryt Las a’r Hafod SSSI as it was made on 9 November 2000.  CCW notified SWML of this on 19 July 2001.

38.        On 26 November 2002 MWH applied to the Environment Agency Wales for a permit to dispose of waste in a landfill under the PPC Regulations.  The application excluded the claim area.  The permit was granted on 8 October 2004.

39.        A fourth Derogation licence was granted by NAW to MWH on 26 November 2004.  The purpose of this licence was to enable GCN that had re-entered the quarry following the previous phases of translocation to be removed prior to the commencement of landfill operations.  The method statement accompanying the application said:

“As part of this current translocation exercise, it is proposed not to use the original receptor site [R1], but to use other parts of the SSSI/cSAC adjacent to Hafod Quarry [the claim area], as requested by CCW.”

This area was chosen as the most suitable receptor site during discussions with CCW.  No GCN were counted in the claim area during the 1999-2001 translocation period and only two male GCN were seen here during a torch survey conducted in April 2004.  The lack of GCN in the claim area was attributed to the relatively poor quality of its habitat and as part of the application it was proposed to improve the availability of suitable habitats for GCN.  MWH said it was committed to ensuring that the receptor site at the claim area was managed for a 21 year period post translocation in accordance with a request from CCW.  MWH intended that “an appropriate body” be appointed to manage the site in consultation with CCW.

40.        The European Commission adopted the candidate SAC on 7 December 2004 following which NAW designated it as the Johnstown Newts Site SAC on 13 December 2004.

41.        A fifth derogation licence was granted by NAW on 14 June 2006.  Its purpose was to permit the removal of any remaining GCN which might be found within the quarry working area during activities connected with the permitted development of the site.  Any GCN which were captured would be translocated to either the original receptor site (R1) or to the “2005 receptor site” (R2: the claim area).  The method statement that accompanied the application said:

“4.3.2 The receptor sites (R1 and R2) will be managed for a 21 year period post-translocation in accordance with a request from CCW.  MWH is committed to ensuring that both receptor sites are managed appropriately in order to ensure the maintenance of the population of GCN, and is aware of the need to make financial commitments to ensure that this is the case … it is intended that an appropriate body is appointed to manage the R2 site, in consultation with CCW, for a 21 year period following the completion of the translocation scheme.”

Statutory provisions

42.        Three statutory regimes affect the claim area:

(i)          The provisions for the review of mineral planning permissions (ROMP) contained in section 96 and Schedule 14 of the Environment Act 1995.

(ii)        The provisions of Part IV of the Habitats Regulations which impose a duty on the competent authority (WCBC) to review any planning permission granted before the claim area became part of a SAC which is likely to have a significant effect on that SAC.

(iii)      The requirement to obtain a permit to dispose of waste in a landfill under the PPC Regulations.

(i) The review of mineral planning permissions

43.        Section 96 and Schedule 14 of the Environment Act 1995 require the periodic review of mineral planning permissions.  Under Schedule 14 paragraph 2(1) mineral permission means:

“any planning permission, other than a planning permission granted by a development order, for minerals development.”

“minerals development” is defined under section 96 as:

“development consisting of the winning and working of minerals, or involving the depositing of mineral waste.”

The ROMP provisions therefore apply to the 1988 Mineral Permission but not to the 1995/98 Landfill Permissions.

44.        The ROMP application in this reference was made under paragraph 6 of Schedule 14 of the 1995 Act following notification by WCBC as MPA that the first review date was fifteen years after the date upon which was granted the most recent mineral permission which relates to the site, ie the 1988 Mineral Permission granted on 25 October 1988.

45.        Paragraph 13 of Schedule 14 applies where –

“(1)(a) an application under paragraph 6 [ROMP] above in respect of a mining site is finally determined; and

(b) the conditions to which the mineral permissions relating to the site are to be subject, as determined under this Schedule, differ in any respect from the proposed conditions set out in the application; and

(c) the effect of the new conditions, except insofar as they are restoration or aftercare conditions, as compared with the effect of the existing conditions, except insofar as they were restoration or aftercare conditions, is to restrict working rights in respect of the site.”

46.        The ROMP application made under paragraph 6 was finally determined by the MPA in its decision dated 4 September 2006.  The MPA’s decision included condition 4 which prevented any mineral extraction from taking place within any area notified as a SSSI/SAC or in any adjacent area which might affect the integrity of the SSSI/SAC’s ecological features.  This condition was not one of the proposed conditions contained in the application and it restricted working rights in respect of the claim area.

47.        Paragraph 13 of Schedule 14 continues:

“(4)  In a case to which this paragraph applies, but subject to sub-paragraph (6) below, Parts IV and XI of the 1990 Act … shall have effect as if [a modification] order made under section 97 of the 1990 Act … –

(a) had been confirmed by the Secretary of State under section 98 of the 1990 Act … at the time when the application in question was finally determined; and

(b) as so confirmed, had effect to modify those permissions to the extent specified in sub-paragraph (6) below.

(5) For the purposes of this paragraph, the order referred to in sub-paragraph (4) above is one whose only effect adverse to the interests of any person having an interest in the land or minerals comprised in the mineral site is to restrict working rights in respect of the site to the same extent as the relevant restriction.

(6) For the purposes of section 116 of the 1990 Act …. and of any regulations made under [that section], the permissions treated as being modified by the order mentioned in sub-paragraph (4) above shall be treated as if they were planning permissions for development which neither consists of nor includes any minerals development.”

Reference to the 1990 Act is to the Town and Country Planning Act 1990.

48.        The 1988 Mineral Permission is therefore treated as if modified by a modification order which took effect on 4 September 2006.  Part IV of the 1990 Act (compensation) therefore applies.

49.        Section 107 of the 1990 Act states that:

“(1) Subject to section 116, where planning permission is revoked or modified by an order under section 97, then if, on a claim made to the local planning authority within the prescribed time and in the prescribed manner, it is shown that a person interested in the land or in minerals in, on or under it –

(a) has incurred expenditure in carrying out works which is rendered abortive by the revocation or modification; or

(b) has otherwise sustained loss or damage which is directly attributable to the revocation or modification,

the local planning authority shall pay that person compensation in respect of that expenditure, loss or damage.”

Under section 107 a claim for compensation can be for the depreciation of the value of an interest in land or for loss of profits (provided such loss is directly attributable to the modification order).

50.        Section 117 of the 1990 Act makes general provisions as to compensation for depreciation of the value of an interest in land.  It applies the rules set out in section 5 of the Land Compensation Act 1961 as they have effect, subject to any necessary modifications, for the purpose of assessing compensation for the compulsory acquisition of an interest in land.  Section 117 applies, subject to regulations by virtue of section 116 (which are not relevant in this reference), to any compensation which under the provisions of Part IV is payable in respect of depreciation of the value of an interest in land.  The claim in this case (see below paragraph 69 et seq) is said to be advanced in the alternative on the basis of loss of profits and on the basis of depreciation in the value of land.  On the latter basis section 117 would have effect so as to apply rule (2) of section 5.  The value of the land, before and after the imposition of the ROMP conditions, would be its value if sold in the open market by a willing seller.  As a claim for loss of profits the claim would not be one for disturbance under rule (6), see the decision of this Tribunal in Bond and Others v Dorset County Council [2011] RVR 119 where at paragraph 25 this was said:

“Since section 117 applies the rules in section 5 only for the purpose of assessing compensation for the depreciation in the value of an interest in land, rule (6), relating to matters other than this, has no application. … rule (6) is simply a recognition of entitlement to compensation for disturbance and other loss, and the entitlement is that which arises where land is compulsorily acquired.  In the case of a modification order it is section 107 that contains the entitlement, and the person who claims compensation must bring himself within the terms of subparagraphs (a) and (b).”

Under rule (4) any use of the land that would be contrary to law would have to be left out of account in determining the value of the land.  The rule would not in terms apply to a claim for loss of profits arising other than under rule (6).  The question on that basis would seem to us not to be whether the use would have been contrary to law.  The question would be the factual one of whether in practice works in the claim area would have been restrained by enforcement action and whether the claimant would have been deterred from working the quarry by the prospect of enforcement action being taken.

 (ii) The Habitats Regulations

51.        The Habitats Directive aims to ensure bio-diversity through the conservation of natural habitats and of wild fauna and flora.  It achieves this by measures which are designed to maintain or restore, at favourable conservation status, natural habitats and species of Community interest, namely species that are endangered, vulnerable, rare or endemic.  The great crested newt is a species designated under (i) Annex II of the Directive to be of Community interest whose conservation requires the designation of special areas of conservation and under (ii) Annex IV of the Directive to be an animal species of Community interest in need of strict protection.

52.        The conservation status of a species means the sum of the influences acting on that species that may affect the long-term distribution and abundance of its populations within its natural habitat.  Under Article 1(i) the conservation status of a species will be taken as ‘favourable’ when:

–         population dynamics data on the species indicate that it is maintaining itself on a long-term basis as a viable component of its natural habitats, and

–         the natural range of the species is neither being reduced nor is likely to be reduced for the foreseeable future, and

–         there is, and will probably continue to be, a sufficiently large habitat to maintain its populations on a long-term basis.

Article 12(1) requires Member States to take the requisite measures to establish a system of strict protection for the animal species cited in Annex IV(a) in their natural range.  Under Article 16(1) Member States are permitted to derogate from the provisions of Article 12 (and other articles) for particular specified purposes and provided that there is no satisfactory alternative and the derogation is not detrimental to the maintenance of the population of the species concerned at a favourable conservation status in their natural range.

53.        The Habitats Directive was implemented in Wales by the Habitats Regulations.

54.        Part II of the Habitats Regulations contains provisions to control operations which are potentially damaging to SACs.  Regulation 18 gives effect, in relation to a SAC, to any notification about SSSIs given under section 28 of the Wildlife and Countryside Act 1981 (as amended) specifying operations that are likely to damage the fauna by reason of which the land is of special interest.  In its notification of the Stryt Las a’r Hafod SSSI in November 2000, CCW identified two of those operations as:

“15. Infilling…quarries or pits.

  20. Extraction of minerals including hard rock, clay, coal, sand and gravel, topsoil, subsoil and spoil.”

55.        Under regulation 19 the owner or occupier of any land within a SAC shall not carry out on that land any operation specified in a notification in force in relation to the site under regulation 18 unless one of them has given written notice to CCW of the proposal to carry out the operation and has either received the written consent of CCW or carries out the operation in accordance with the terms of a management agreement.

56.        Part III of the regulations deals with the protection of species.  GCN are a European protected species under Schedule 2 of the Habitats Regulations.  Under regulation 39 it is an offence deliberately to kill GCN and (this need not be deliberately) to damage or destroy their breeding sites.

57.        Regulation 40(3)(c) of the Habitats Regulations (a provision that was removed by regulation 5(14) of The Conservation (Natural Habitats, &c) (Amendment) Regulations 2007 with effect from 21 August 2007) provided that notwithstanding regulation 39, a person should not be guilty of an offence under regulation 39 by reason of

 “any act made unlawful by that regulation if he shows that the act was the incidental result of a lawful operation and could not reasonably have been avoided.”

58.        Apart from the exception originally contained in regulation 40(3)(c), liability under regulation 39 is also excluded for anything done for certain purposes and in accordance with a derogation licence obtained under regulation 44.

59.        Regulation 39 does not apply, under regulation 44(2), to anything done under and in accordance with the terms of a derogation licence for

“(c) conserving wild animals or wild plants or introducing them to particular areas;

…

(e) preserving public health or public safety or other imperative reasons of overriding public interest including those of a social or economic nature and beneficial consequences of primary importance for the environment”.

60.        Regulation 44(3) states that the appropriate authority shall not grant a derogation licence unless they are satisfied –

“(a) that there is no satisfactory alternative, and

(b) that the action authorised will not be detrimental to the maintenance of the population of the species concerned at a favourable conservation status in their natural range.”

61.        There are general provisions for the protection of SACs under Part IV of the Habitats Regulations.  Under regulation 50 (and subject to the exceptions contained in regulation 55) the competent authority shall, as soon as reasonably practical, review any planning permission that was granted before the date on which a site became a SAC and which, had a planning application for that development been made as of that date, would have been subject to an assessment of its implications for the conservation objectives of the SAC under regulation 48(1), which deals with proposed developments.

62.        Regulation 49(1) provides that if the competent authority are satisfied that, there being no alternative solutions, a proposed development must be carried out for reasons of overriding public interest (which may be of a social or economic nature) they may grant permission for the development notwithstanding a negative assessment of the implications for the site.  This regulation is applied, with the appropriate modifications, to the review of existing planning permissions under regulation 51.

63.        In reviewing any planning permission under regulations 50 and 51 the competent authority shall consider, under regulation 56, whether any adverse effects could be overcome by planning obligations under section 106 of the 1990 Act being entered into, and, if they consider that those effects could be so overcome, shall invite those concerned to enter into such obligations.  As far as the adverse effects are not thus overcome the competent authority shall make such a modification order under section 97 of that Act as may be required.  Under regulation 56(3) where the competent authority ascertain that the carrying out or, as the case may be, continuation of the development would adversely affect the integrity of the SAC they nevertheless need not proceed under regulations 50 and 51 if and so long as they consider that there is no likelihood of the development being carried out or continued.

64.        Under regulation 57 a modification order under section 97 of the 1990 Act made pursuant to regulation 55 (which applies regulations 50 and 51 to planning permissions) shall take effect upon service of the notices required by section 98(2) of that Act (and not from the date upon which that order is confirmed by the Secretary of State).

65.        The provisions for the review of planning permissions under Part IV of the Habitats Regulations apply to the 1988 Mineral Permission and the 1995/98 Landfill Permissions.  In each case WCBC resolved to modify those permissions on 4 September 2006 and three modification orders were subsequently made.  In the case of the 1988 Mineral Permission a modification order was deemed to have been made on the date the ROMP application was finally determined (4 September 2006).  However WCBC subsequently made The Wrexham County Borough Council (Modification of Mineral Planning Permission) (Hafod Quarry, Ruabon) Order 2007 on 2 May 2007 and which referred in recitals to:

“The modification of planning permission and the ROMP conditions will take effect immediately pursuant to regulation 57 of the [Habitats Regulations] pending confirmation.”

66.        The 1995 Landfill Permission was modified by an order made on 2 May 2007 and the 1998 Landfill Permission was modified by an order made on 28 November 2007.  No copies of the notification to land owners and occupiers of the making of the modification orders are contained in the evidence but, from the responses received, these seem to have been served at or shortly after the dates on which the orders were made.

(iii) The PPC Regulations

67.        Under regulation 10 of the PPC Regulations it is necessary to obtain a permit from the Environment Agency Wales to operate an installation carrying out one or more of the activities covered by the description in Section 5.2A(1)(a) in Part 1 of Schedule 1 of those regulations.

68.        An application for a permit to dispose of non-hazardous waste by landfill under these regulations was made on 26 November 2002 and granted on 8 October 2004.

The basis of the claim

69.        The parties have agreed that the valuation date is 4 September 2006.  That is the date that is appropriate for the review of the 1988 Mineral Permission under the ROMP provisions in the 1995 Act, although it would not be the appropriate valuation date for the modification orders made in respect of the 1995/98 Landfill Permissions pursuant to regulations 55 and 57 of the Habitats Regulations.  Those modification orders took effect from the date of the service of the notices required under section 98 of the 1990 Act, namely at, or shortly after, 2 May 2007 and 28 November 2007 respectively.

70.        The claimant’s claim for compensation in respect of the imposition of new conditions following the review of the 1988 Mineral Permission under the 1995 Act is not only for expenditure, loss and damage arising from the claimant’s inability to extract minerals from the claim area but also “as a direct result thereof for the expenditure, loss and damage incurred as a result of losing voidspace for landfill.”  So there is not a separate claim for losses under the different review process for the 1995/98 Landfill Permissions under the Habitats Regulations.  There is a single claim for compensation arising from the ROMP review which encompasses losses from both the inability to extract minerals and the consequent inability to landfill a void that could no longer be created in the claim area.

71.        The compensating authority accepted in its skeleton argument that the claim was both for the loss of mineral extraction rights brought about by compliance with the new ROMP condition 4 and for “the consequent loss of void space for landfilling within the Claim Area under [the 1995/98 Landfill Permissions].”  The parties therefore did not treat the possibility of modification of the Landfill Permissions under the Habitats Regulations as affecting the claim. 

72.        The claim was for compensation under section 107 of the 1990 Act:

“for expenditure, loss and damage incurred as a result of being unable to win and work minerals from the area of the site affected by the new condition [4] and, as a direct result thereof for the expenditure, loss and damage incurred as a result of losing voidspace for landfill” (paragraph 6 of the claimant’s statement of case).

  The statement of case said (at paragraphs 21-23):

“The final extraction phases are likely to have been worked over the period 2007 to 2009 in order to release void space for landfilling.  These dates form the basis of the valuation of the claim…All costs associated with mineral extraction are treated as landfill cell development costs and as such the sale price of the mineral is the profit… Costs for working the minerals have not been deducted from the claim. These costs appear in the landfill development accounts...”

The claim attributable to the loss of void space was not quantified at that time, so that it was not then apparent how the extraction costs were to be reflected in the overall claim.  However the statement of case (at paragraph 30) said that:

“The sterilisation of voidspace…has had a significant impact on the underlying asset value of Hafod Quarry”

73.        In their reply to the statement of case the compensating authority asserted that any restriction of working rights was:

“by reason of the actions and intentions of the Claimant and their predecessors in title and not by reason of the new ROMP conditions” (paragraph 16).

They also said that in any event it would have been unlawful in September 2006 for the claimant to work minerals within the R2 land without a licence under the Habitats Regulations and that compensation was not payable under section 117 of the 1990 Act and section 5 of the 1961 Act in respect of development that would be contrary to law (paragraph 17).

74.        In his skeleton argument Mr Price Lewis said that the first main issue was whether condition 4 of the ROMP conditions restricted the claimant’s working rights and

“if so whether the Claimant would have exercised those rights if condition 4 had not been imposed and the modification orders had not been made.”

He then reviewed the background to the designation of the claim area as a SSSI/SAC and said that the claimant had declined to surrender its mineral extraction and landfill rights voluntarily without compensation.

75.        At the start of Mr Price Lewis’s opening we summarised the claim as being for a loss of profits, with that loss having been agreed between the parties (subject to the issue of translocation costs) based upon (i) the assumption that there was no need for a derogation licence or (ii) if such a licence was needed then it would have been granted and (iii) on the assumption that the claim area would have been worked and infilled.  We said that the compensating authority were challenging the claimant’s argument that it intended to work and infill the claim area under (iii).  Mr Price Lewis did not demur from this summary, and he did not describe the claim in terms of the depreciation of the value of the claim area.

76.        In the course of the hearing extensive evidence was directed to the question whether the claimant had intended to work and infill the claim area.  No oral evidence was given or argument addressed on any depreciation of the value of the claim land.

77.        At the end of a lengthy passage in his written closing submissions about the intentions of the claimant Mr Price Lewis went on to say that while the loss in relation to minerals had been valued on the basis of lost profit there was a land value element because the land with the benefit of the Mineral and Landfill Permissions had value that was lost in consequence of the ROMP.  Thus, he said, whatever the claimant’s intentions, the amount agreed by the valuers represented a loss in the value of the claimant’s land, which, but for the ROMP, could have been sold in the market.

78.        Mr Sauvain advanced the compensating authority’s case on the basis that the claim was for loss of profits, but he did not contend that the claim could not be put on the basis of depreciation of the value of the land. 

79.        In view of this we feel constrained to treat the claim as one advanced on alternative bases – loss of profits and depreciation in the value of the land.  However, neither party sought to explore, or even to identify, the differences that might arise between these alternatives or the different evidence that would be relevant to each of them.  The agreement as to quantum (see paragraph 5 above) is based on the assumption that the compensating authority would fail in their contentions that the claimants would not have worked the minerals and that it would have been unlawful to do so.  It is clear from the reports of the experts that the agreed compensation is agreed to represent the depreciation of the value of the land and is assessed on the basis of the loss of profit from mineral extraction and landfill.

80.        The principal differences that arise between the alternative claim bases appear to us to be these:

(a) If the claim is for depreciation of the value of land, the facts are to be taken as they were at the valuation date.  If the claim is for loss of profits, all relevant facts affecting what those profits would have been can be considered, including events that occurred after the valuation date.

(b) If the claim is for depreciation of the value of land, the intentions of the actual owner of the land in relation to its development are not relevant.  If the claim is for loss of profits they are an essential consideration.

(c)   If the claim is for depreciation of the value of land rule (4) applies (see above), and a conclusion that mineral extraction and waste disposal would have been unlawful at the valuation date would be fatal to the claim.  If the claim is for loss of profits our view is that this would not have been fatal to the claim in itself.  The question would be whether in practice this meant that operational works would not have taken place.

Of these differences, it is (c), the question of legality, that requires consideration at this stage and to which we now turn.

81.  We have referred above to the material provisions of the Habitats Directive and the Habitats Regulations.  Under regulation 39 it is an offence deliberately to kill GCN and, whether deliberately or not, to damage or destroy their breeding sites.  Since mineral extraction would not have been possible without at least damaging GCN breeding sites, it would have constituted an offence under this provision unless the mineral operator could rely on a defence provided by the Habitats Regulations.  It would have been a defence if what was done was in accordance with a derogation licence.  No such licence, however, had been granted for the translocation of GCN from the claim area at the valuation date.  Whether a derogation licence would have been given if application for it had been made is a matter we consider below.

82.  Additionally at the valuation date (4 September 2006) regulation 40(3)(c) was still in force, providing, as we have noted, that a person was not guilty of an offence under regulation 39 in respect of an act that was “the incidental result of a lawful operation and could not reasonably have been avoided”.  This exclusion had been the subject of consideration by the Court of Appeal in R (on the application of JHM Newsum) v Welsh Assembly Government [2004] EWCA Civ 1565.  That case concerned a challenge by judicial review to the refusal by the Welsh Assembly Government of a derogation licence under regulation 44 to translocate a population of GCN from a quarry to a specially prepared site.  Reference had been made in argument to the defence provided by regulation 40(3)(c), and at [8] Waller LJ said this:

“I do not myself think that the question whether the trustees if they chose to quarry will be committing an offence is a question that needs to be answered, or indeed should be answered.  It is sufficient, and no one I think would dispute this, that it is certainly arguable that the circumstances may be such that they might not be committing an offence, and it is certainly possible that the Trustees will act in accordance with the planning permission, whether or not they obtain a licence to relocate the gcns.”

83.  This observation was thus no more than the unsurprising one – unsurprising in view of the terms of regulation 40(3)(c) – that it was arguable that there would be no offence if extraction was carried out in accordance with the planning permission and the damage could not reasonably have been avoided.

84.  By the valuation date, however, the European Court of Justice in Commission v United Kingdom (case C-6/04) [2006] Env LR 29 had upheld a complaint by the European Commission that the Habitats Regulations constituted an incorrect transposition of Article 16 in providing for the derogation contained in regulation 40(3)(c).  The complaint had addressed what had been said in Newsum, and said in the light of it that the derogation was not justified under the Habitats Directive.  The court in its judgment said this:

“112  Furthermore, as the Advocate General has observed in point 113 of her Opinion, Arts 12, 13 and 16 of the Habitats Directive form a coherent body of provisions intended to protect the populations of the species concerned, so that any derogation incompatible with the directive would infringe both the prohibitions set out in Arts 12 and 13 and the rule that derogations may be granted in accordance with Art 16.

113  The derogation at issue in the present case authorises acts which lead to the killing of protected species and to the deterioration or destruction of their breeding and resting places, where those acts are as such lawful.  Therefore such a derogation, founded on the legality of the act, is contrary both to the spirit and purpose of the Habitats Directive and to the wording of Art 16 thereof.”

85.  The judgment of the European Court of Justice was given on 20 October 2005, but it was not until 21 August 2007 that the derogation was removed.  Nevertheless the effect of judgment in our opinion was to disable a person charged with breach of the Habitats Regulations from relying on the legality of the act in question.  The fact that there was planning permission for extraction thus would have been of no avail.  In the absence of a derogation licence, therefore, extraction would have been unlawful.

86.  The effect of this conclusion is as follows.  If the claim is treated as one for depreciation of the value of the land, mineral extraction would at the valuation date have been contrary to law, and under rule (4) it would have to be left out of account in valuing the land.  On this basis the compensation would be nil.

87.  Even if we are wrong in our conclusion that mineral extraction would have been unlawful, the fact is that any prospective purchaser of the land at the valuation date would clearly not have paid an amount based on the certainty of the profits used in the assessment of the agreed value.  A purchase on the valuation date would have been a mere speculation based on the hope that, despite the judgment of the ECJ, extraction would not have met with prosecution or alternatively that a derogation licence would be granted.  There is no evidence, however, as to what such a speculative value, if any, might have been, so that the claimant has failed to establish any case for compensation based on the depreciation of the value of the claim area.

88.  We are therefore left with a claim based on loss of profits, and in relation to this there are two issues that arise: whether the claimant would in fact have extracted minerals from the claim area and used the voidspace for the disposal of waste and, secondly whether a derogation licence would have been obtained.  We refer to the first issue as Intention and to the second as Derogation Licence.

Intention

Submissions for the claimant

89.        Mr Price Lewis submitted that notwithstanding SWML’s view in 2000 that it was then unviable and uneconomic to work minerals in the SSSI (claim) area, a mining operator would take a long-term view of the site’s economics.  The claimant had planning permission until 2048 and, so long as it retained its rights, it could have extracted minerals from the claim area whenever the circumstances persuaded the claimant that it was appropriate to do so.

90.        SWML made a timely application for the review of the 1988 Mineral Permission under the 1995 Act and included a proposed condition under which no extraction of sand and gravel would take place in the claim area until a detailed scheme of working had been submitted to and approved by the MPA.  SWML therefore sought to retain its rights to work minerals in the claim area.  At no time did SWML offer to surrender such rights.

91.        The claimant maintained this approach in the environmental statement and environmental impact study that it submitted in September 2005 in support of the ROMP application following its acquisition of Hafod Quarry the previous February. The claimant did not seek to amend that application to propose a condition that surrendered working rights in the claim area. It consistently declined WCBC’s requests to agree to surrender those working rights by entering into a binding agreement under section 106 of the 1990 Act.

92.        By 2006, following the confirmation of both the SSSI and the SAC, it was unrealistic to suggest that the claimant would seriously contemplate the possibility that it would be able to retain its permissions to excavate and subsequently landfill the claim area. By the valuation date the international importance of the claim area to nature conservation was known, as were the powers available to WCBC to protect those interests under the ROMP provisions and under section 97 of the 1990 Act. The claimant had therefore properly and responsibly cooperated with the authorities to the benefit of the nature conservation interests, but in the knowledge that they would be compensated for the inevitable loss of their working rights.

93.        CCW had formed their scientific opinion about the conservancy importance of the claim area at the same time as the claimant’s decision to exclude that area from quarry operations in March 2000.  By May 2000 CCW had prepared a map showing the proposed boundaries for the extended SSSI to include Hafod Quarry and had decided to recommend the area as a candidate SAC.  SITA (as the owner of SWML) objected to the proposed SSSI on 26 February 2001 pointing out that the proposal would conflict with a scheme for mineral extraction and restoration via landfill for which valid planning permission and a waste management licence already existed. Although SITA referred in its objection letter to its intention to submit “an application seeking to amalgamate and vary the existing planning permission to move the boundary of the landfill site further eastwards away from the proposed SSSI”, it never in fact submitted such an application and the claim area was never relinquished for the purposes of nature conservation by any formal procedure under the planning system.

94.        SWML/SITA/MWH’s actions after the end of 2000 were recognition of the reality of the position whereby CCW had formed the opinion that the claim area should be designated as a SSSI and recommended for designation as a European SAC.

95.        Mr Price Lewis acknowledged that in making its application for the third derogation licence in March 2001 SWML/SITA had identified the claim area as a reserve area. But they took no steps to surrender their rights to work the claim area. This was evident from the ROMP application submitted in October 2003.  There was nothing inconsistent or insincere about the ROMP application which set out the applicant’s wish to retain its working rights while recognising that given the European importance of the site, the strong likelihood was that statutory powers would be used to reduce the area in which those rights could be exercised.

96.        In its due diligence report AIG advised the claimant that it was likely that the existing planning permissions over the claim area would be revoked in view of its nature conservation importance. The claimant’s actions thereafter reflected that advice and the powers available to WCBC and CCW to protect the GCN habitat in that area. One of the key elements of the due diligence exercise was “to realise the maximum void potential at the site”. This involved considering a possible reduction in base level regardless of the SSSI designation. The loss of void space under ROMP would not, as suggested by the compensating authority, have been recovered simply by lowering the base level.

97.        The claimant’s undertaking in 2004 to manage the protected (claim) area for 21 years reflected the advice that it had received and the likelihood that its right to work that area would be removed by WCBC.  It was not an admission that, in the absence of such action by WCBC, it would not have wished to exercise its working rights and generate the agreed (2006) value of over £4m in the minerals and void space. That figure reflected a changed position from 2000 when SWML had judged it uneconomic to extract the minerals.

98.        The claimant was aware of the decision in Newsum but the imposition of condition 4 on the ROMP application, prohibiting mineral extraction in the claim area, meant that there was no longer a valid planning permission and no prospect of lawfully translocating the GCN. The claimant had suffered a real and compensatable loss upon the removal of the working rights in the claim area.

Submissions for the compensating authority

99.        Mr Sauvain submitted that the claimant’s claim for compensation was speculative. He distinguished between an intention to work the claim area, which he said the claimant did not have, and an intention to claim compensation, which he said it did.  The claim was for loss of profits. As such it necessarily involved the assertion by the claimant that the claim area would have been worked at sometime and would have provided a profit. If the landowner did not intend to work that area then there would be no loss of profits on which a compensation claim could be based.

100.    The claimant’s predecessor, SWML, had expressed its intention not to work the claim area in its second derogation licence application in March 2000 when it excluded that area from the translocation exercise and instead described it as a “reserve area” (R2) to be managed for the benefit of amphibians. This decision to exclude the claim area pre-dated its consideration by CCW as a suitable candidate for designation as a SSSI/SAC. It was not until May 2000 that the possibility of including the claim area within a proposed SSSI or SAC was considered. Mr Ellis’s evidence was that the claim area was only considered as part of the candidate SAC following SWML’s statements that it would not be worked. Prior to that time the claim area had formed part of the area from which GCN were to be translocated and, under these circumstances, it would have made no sense to include it as part of a SSSI.

101.    The intention that the claim area was to be set aside as a reserve for amphibians was confirmed by SWML at its meeting with CCW on 25 May 2000 and by the subsequent erection of permanent GCN exclusion fencing between the claim area and the rest of the quarry.

102.    The due diligence report prepared for the claimant by AIG identified the problems caused by the SSSI for the working of minerals and subsequent landfill operations in the claim area. AIG sought to identify how the reduced capacity could be recovered by lowering the level of the base of the landfill operation and obtaining a new PPC licence on that basis. This reconfiguration of the landfill design was done in order to achieve a minimum landfill capacity of 4.64 million cubic metres, which was the volume on which MWH’s original valuation and offer to buy the quarry had been based. The due diligence exercise to verify the information upon which MWH’s valuation and offer were made did not depend upon any compensation being achieved in respect of the modification of planning permission following the ROMP process.

103.    Following AIG’s due diligence report the claimant applied in December 2002 for a PPC licence excluding the claim area but based upon a lowered base level in the landfill design. That licence was issued in October 2004. Meanwhile the claimant had submitted the ROMP application and, in October 2003, it submitted a section 73 planning application to vary the phasing and restoration scheme under the 1995/8 Landfill Permissions to exclude the claim area. This application was refused on 5 April 2004 and pursued vigorously at appeal by the claimant. The fourth application for a derogation licence made in August 2004 included an undertaking that the claimant would manage the claim area as a receptor site for GCN for a 21 year period post translocation. This commitment was repeated in the fifth derogation licence granted in June 2006.

104.    Mr Sauvain submitted that the claimant’s actions following the due diligence report were consistent with their desire to commence waste disposal operations as soon as practicable following completion of their purchase of the quarry in February 2005. To do this they needed the PPC permit and, in order to ensure correspondence with that permit, a revised planning permission. Both the permit and the permission were pursued on the basis that the claim area was excluded from quarry operations. If matters had proceeded on the basis of the revised restoration profile of the section 73 application (which although successful on appeal was quashed in the High Court) then the claim area could never have been developed.

105.    The final requirement to enable the claimant to commence landfill operations was the translocation of the remaining GCN. The claimant was instrumental in identifying the claim area as a receptor site (R2) which would be managed as such for 21 years. This action only made sense if the claimant had decided not to pursue active quarrying and landfill over the claim area. To retain the intention to work that area while giving an undertaking (twice) to manage it as a reserve for 21 years would have been dishonest.

106.    Mr Sauvain then considered whether there was any evidence of a change in the claimant’s intentions following the quashing of the section 73 permission in the High Court and/or after the Court of Appeal decision in Newsum. Mr Davies said that the claimant had decided to proceed with the 1995/98 Landfill Permissions before the section 73 permission was quashed. But this was at a time when the claimant had undertaken in its fourth derogation licence application to manage the claim area as a reserve, an undertaking that was repeated in its fifth derogation licence application after the section 73 permission had been quashed. The correspondence with WCBC which followed the High Court’s decision, when read carefully, showed no indication of a change in the claimant’s intentions. Ms Wilkinson’s evidence was that the claimant would not have “hard nosed it” by working the claim area without a derogation licence. The claimant’s action, to the contrary, had consistently been directed at translocating the remaining GCN into the claim area in readiness for landfilling over the main part of the quarry.

107.    There was only a limited opportunity for the claimant to pursue the “lawful operation” defence following the Court of Appeal’s judgment in Newsum in November 2004.  By June 2005 the Advocate General had issued his opinion in Commission v United Kingdom, followed in October 2005 by the decision of the European Court, from which it was clear that the Habitats Regulations would have to be amended to correctly transpose the Habitats Directive.  The regulations were duly changed in August 2007.  Mr Sauvain submitted that there would not have been time for the claimant to have relied upon the lawful operation defence.  They had not done so by the valuation date and there was no evidence to suggest that they were likely to have done so before the change in UK law.

108.    Mr Sauvain said that the only evidence that indicated the claimant might work the claim area was its ROMP application.  But from AIG’s due diligence report and Mr Davies’ evidence it was apparent that the purpose of making this application was to bring about a modification to the existing planning permissions which would provide a basis for making a compensation claim.  There was no real intention to work the claim area.

Discussion

109.    The question to be determined is whether SWML and subsequently MWH intended to work and then landfill the claim area or whether they only intended to preserve their right to compensation.  Mr Price Lewis submits that there was a genuine intention to work the site and that the claimant’s action in not doing so, but instead continuing to devote the claim area as a reserve for amphibians, was driven by a pragmatic and realistic assessment of the statutory powers available to and exercised by NAW, CCW and WCBC.  Mr Sauvain attributes a different motive to the claimant; he submits that SWML had already recognised that the claim area was uneconomic to work by the time the statutory authorities designated the SSSI/cSAC and that the claimant’s subsequent actions were motivated by a desire to protect the possibility of sustaining a compensation claim.

110.    This issue must be decided on the evidence.  The claimant did not call a witness of fact from the company itself, preferring instead to rely upon the evidence of Ms Wilkinson and Mr Davies, neither of whom could speak directly about the claimant’s intentions.

111.    Ms Wilkinson had been involved with GCN at Hafod Quarry since 1999 and was the named licensee on the first three derogation licences.  The application for the second derogation licence made on 14 March 2000 involved a change to the originally proposed second phase of GCN translocation.  The claim area was no longer to be cleared of newts but instead it was now proposed to retain and manage it as a reserve for the benefit of amphibians.  Ms Wilkinson described the background to SWML’s change of approach at paragraph 3.3 of her rebuttal report:

“It was during the process of applying for the phase 2 licence in early 2000 that the option of excluding what is now the claim area from the GCN translocation was first discussed, with the result that the phase 2 licence proposed the retention of GCN within that area.  I was not informed by SWML of their reasons for excluding the claim area, but I was aware that CCW had been in discussion with SWML regarding the prospective SSSI notification.  Although I was not directly involved in those discussions, it was my understanding that CCW were keen to include the claim area in the SSSI notification because it contributed towards the overall terrestrial habitat available for the GCN population and because it offered scope for future enhancement…”

112.    SWML’s revised intentions for the claim area were stated at paragraph (6) of the additional information that accompanied the application for the second derogation licence (see paragraph 28 above).  In cross-examination Ms Wilkinson said that the words in paragraph (6) had been given to her by SWML.  She was asked whether she had queried this new wording and replied that she had discussed it with SWML.  At that time it no longer intended to work the claim area and so did not need to remove the GCN from the site.  When she was asked about her use of the words “at that time” Ms Wilkinson replied that “I understood that SWML no longer intended to work in there [the claim area]”.  Asked why that was so she replied “We were informed that they didn’t want to work it”, a decision which Ms Wilkinson said “had nothing to do with ecology.”  Ms Wilkinson replied, in answer to a question about whether the decision not to work the claim area was an operational one, that it was difficult to remember the verbal discussions that had taken place but thought that “SWML said that it might have been a difficult area to work.”

113.    Ms Wilkinson agreed that SWML’s revised proposals for the claim area reflected a relatively long-term view given their proposal to erect permanent GCN exclusion fencing around the claim area.

114.    In their application for a fourth derogation licence MWH said that the claim area (R2) would be managed for a 21 year period post translocation.  Ms Wilkinson confirmed that the claimant had assured her that they would honour this intention:

“They were my instructions – MWH was prepared to manage [the claim area] for 21 years.”

115.    Mr Davies said the ROMP application was made to protect the claimant’s right to work the minerals in the quarry, including the claim area.  He said that this application showed a clear intention to work the claim area even though the claimant anticipated a condition being imposed that would stop them working it.  He went on:

“My clients didn’t think they’d have the right to work the area and so conducted themselves accordingly.  Of course they had compensation in mind.”

Had the compensating authority not imposed restrictions on the claim area under the ROMP process Mr Davies said that the right to claim compensation would not have arisen and his client would have reviewed the development of the site.  Mr Davies said that the agreed level of profits arising from working and infilling the claim area would have been a significant incentive to develop the site.

116.    Mr Ellis said that Ms Wilkinson’s description of the background to the second derogation licence as recorded in her rebuttal report gave the wrong impression.  He explained that he had been directly involved with discussions between CCW and SWML in 2000 and said that, contrary to Ms Wilkinson’s evidence, CCW’s interest in notifying the claim land as a SSSI resulted from SWML’s decision not to work the land but to retain it for the benefit of amphibians.  None of the detailed documentation required to establish the scientific case for a SSSI notification (including for example a proposed boundary) had even begun to be prepared at the time SWML made its licence application on 6 March 2000. 

117.    Discussions about additional SACs in March 2000 were very general and no site specific boundaries for proposed new SACs had been chosen.  It was at that time thought that R1 might be designated as a SAC, but Mr Ellis said that even that possibility was confidential and was not discussed with SWML in any way.  It was in early May 2000 that CCW began to consider R2 as a candidate SAC, as a direct result of SWML’s statements that it would not be worked and would be retained for amphibian conservation.

Conclusions on intention

118.    We are satisfied on the evidence that the decision not to work the claim area was reached by SWML in March 2000, before CCW had discussed with them the possibility of including the claim area within the SSSI or cSAC.  At the time they reached this decision SWML could have proceeded with its second derogation licence application on the basis of the phased translocation of GCN from the claim area that it had anticipated in its first such application.  It chose not to do so and, in our opinion, its decision was a clear expression of its intent not to work and subsequently landfill the claim area and one that was based on commercial and economic considerations.  Its subsequent objection to the designation of the claim area as an SSSI and the submission of a ROMP application proposing mineral extraction in that area protected its ability to claim compensation but it did not, in our opinion, reflect a genuine intention to work the claim area.

119.    According to AIG’s due diligence report the acquisition by MWH of the Hafod Quarry landfill site and its procurement of a pre-emption right over industrial land adjoining Hafod Tileries to the north was undertaken by the purchase of 100% of the issued share capital of Hafod Quarries Ltd, the freeholder of the site.  Heads of terms for this acquisition were agreed by MWH and SWML on 4 March 2002.  By that time the claim area was already designated as a SSSI and a cSAC.  The claimant argues that its subsequent actions were not consistent with what it describes as the “provisional position” taken by its predecessor SWML that it did not intend to work the claim area.  We have considered the reasons that the claimant gives in support of this assertion and which are summarised in the further statement of agreed facts and issues regarding environmental evidence that the parties helpfully prepared on 12 January 2011.

120.    There is evidence that the claimant expressed a positive intention not to work the claim area.  In particular the fourth and fifth derogation licences (which were both issued to MWH) reflected the claimant’s commitment to ensuring that the claim area was managed as a reserve for a 21 year period post translocation.  Also, in a letter to WCBC dated 23 November 2005 MWH stated:

“We have always sought to achieve the position that neither mineral extraction nor tipping of waste takes place within [the SSSI/SAC], as stated by our counsel in his closing submissions to the appeal inquiry [against the refusal of WCBC to grant planning permission for the variation of the 1995/98 Landfill Permission]”

Nor did the claimant pursue in practice its argument that Newsum was authority that the grant of planning permission provides a lawful operation defence under the Habitats Regulations (before these were amended in August 2007).

121.    The designation of the SSSI and subsequently the SAC meant, even in the absence of a modification order, that the claimant faced statutory obstacles to implementing the Mineral and Landfill Permissions.  It could only have worked the claim area by applying for a derogation licence on terms that ran contrary to the approach first put forward in their second derogation licence application, or by invoking the exception under regulation 40(3)(c) and “hard-nosing” ahead with the lawful operation defence under Newsum.  Realistically the claimant could not be confident of success under either of these strategies.  The claimant might have thought it desirable to work the claim area at the valuation date given the possibility of favourable returns but it did not, in our opinion, intend, plan or propose to do so at that time or at any time before or after its acquisition of Hafod Quarry.

Derogation licence

122.    The second issue is whether in the absence of a deemed modification order made under ROMP a derogation licence under the Habitats Regulations would have been granted to allow the implementation of the 1988 Mineral Permission and the 1995/98 Landfill Permissions over the claim area.

The case for the claimant

123.    Mr Price Lewis submitted that the application for a derogation licence needed to show that its purpose was one of those defined in regulation 44(2).  He said that the purposes would have been either the conservation of wild animals (regulation 44(2)(c)) or an imperative reason of public interest (IROPI) including those of a social or economic nature, namely the need for landfilling facilities in the north Wales region (regulation 44(2)(e)). 

124.    In Newsum, the facts of which were very similar to those of this reference, the Court of Appeal addressed regulation 44(2)(c) and Mr Price Lewis concluded from that decision that:

“…where a valid planning permission exists for a development which would harm wild animals if they were not moved then it is sensible for the purpose of conserving these animals to move them out of harm’s way.  Such an argument would be likely to succeed in the hypothetical world of the working rights being retained.”

125.    Turning to the second purpose for which a derogation licence could have been made, Mr Price Lewis said that the applications for the fourth and fifth derogation licences that were granted by NAW in November 2004 and June 2006 (see paragraphs 39 and 41 above) were both submitted under regulation 44(2)(e).  The need for landfill facilities in the north Wales region was identified in the applications as the ground for establishing the IROPI purpose and this was accepted by NAW.  The chief planning officer’s report to the WCBC planning committee dated 4 September 2006 in connection with the ROMP application recognised the shortage of landfill sites.  That report said that the UDP and other policy guidance supported the development.  Mr Price Lewis submitted that it would be extraordinary if the level of need for landfill sites was not seen as justifying the continued landfill into the claim area.

126.    Mr Price Lewis said that while there had never been a requirement to demonstrate need in the real world for the use of the claim area alone, the need for both landfill capacity locally and the need locally and potentially nationally for the minerals, the policy support and the fact that it was the claim area where most of the remaining reserves were to be found at Hafod Quarry, the IROPI test under regulation 44(2)(e) would easily be satisfied.

127.    Regulation 44(3) required the competent authority to be satisfied that two conditions were satisfied before a derogation licence could be granted (see paragraph 60 above).  The first condition was that there was no satisfactory alternative to what was proposed.  The Court of Appeal in Newsum observed that it was not open to the competent authority, whether CCW under regulation 44(2)(c) or NAW under regulation 44(2)(e), to argue that a satisfactory alternative would be not to pursue the development under the extant planning permission.  Mr Price Lewis submitted that this test could be satisfied in the hypothetical circumstances where the ROMP conditions had not been imposed. 

128.    The second condition under regulation 44(3) was that the action proposed would not be detrimental to the maintenance of the GCN population at a favourable conservation status in their natural range.  Ms Wilkinson considered that R1 would be the most favourable receptor site and said that Dr Howe’s dismissal of it as being unsuitable was wrong for three reasons.  Firstly, CCW had expressly requested that GCN be moved into the SSSI/SAC as part of the 2005 (fourth) translocation scheme with a total of 424 GCN being moved into R1 and R2.  The principle of translocation into the SSSI/SAC had therefore been established.  Secondly, a movement from R2 to R1 was simply a movement from one component of the SSSI/SAC to another which amounted to an “in situ” translocation as identified in the Great Crested Newt Mitigation Guidelines published by English Nature in August 2001 and adopted by CCW.  It was acceptable to move newts to an area which already supported a pre-existing population.  Thirdly, it was likely that some, and probably the majority, of the GCN that were moved into R2 in 2005 would have originated from the R1 site, having been translocated there previously and regained access to the quarry. Moving them back to the same location was reasonable and unlikely to harm either the animals or their population.

129.    Ms Wilkinson said she believed that R1 was the most appropriate receptor site because it was close to R2, was part of an extensive mosaic of terrestrial and aquatic habitats and was capable of further enhancement. 

130.    The method statement that accompanied the application for the fifth derogation licence granted in June 2006 said that GCN that were captured in Hafod Quarry would be translocated to either R1 or R2, with the choice of receptor site being decided in consultation with CCW.  Mr Price Lewis said that, contrary to the claimant’s submission, CCW had not retained the right to stipulate which of the two receptor sites would be more suitable.

131.    There would be no significant reduction in the local range of GCN since the New Hall Farm site to the south of the claim area would still be available with corridors continuing to ensure a connection between that area and R1.  Finally, any problems of fish and Crassula helmsii (an invasive plant) found at R1 were matters of site management that could be properly addressed in any translocation proposal.

132.    In the absence of the deemed modification order under ROMP Ms Wilkinson said that she was confident that the favoured conservation status of the GCN would not have been adversely affected by a move to R1.

The case for the compensating authority

133.    Mr Sauvain said that the relevant derogation purpose in relation to any licence application which might have been made by the claimant was the IROPI purpose under regulation 44(2)(e).  Mr Ellis explained that by the time of the application for the third derogation licence application in March 2001 the European Commission had investigated the granting of derogation licences in the UK associated with development but purportedly for conservation purposes and had provided advice in respect of the types of activity that satisfied the various derogation tests.  As a result of that investigation Mr Ellis said that:

“…the accepted interpretation of the legislation in situations where the capture and removal of animals from an area was considered necessary in order to protect them from the damaging effects of authorised development, as was the case at Hafod Quarry, was that derogations could not lawfully be granted under regulation 44(2)(c) for the purposes of conserving wild animals…”

The only other category of purpose that could apply at Hafod Quarry was that under regulation 44(2)(e).  The third and subsequent derogation licence applications had therefore all been made under this regulation and not regulation 44(2)(c).

134.    Mr Sauvain submitted that the claimant had produced no evidence to show that it would have met the IROPI test in relation to the mineral reserves or landfill capacity available in the claim area alone as distinct from Hafod Quarry as a whole.

135.    The licensing authority under regulation 44(2)(e) was NAW (and subsequently the Welsh Assembly Government, see paragraph 144 below) and not CCW.  However NAW did not have any independent expertise available and therefore, unless the advice given to it was objectively and demonstrably wrong, it gave considerable weight to judgments made by CCW in individual cases.  Mr Sauvain referred to Morge v Hampshire County Council [2011] UKSC 2 in which the Supreme Court accorded deference to the specialist view in that case of Natural England in relation to the application of the Habitats Directive and submitted that a similar approach should be adopted in this case to the expert view of CCW.

136.    Dr Howe’s evidence was that a derogation licence would not have been granted under regulation 44(2)(e) because the claimant could not have identified a suitable receptor site for translocation, namely one which would not have had a detrimental effect on the favourable conservation status of GCN. 

137.    Dr Howe identified 11 possible receptor sites within 1km of the claim area (not including R1) based on guidelines issued by CCW in 2003 and which Dr Howe said would have been used in respect of a licence application made at the valuation date.  She said that none of these sites was a suitable receptor.  Dr Howe originally rejected R1 as being an unacceptable receptor site because, contrary to the Guidelines published by English Nature, it was within a SSSI which “precludes the further transfer of GCNs into the site”.  She subsequently said that this comment was an oversimplification and explained:

“The principle is that progressive concentration of GCNs into smaller numbers of sites is contrary to the principles of a protected site series and contrary to the maintenance of FCS.  Concentrating GCN to smaller numbers of sites and within smaller ranges has the consequent effect of increasing dispersal distances between sub-populations.  This would impact on meta-population dynamics and thereby cause a further adverse impact on the maintenance of FCS.

The prospect of the removal of an entire SSSI/SAC compartment population of newts [R2] and transfer into another one [R1] is something that is totally at odds with the principles of the conservation process in the UK.” 

138.    Dr Howe said that R1 had received many more newts than had originally been anticipated and had already been extended and improved in 2005.  The fact that some GCN had been allowed to be moved to R1 in 2005 under the fourth derogation licence was exceptional and was not evidence that CCW would have thought it appropriate to move all of the GCN that had gone to R2 to R1 instead.  She said that the carrying capacity of R1 would have been exceeded under those circumstances.  R2 was the only part of the SSSI/SAC which did not support species that threatened the GCN, viz predatory fish and the invasive plant Crassula helmsii.  These species were present at R1 and would have added to CCW’s concerns about the carrying capacity of that site.  Furthermore the claim area was sufficiently remote from public access to minimise the risk of spreading these problem species.  Mr Sauvain submitted that this gave the claim area a major advantage over R1 that any replacement receptor site would have to emulate if it was to maintain the favourable conservation status of the GCN population.  Moving from a habitat free of such species to one where both threats were present was likely to be deleterious to that status.  

139.    The translocation of more GCN to R1 would require further improvements to its habitat, notably the provision of more ponds, which in turn would reduce the amount of terrestrial habitat available.  Dr Howe said that a scheme that entailed creating mitigation habitat in what was already mitigation habitat from a previous translocation would be likely to constitute a net loss of habitat.

140.    Dr Howe said that it was impossible to tell how many of the 130 GCN found in R2 in the torch survey in 2006 might have come from R1.  There was no means of identifying such individuals in this instance.  Whatever their origin the GCN in R2, at the valuation date, comprised a population inhabiting suitable habitat in the southern part of Hafod Quarry, making up the southern extent of the local metapopulation and contributing to the range of that population in both the local area and the SSSI.  Removing the GCN from R2 would isolate New Hall Farm to the south and would further fragment the range and functionality of the population.  That range would be compromised by the destruction of R2 and by concentrating all the GCN in the “one basket” that R1 would become.

141.    Dr Howe concluded that if the licence application had failed the favourable conservation status test then it would not have been approved.  In her opinion it would have failed that test as there was no other suitable receptor site similar to R2 and CCW would not have been able to recommend the grant of a derogation licence in 2006 or subsequently.

Conclusions on derogation licence

142.    There are two possible purposes for which an application for a derogation licence would have been made; either the conservation of GCN under regulation 44(2)(c) or for the IROPI purpose under regulation 44(2)(e).  The first two derogation licences (March 1999 and March 2000) were granted for the purpose of conservation under 44(2)(c).  Thereafter the remaining three derogation licences that were granted before the valuation date (in April 2001, November 2004 and June 2006) were all granted for the IROPI purpose under 44(2)(e). We accept Mr Ellis’s (unchallenged) evidence of the reasons for this change (see paragraph 133 above). 

143.    In our opinion an application for a derogation licence (i) would have been considered in the context of the use of Hafod Quarry as a whole and not just the claim area and (ii) would have been made, and accepted, under regulation 44(2)(e).  In any event we accept Mr Price Lewis’s submissions that the IROPI purpose would have been established even if the claim area had been considered in isolation.

144.    Having determined that the purpose of working and landfilling the claim area would have been accepted as an imperative reason of overriding public interest, the appropriate authority (which at the valuation date would have been the Welsh Assembly Government (WAG) under The Government of Wales Act 2006) would have to be satisfied under regulation 44(3) that (a) there was no satisfactory alternative to the translocation of GCN and (b) that such translocation would not be detrimental to the maintenance of the population of GCN at a favourable conservation status in their natural range.

145.    Under regulation 44(3)(a) we consider that there was no satisfactory alternative to the translocation of the GCN from the claim area in order to allow mineral working and landfilling to take place.  The fact that the claimant need not implement the 1988 Mineral Permission is not a satisfactory alternative for these purposes.  As Waller LJ said in Newsum at [16]:

“…if the Assembly was considering whether to grant a licence under regulations 44(2)(e) to (g) it would not be open to them simply to say a satisfactory alternative would be not to carry out that which the trustees had permission to do.”

146.    In our opinion the key issue when considering whether a derogation licence would have been granted to translocate the GCN out of the claim area is the effect of that translocation on their favourable conservation status in their natural range.  This in turn depended upon whether a suitable receptor site could be identified.  The parties agreed that this issue should be determined on a balance of probabilities.

147.    Ms Wilkinson’s favoured site for relocating the GCN was R1 but she added that “it would not have been impossible to identify and prepare an alternative site within 1km had it been necessary to do so.”  She thought in particular that sites 1 and 9 identified by Dr Howe had potential but in cross-examination she agreed that she was not putting them forward and acknowledged that they would need to be considered in more detail before she could identify them as suitable sites.  The only receptor site that the claimant relied upon as being a suitable receptor was R1 and therefore that is the only site that we consider in the context of this issue.

148.    The parties agree that the SSSI designation does not in principle preclude the selection of the R1 area as a suitable receptor site and that a minimum of 183 GCN were translocated into R1 in 2005 after its designation as a SSSI.  The parties have also agreed that the population of GCN in the claim area in 2006 was a minimum of 130 individuals based on torch count data.

149.    Under regulation 44(3)(b) WAG would need to be satisfied, before granting a derogation licence at the valuation date, that the proposed translocation of at least 130 GCN from R2 to R1 would not be detrimental to the maintenance of the population of GCN at a favourable conservation status in their natural range.  In our opinion that criterion requires WAG to compare the donor (R2) and receptor (R1) sites in order to determine which of them is best able to maintain the GCN population in that status.  If the answer to that analysis is that it is R2 that best achieves this desideratum then translocation of GCN to R1 would, in our opinion, be detrimental for the purposes of regulation 44(3)(b).

150.    On the evidence there are several reasons for concluding that, at the valuation date, the habitat at R2 was best able to support and maintain the population of GCN at a favourable conservation status in their natural range:

(i)         R1 was at or close to its carrying capacity.  Between 1999 and 2005 more than 2000 GCN had been translocated from Hafod Quarry, the majority of which (we estimate 1,830) were moved to R1 (although an unknown number of these are likely to have been double counted following their return to the quarry after previous translocations).  These numbers were higher than originally anticipated and therefore the habitat of R1 had to be improved.  The translocation of at least another 130 GCN from R2 would have required yet further improvements, especially the provision of aquatic habitat. This in turn would have reduced the amount of terrestrial habitat available.  Dr Howe described R1 in cross-examination, fairly in our opinion, as being “under pressure” and the translocation of GCN from R2 as putting “all the GCN into one basket.”

(ii)       The habitat at R2 had been significantly improved to allow the translocation of GCN to it in 2005.

(iii)     Unlike R1, R2 was, at that time, free from predatory fish and the invasive Crassula helmsii. The site was defensible from the incursion of the public and therefore future management of this problem would have been easier than at R1.

(iv)      Removal of R2 would potentially lead to the isolation of the area of the SSSI/SAC to the south (New Hall Farm) and thereby risk reducing the natural range of the GCN.  Its retention would ensure a more geographically diverse range of habitat.

(v)        The claimant said that under the first derogation licence it was intended (in a later phase) to translocate the GCN from the claim area to R1.  But this did not happen and the circumstances materially changed following the designation of the extended SSSI and the SAC.

151.    Our conclusion is that WAG, as advised by CCW, would have refused to grant a derogation licence at the valuation date to translocate GCN from R2 to R1.  The depreciation of the value of the claim area was therefore not directly attributable to the deemed modification order arising from the imposition of the ROMP conditions.

The assumed population of GCN to be translocated from R2 to R1

152.    We have determined that the claimant would not have succeeded in obtaining a derogation licence to translocate GCN from R2 to R1.  It is therefore not necessary for us to decide the issue of what population of GCN should be assumed to have been translocated.  However, our decision, had we concluded that a derogation licence would have been granted, would have reflected our view that it was the factual matrix as it existed at the valuation date that should be taken into account.

Determination

153.    Having determined that the claimant (i) has failed to establish any case for compensation based upon the depreciation of the value of the claim area; (ii) did not intend to work the claim area; and (iii) would not have been granted a derogation licence to translocate GCN from the claim area, it follows that no compensation is payable and we determine the reference accordingly.

154.    A letter on costs accompanies this decision which will take effect when, but not until, the issue of costs is determined.

Dated 19 July 2011

 

George Bartlett QC, President

 

A J Trott FRICS

 

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URL: http://www.bailii.org/uk/cases/UKUT/LC/2011/269.html