Crossrail and the Crichel Down Rules

Surface development at the new Woolwich Crossrail station. Photo Kleon3.

The Crichel Down Rules stem from a great political scandal of the 1950s when the Government of the day failed to honour an undertaking to allow the original owner of land, which it had acquired under compulsory purchase powers for military purposes, to purchase it back once it was surplus to requirements. The affair features heavily in textbooks on politics and public law in that it served to clarify the concept of ministerial responsibility and the type of decision which would require the minister to ‘fall on his sword’ following mistakes or misconduct by civil servants in his department; the case led to the resignation of Sir Thomas Dugdale, the minister of agriculture, who famously told Parliament that

I, as minister, must accept full responsibility for any mistakes and inefficiency of officials in my department, just as, when my officials bring off any successes on my behalf, I take full credit for them. See Hansard HC Deb 20 July 1954, vol 530, col 1186.

On the narrower issue of compulsory purchase powers it led to the ‘Crichel Down’ rules. These sought to establish a fair and transparent procedure for allowing the original owner of land, acquired by a public body under compulsory purchase powers, to buy it back if it becomes surplus to requirements. In short, such a person must be offered ‘first refusal’ on the property before it is offered for sale on the open market. The rules have been at the centre of two recent cases involving Crossrail and the acquisition of land needed to build what has now been officially named as the ‘Elizabeth Line.’ The case focused on the original Crichel Down Rules themselves and a version of them in a policy document produced by Crossrail itself on how such issues should be dealt with  – the C10 Land Disposal Policy.

In the most recent case, R (on the application of) Daniel Charlesworth v Crossrail Limited and another [2019] EWCA Civ 1118 the claimant challenged a decision not to offer him first refusal on a parcel of land which had been acquired by Crossrail in connection with the construction of an underground station at Woolwich and was no longer needed for the project. The property transactions were complicated and what follows is somewhat of an over-simplification. In short, the claimant had a long leasehold interest in a parcel of land which Crossrail needed for the construction of the station. It so happens that the land formed part of a larger parcel of land the freehold of which was owned by the London Development Agency (LDA). Crossrail (which enjoyed extensive compulsory purchase powers under the Crossrail Act 2008) used its powers to obtain the claimant’s leasehold interest of the property in 2010. On 11 February 2011 the LDA sold its freehold interest in the larger parcel of land to a property developer, Berkeley Fifty-Five Ltd (B55),  for £3 million. Just days later, on 15 February 2011, B55 Ltd sold a small part of that land to Transport for London (TfL) (of which Crossrail is a subsidiary) on a voluntary basis for a mere £1. The land in question (which included the claimant’s former premises) was of no value to B55 but was needed by TfL for the construction of the station.

By 2017 the station had been largely completed and, being a subterranean structure, the land on the surface was no longer needed and could be released for development. However, it was now very different to how it had appeared before in that it had been cleared of buildings and the only structure were now two large ventilation shafts.

Now, the Crichel Down Rules stipulate that no one can be offered first refusal if there is more than one competing claim on the land (see rule 15(6)). Here there were two people with a ‘Qualifying Interest’; namely the claimant by dint of his former leasehold interest in the property and B55 by dint of the short time it had enjoyed the freehold of the property. Thus, where more than one person qualifies no-one qualifies! The claimant sought to establish that B55 did not have a qualifying interest because the transaction executed on 15 February 2015 was entirely voluntary and was in no way prompted by the imminent use of compulsory purchase powers. If the claimant succeeded in this argument he would be regarded as the only party with a qualifying interest and would thereby have to be offered first refusal. These arguments focused attention on rule 7 of the Crichel Down rules and section 5 of the C10 Land Disposal Document by which Crossrail sought to give effect to those rules in a slightly modified form. Rule 7 of the Crichel Down Rules provides as follows:-

The Rules apply to all land if it was acquired by or under threat of compulsion. A threat of compulsion will be assumed in the case of a voluntary sale if power to acquire the land compulsorily existed at the time unless the land was publicly or privately offered for sale immediately before the negotiations for acquisition.

Sections 5.2 and 5.3 of the C10 Land Diposal Document (reflecting rule 15(6) of the CDR) provide as follows:-

[5.2] Where only one expression of interest from a former owner or long leaseholder with a Qualifying Interest is made to acquire a site, that person will be given the opportunity to acquire the site at market value within the timescales set. [5.3] If there are competing bids for a site from former owners, it will be disposed of on the open market.

Thus, if the land disposed of by B55 could be construed of has having been ‘acquired by or under threat of compulsion, ‘ B55 would have a competing claim and TfL/Crossrail would be at liberty to sell it on the open market without offering Mr Charlesworth first refusal.

The issue of what constitutes a ‘competing bid’ had been considered in the earlier very similar case of Pritchett v Crossrail Ltd [2017] EWCA Civ 317. The claimant argued in this case that an ‘expression of interest’ did not amount to a competing bid. The Court of Appeal rejected this argument on the grounds that the rules were drafted in such a way that they covered a broad spectrum ranging from serious bids to more tentative approaches.

As regards the case at hand, in an approved judgment delivered by Lewison LJ, the Court of Appeal was at pains to point out that the Crichel Down Rules are a policy and do not have the force of law behind them (at para [2]). Nevertheless, the Court then appeared to proceed on the basis that they were a form of legislation and interpreted them using an approach which is highly redolent of statutory interpretation.

The claimant  struggled to get round the ‘assumption’ that land is acquired by or under of threat of compulsion even where the sale is ostensibly voluntary. Counsel for the claimant argued that TfL and B55 had been in league all along in that B55 was the preferred developer for the site. The transaction had been designed to create two competing interests thereby defeating the claimant’s entitlement to first refusal under the Crichel Down rules. This militated against the notion that the transaction was anything to do with the impending use of compulsory purchase powers in that there was an ulterior motive. As counsel put it,

an assumption of this kind [that the sale was made under threat of compulsion] can be displaced by contrary evidence … The judge was wrong to equate a backcloth of compulsion and a sale made under threat of compulsion. The true reason for B55’s aquisition and (almost) immediate sale to TfL was to protect B55 and to enhance the prospects of its successful redevelopment of Woolwich. (see para [11])

The Court of Appeal was not receptive to these arguments and emphasised the fact that the assumption contained in the Crichel Down Rules was there for pragmatic reasons and the rules would become unwieldy and difficult to apply if one had to enquire too closely into the motives of the parties:-

The reason for the assumption in rule 7 is, to my mind, clear. It avoids the necessity of investigating the internal state of mind of an individual landowner. The investigation of the subjective state of mind of an individual landowner is likely to be partly speculative, since it postulates a hypothetical state of affairs in which the threat of compulsory acquisition is airbrushed out of history. It is also speculative in the sense that it is likely to be based in inferences. Such an investigation is also likely to be burdensome for an acquiring authority to undertake; particularly if the scheme in question affects a large number of landowners … (Lewison LJ at [17]).

The Court of Appeal (at para [12] also commented on an argument that was raised in the claimant’s skeleton argument but not pursued in counsel’s submissions, namely, that there is a difference between an assumption and a ‘deeming provision.’ A deeming provision provides that a certain set of circumstances exists whether or not this reflects the reality of the situation; an assumption, it was argued, does not automatically bring about a certain state of affairs and can be displaced by other factors. The Court felt that the distinction between the two terms was too fine to draw and they had been used interchangeably in the case law.

An argument that the Crichel Down Rules were motivated by fairness and thus should not be applied in a manner which was unfair to the claimant was also rebuffed on the grounds that, “for TfL to disapply the assumption in vague and unspecified circumstances would not be conducive to good administration.” (Lewison LJ at [15]). Moreover, it was wrong to say that the rules had been interpreted in a way which frustrated their underlying purpose. The rules had been designed to allow displaced persons an opportunity to reoccupy their old homes or resume their former businesses or way of life. The nature of the land here had been irrevocably changed and, as noted above, all the old buildings had gone. The claimant was effectively seeking an opportunity to participate in a new commercial venture rather than resuming his former activities. This point had also been made in the Pritchett case in which the claimant’s flat had been demolished to make way for the Crossrail development. As McCombe stated (at para [35]):-

The CD Rules apply to cases where the land in question has not materially changed in character. This policy [the C10 land disposal policy] is designed to include sites which have so changed. It is not necessarily apparent that the policy considerations in the two cases will be identical. The interested parties here were the appellant, who had owned an individual flat, and other parties who had interests in other individual parts of the site. None would be stepping back into a property of the character that he or it had previously owned. They would be getting the opportunity of commercial benefit from a potential new development of the whole site of an entirely different character. This is hardly the situation faced by the former owners of Crichel Down, whole erstwhile property gave rise to the principles now expressed in the CD Rules.

In point of fact the Crichel Down rules do actually specifically refer to a material change in the character of the land as constituting a ground for not offering first refusal to the original owner (see rule 10).

The interpretation of the Crichel Down rules (as applied in the Crossrail land disposal policy) has almost entirely removed any scope for questioning the motives of the parties. The fact that a transaction was conducted against the ‘backdrop’ of compulsory purchase raises and irrefutable assumption that a sale was not voluntary. On the face of it this appears to be a harsh and narrow approach which militates against the notion of fairness which underpin the Crichel Down rules (although, as pointed out above, the rules do in fact contemplate that eventuality). However, as the Court of Appeal pointed out, the rules are a policy which means that there is some scope for adapting them according to the circumstances on the ground. The fact that the land has changed to the extent that it would be impossible for the claimant to resume his former way of life or commercial activities, arguably lessens any unfairness arising from denying him first refusal on the property. Of course, some might argue that the use or threat of use of compulsory powers in the first place may have been unfair. For example, HS2 has been criticised for taking more land than it needs – see, for example, this NFU article. However, that issue is beyond the scope of this particular blog entry.