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Lawbite: Is Compensation in the Pipeline?

  • United Kingdom
  • Real estate litigation

04-06-2019

Ury Estate Limited v BP Exploration Operating Company Limited [2019] CSOH 36

A landowner raised a court action against BP seeking compensation for their inability to develop land due to a presence of an oil pipeline.  The proposed development was a 5 star, 35 bedroom hotel.  The claim was based on rights granted in a servitude (the Scottish equivalent of easement).

The servitude entitled the landowner to compensation if: (i) its proposed development was prevented from doing so only by the existence of the pipeline; (ii) it served a notice on BP providing details (including the development plans and reasons for rejection of the planning application); and (iii) within 6 months of the notice BP did not divert or agree to divert the pipeline. 

While the court accepted the landowner had a genuine wish to develop, the landowner did not prove that the only factor preventing development was the pipeline.  The court took the view that there was no acceptable evidence that the development could be funded and the development was practically unworkable in its proposed form.  This meant that the trigger for compensation set out in the servitude was not met.

The court also considered the proper measure of loss, had compensation been payable.  This was not the total profit expected to be generated by the hotel.  Instead it was the difference between the profit generated by the hotel which had been refused and the development that had been approved.  As the ordinary and natural reading of the word loss means the diminution resulting from the planning decision. 

Key points

  • servitudes are access rights granted over one piece of land in favour of a neighbouring piece of land
  • it is common for landowners to be entitled to claim compensation but the servitude will usually set out the circumstances in which compensation is payable and the factors that must be met
  • even if compensation is payable there can be issues about the calculation of loss, e.g. the date at which the loss should be valued etc.
Ben Sheppard, Senior Associate
Heidi Archibald, Principal Associate

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