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“Compensation water” is used to describe the water given from a reservoir in compensation for water abstracted from a stream, under statutory powers, in connexion with public works (see Water Supply). As to the use of the word “compensation” in horology, see Clock; Watch.

Compensation, in its most familiar sense, is however a nomen juris for the reparation or satisfaction made to the owners of property which is taken by the state or by local authorities or by the promoters of parliamentary undertakings, under statutory authority, for public purposes. There are two main legal theories on which such appropriation of private property is justified. The American may be taken as a representative illustration of the one, and the English of the other. Though not included in the definition of “eminent domain,” the necessity for compensation is recognized as incidental to that power. (See Eminent Domain, under which the American law of compensation, and the closely allied doctrine of expropriation pour cause d’utilité publique of French law, and the law of other continental countries, are discussed.) The rule of English constitutional law, on the other hand, is that the property of the citizen cannot be seized for purposes which are really “public” without a fair pecuniary equivalent being given to him; and, as the money for such compensation must come from parliament, the practical result is that the seizure can only be effected under legislative authority. An action for illegal interference with the property of the subject is not maintainable against officials of the crown or government sued in their official capacity or as an official body. But crown officials may be sued in their individual capacity for such interference, even if they acted with the authority of the government (cp. Raleigh v. Goschen [1898], 1 Ch. 73).

Law of England.—Down to 1845 every act authorizing the purchase of lands had, in addition to a number of common form clauses, a variety of special clauses framed with a view to meeting the particular circumstances with which it dealt. In 1845, however, a statute based on the recommendations of a select committee, appointed in the preceding year, was passed; the object being to diminish the bulk of the special acts, and to introduce uniformity into private bill legislation by classifying the common form clauses, embodying them in general statutes, and facilitating their incorporation into the special statutes by reference. The statute by which this change was initiated was the Lands Clauses Consolidation Act 1845; and the policy has been continued by a series of later statutes which, together with the act of 1845, are now grouped under the generic title of the Lands Clauses Acts.

The public purposes for which lands are taken are threefold. Certain public departments, such as the war office and the admiralty, may acquire lands for national purposes (see the Defence Acts 1842 to 1873; and the Lands Clauses Consolidation Act 1860, s. 7). Local authorities are enabled to exercise similar powers for an enormous variety of municipal purposes, e.g. the housing of the working classes, the improvement of towns, and elementary and secondary education. Lastly, the promoters of public undertakings of a commercial character, such as railways and harbours, carry on their operations under statutes in which the provisions of the Lands Clauses Acts are incorporated.

Lands may be taken under the Lands Clauses Acts either by agreement or compulsorily. The first step in the proceedings is a “notice to treat,” or intimation by the promoters of their readiness to purchase the land, coupled with a demand for particulars as to the estate and the interests in it. The landowner on whom the notice is served may meet it by agreeing to sell, and the terms may then be settled by consent of the parties themselves, or by arbitration, if they decide to have recourse to that mode of adjusting the difficulty. If the property claimed is a house, or other building or manufactory, the owner has a statutory right to require the promoters by a counternotice to take the whole, even although a part would serve their purpose. This rule, however, is, in modern acts, often modified by special clauses. On receipt of the counter-notice the promoters must either assent to the requirement contained in it, or abandon their notice to treat. On the other hand, if the landowner fails within twenty-one days after receipt of the notice to treat to give the particulars which it requires, the promoters may proceed to exercise their compulsory powers and to obtain assessment of the compensation to be paid. As a general rule, it is a condition precedent to the exercise of these powers by a company that the capital of the undertaking should be fully subscribed. Compensation, under the Lands Clauses Acts, is assessed in four different modes:—(1) by justices, where the claim does not exceed £50, or a claimant who has no greater interest than that of a tenant for a year, or from year to year, is required to give up possession before the expiration of his tenancy; (2) by arbitration (a) when the claim exceeds £50, and the claimant desires arbitration, and the interest is not a yearly tenancy, (b) when the amount has been ascertained by a surveyor, and the claimant is dissatisfied, (c) when superfluous lands are to be sold, and the parties entitled to pre-emption and the promoters cannot agree as to the price. (Lands become “superfluous” if taken compulsorily on an erroneous estimate of the area needed, or if part only was needed and the owner compelled the promoters under the power above mentioned to take the whole, or in cases of abandonment); (3) by a jury, when the claim exceeds £50, and (a) the claimant does not signify his desire for arbitration, or no award has been made within the prescribed time, or (b) the claimant applies in writing for trial by jury; (4) by surveyors, nominated by justices, where the owner is under disability, or does not appear at the appointed time, or the claim is in respect of commonable rights, and a committee has not been appointed to treat with the promoters.

Promoters are not allowed without the consent of the owner to enter upon lands which are the subject of proceedings under the Lands Clauses Acts, except for the purpose of making a survey, unless they have executed a statutory bond and made a deposit, at the Law Courts Branch of the Bank of England, as security for the performance of the conditions of the bond.

Measure of Value.—(1) Where land is taken, the basis on which compensation is assessed is the commercial value of the land to the owner at the date of the notice to treat. Potential value may be taken into account, and also good-will of the property in a business. This rule, however, excludes any consideration of the principle of “betterment.” (2) Where land, although not taken, is “injuriously affected” by the works of the promoters, compensation is payable for loss or damage resulting from any act, legalized by the promoters’ statutory powers, which would otherwise have been actionable, or caused by the execution (not the use) of the works authorized by the undertaking.

The following examples of how land may be “injuriously affected,” so as to give a right to compensation under the acts, may be given:—narrowing or obstructing a highway which is the nearest access to the lands in question; interference with a right of way; substantial interference with ancient lights; noise of children outside a board school.

Scotland and Ireland.—The Lands Clauses Act 1845 extends to Ireland. There is a Scots enactment similar in character (Lands Clauses [Scotland] Act 1845). The principles and practice of the law of compensation are substantially the same throughout the United Kingdom.

India and the British Colonies.—Legislation analogous to the Lands Clauses Acts is in force in India (Land Acquisition Act 1894 [Act 1 of 1894]) and in most of the colonies (see western Australia, Lands Resumption Act 1894 [58 Vict. No. 33], Victoria, Lands Compensation Act 1890 [54 Vict. No. 1109]; New Zealand, Public Works Act 1894 [58 Vict. No. 42]; Ontario [Revised Stats. 1897, c. 37]).

Authorities.English Law: Balfour Browne and Allan, Compensation (2nd ed., London, 1903); Cripps, Compensation (5th edition, London, 1905); Hudson, Compensation (London, 1906); Boyle and Waghorn, Compensation (London, 1903); Lloyd, Compensation (6th ed. by Brooks, London, 1895); Clifford, Private Bill Legislation, London, 1885 (vol. i.), 1887 (vol. ii.) Scots Law: Deas, Law of Railways in Scotland (ed. by Ferguson; Edinburgh, 1897); Rankine, Law of Landownership (3rd ed., 1891).  (A. W. R.)