Highways Agency Annual Report and Accounts 2011-2012

SECTION 10: Financial Statements
20 Contingent liabilities and assets
20 (a) Contingent liabilities
31 Mar 2012 31 Mar 2011
£000 £000
Land & property acquisition 173,550 168,651
Engineering & construction services 7,500 7,110
Other 8,770 4,446
189,820 180,207
Land and Property Acquisition
Contingent liabilities from land and property acquisition arise from the following sources:
Acquisition and Blight
The construction of any major road construction scheme invariably requires the acquisition of property.
The Acquisition and Land Act 1973 gives the Secretary of State the power to make compulsory
purchases. Possible purchases for schemes in the Secretary of State’s major projects programme are
included as contingent liabilities until the point when Compulsory Purchase Orders are made and a
reliable estimate is available.
In addition, road schemes, when announced, can adversely impact surrounding property values and The
Town and Country Planning Act 1990 provides for individuals to claim compensation for the blight of their
properties. Possible blight costs for schemes in the major projects programme are included as contingent
liabilities until the point when Blight Notices are issued and a reliable estimate is available.
Compensation for Loss After Construction
Home owners can apply for compensation for lost value (‘injurious affection’) under Part 1 of The
Acquisition and Land Act 1973, where property, which was not acquired for a road scheme, has lost value
because of physical factors, including noise, light, dirt, smell and vibration, associated with the new or
improved roads.
Claims become inevitable once the construction phase is started and the Agency accounts for the
constructive obligation as a provision. A legal obligation crystallises one year after the road has opened
for traffic when homeowners are entitled to lodge claims that are normally settled in less than a year. Such
obligations are treated as contingent liabilities until the start of construction work.
Claims in Dispute
As at the Statement of Financial Position date, the Agency is involved in a number of property cases
that have been referred to the Lands Tribunal for resolution or are otherwise in dispute. The Agency has
provided for, in its accounts, management’s best estimate of the outcome of these cases although this
may be exceeded by the actual outcome.
Engineering and Construction Services
The Agency is involved in a number of arbitration cases in respect of contractual claims for engineering
and construction services and has provided for the best estimates of the outcome of these cases,
although this may be exceeded by the actual outcome.
Other
Other contingent liabilities relate to management estimates of partial claims from third parties who have
suffered damage or injury as a result of the road network being damaged but for which no claim has been
received at the year-end and are based on prior years’ experience.
Highways Agency Annual Report and Accounts 2011-12