England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
(GEORGE BARTLETT QC)

		Royal Courts of Justice Strand London WC2 Tuesday, 26th June 2001

Tuesday, 26th June 2001

1. LORD JUSTICE ROBERT WALKER: This is an appeal from a decision of the Lands Tribunal in the person of the President, Mr George Bartlett QC. The Tribunal's order, dated 7th January 2000, determined the compensation payable by Sandwell Metropolitan Borough Council ("Sandwell") for the compulsory acquisition of the freehold interest in a house ("the property") at 37 Old Park Lane, Oldbury, Warley, West Midlands. The compensation was determined at £750, the agreed site value.
2. The parties to the proceedings before the Lands Tribunal were Mr Stephen Farrell, First National Bank Plc ("First National") and Sandwell. Mr Farrell had at an earlier stage been regarded as the owner of the property - in particular, it was he on whom was served a notice to treat dated 14th February 1991 - but the duration of his ownership later became a subject of controversy; indeed it was the first and main issue in the proceedings. Mr Farrell himself did not appear at either of the two hearings which took place before the Lands Tribunal. The argument against Sandwell was undertaken at a second hearing by Miss Julia Smith as counsel for First National. It was interested as proprietor of a charge on the property executed by Mr Farrell on 2nd April 1990 and registered at the HM Land Registry on 23rd April 1990.
3. Before any further explanation of the evidence (some fairly remarkable) about the ownership and occupation of the property it is desirable to summarise as briefly as I can the main statutory provisions relevant to this appeal. That is made easier by Miss Smith's admirable skeleton argument and the various annexures to it. All or most of the relevant provisions of the Housing Act 1985 have now been repealed and replaced but they remained in force in relation to compulsory purchase orders made before 1st April 1990. In this case the relevant order was the Sandwell (Old Park Lane, Oldbury) (Clearance Areas) Compulsory Purchase Order 1988.

Part IX of the Housing Act 1985 dealt with slum clearance. Sections 289 and 290 in Part IX enabled the local housing authority to make a declaration of a clearance area, and to secure its clearance by compulsory acquisition and demolition. Section 585 (in Part XVII, headed compulsory purchase and land acquisition) provided in subsection (1) as follows:

"(1) The compensation payable for -

(b) land purchased under section 290 as being comprised in a clearance area, except as mentioned in subsection

(2),...

is the value at the time when the valuation is made of the site as a cleared site available for development in accordance with the requirements of the building regulations in force in the district."

4. Subsection (2) was made an exception which is not now material. Subsection (3) made exceptions which are material, and which point to the policy behind this part of the legislation (which can be traced back at least to the Housing Act 1957):

"The provisions of this section as to site value compensation are without prejudice to any further payment falling to be made under section 586 and Schedule 23 (well maintained houses) and section 587 and Schedule 24 (houses which are owner occupied or used for business purposes)."

5. Sections 586 and 587 simply incorporated Schedules 23 and 24 respectively. Section 588 prevented a claimant obtaining double compensation under both sets of provisions.
6. Schedule 23 (payments in respect of well maintained houses) provided in paragraph 3 for the local housing authority to make a payment if satisfied that a house which is compulsorily acquired under section 290 has been well maintained. The payment is normally to be made to the owner-occupier, if any. Paragraph 4 regulated the amount of the payment (by reference to a multiple of the rateable value). Paragraph 5 provided for a payment of half that amount if a house had been well maintained internally but not externally (or vice versa). In this case the property was well maintained internally but not externally.
7. Schedule 24 Part I dealt with payments in respect of owner-occupied houses including (among other categories) those which had been acquired at site value under section 585. It defined the "relevant date" (in such a case) as the date of declaration of a clearance area under section 289. In this case the date of the declaration was 11th October 1988. Paragraph 2(1) provided:

"Where this Part of this Schedule applies and - (a) on the relevant date and throughout the period of two years ending with that date the house was wholly or partly occupied as a private dwelling, and

(b) the person so occupying it (or, if during that period it was so occupied by two or more persons in succession, each of those persons) was a person entitled to an interest in the house or a member of the family of a person so entitled, the local housing authority shall make in respect of that interest a payment of an amount determined in accordance with the following provisions of this Part of this Schedule."

8. Paragraph 4(1) provided that the amount of the payment was to be the full compulsory purchase value of the relevant interest, less site value as assessed under section 585. I should also read paragraph 4(4) and paragraph 5(3). The former provision is as follows:

"5(4) Any question as to the purposes for which any part of a house was occupied shall be determined by the Secretary of State; subject to that, the amount of any payment under this Part of this Schedule shall be determined (in default of agreement) as if it were compensation payable in respect of the compulsory purchase of the interest and shall be dealt with accordingly."

9. The latter provision is as follows.

"5(3) Payment under this Part of this Schedule in respect of an interest which, at the date when the house was purchased compulsorily or, as the case may be, vacated, was held by virtue of an agreement to purchase by instalments shall be made to the person entitled to the interest at that date."

10. It is not necessary to cover exhaustively all the statutory provisions relating to compulsory purchase generally. Most are found in the Land Compensation Act 1961 and the Compulsory Purchase Act 1965. But it is right to draw attention to sections 14 and 15 of the latter Act, which deals specifically with the interest of a mortgagee. Section 15 deals with the situation where the mortgage debt exceeds the value of the mortgaged land. Under subsection (2) the compensation agreed or awarded is in such a case to be paid to the mortgagee in part satisfaction of the mortgage debt.
11. Under section 1 of the Land Compensation Act 1961 any question of disputed compensation for land compulsorily acquired is to be referred to and determined by the Lands Tribunal. Appeals from the Lands Tribunal to this court are regulated by section 3 of the Lands Tribunal Act 1949 as amended. In England and Wales the case stated procedure has recently been replaced by a straightforward appeal. The present appeal must be one of the very last brought in England and Wales under the case stated procedure.
12. I now return to the facts. The property was a two-story mid-terraced house. On 25th March 1985 it was registered in the name of Mr Soukhbir Singh Sander, a Birmingham businessman.
13. On 12th July 1985 there was a written agreement, apparently prepared by Birmingham solicitors, for Mr Sander to sell the property to Mr Farrell, whose address was given as the property. He was then, it appears, employed as a cutting-room manager at a Birmingham clothing manufacturer. By the agreement Mr Sander agreed to sell and Mr Farrell agreed to buy the property for £10,000 payable as to £1,000 at once and then by 15 quarterly payments of £550 and a final payment of £750 in July 1989. Mr Farrell was to be allowed to occupy the property during this period so long as he kept up the payments. He was to be responsible for the insurance.
14. Clauses 5 and 6 provided as follows:

"In the event of the purchaser failing to meet the payments the vendor reserves the right to treat the contract as discharged and any monies paid by the purchaser will be forfeited. In such circumstance the vendor reserves the right to re-enter the property and the purchaser to vacate the property immediately."

15. Then clause 6:

"Completion shall take place within 28 days of the purchaser adhering to the payment schedule in condition 1 or, by repaying the outstanding balance in one lump sum at an earlier date."

16. I would add that in the last clause "repaying" seems to be a slip of language. There is no suggestion that this was in any way a loan transaction.
17. I should emphasise that although there are some questionable pieces of documentary evidence in this case no doubt has been cast on the genuineness of the agreement dated 12th July 1985, at any rate until Mr David Fletcher (appearing for Sandwell) sought to cast some doubt on it in his oral submissions this morning. However, it seems to me that an attack on that document cannot be contemplated at this stage of the matter.
18. Moreover Mr Farrell became registered proprietor of the property on 23rd November 1988 pursuant to a transfer dated 1st July 1988 made by Mr Sander for a stated consideration of £9,500. The evidence before the tribunal and before this court includes a copy of this transfer with an official stamp of the Coventry District Land Registry indicating that it was received on 22nd November 1988 and the genuineness of this document is not in doubt. There are therefore, whatever uncertainties there are in this matter, a solid beginning and end, as it were, to the process under which Mr Farrell became registered proprietor of the property. Furthermore with a single possible exception (that is Mr Farrell's address as stated in manuscript on the transfer, unless indeed that address is the address of the witness) Mr Farrell's address is throughout given as that of the property - 37 Old Park Lane, Oldbury, Warley, B69 4PT. That appears in all official documents and in communications before the court. These included a mortgage offer made by the Halifax Building Society which Mr Farrell obtained in October or November 1987 but for whatever reason did not proceed with. The property was the proposed security for that transaction.
19. The written evidence of Mr Alan Cox, a partner in a firm of surveyors at Warley, was that he acted for many clients in connection with the compulsory purchase order, and in or about March 1988 he received instructions from Mr Farrell to attend at the property, and that he did so. On the basis of the documents which he was shown and his own investigations he was, he said, satisfied that Mr Farrell was entitled to receive owner-occupier supplement under section 587 and Schedule, 24 Part 1. His own investigations included copies of the electoral roll for 1986, 1987 and 1988. Those documents were also put in evidence by Sandwell. Mr Cox said that whenever he visited Mr Farrell he found him resident, and that when he wrote letters to Mr Farrell at the property he received a response to them.
20. Mr Cox gave oral evidence to the Lands Tribunal and he produced copies of relevant documents. He agreed in cross-examination that he had, in an offer form dated 4th April 1989 sent by his firm to Sandwell on behalf of Mr Farrell, stated the date of purchase of the property as 1st August 1988. That was a date between a date of Mr Sandwell's transfer, 1st July 1988, and its registration at the Land Registry, 23rd November 1988.
21. The only other oral evidence was from Mr Brian Spencer, First National's investigations manager, and from Mr Alan Whiting, an officer with Sandwell. Mr Spencer said that Mr Farrell had quickly fallen into arrears on his mortgage (originally for £15,000) and that no less than £128,000 was due by the end of May 1999. That seems to reflect an interest rate which started in 1990 at 16.5 per cent. Mr Whiting produced correspondence which passed at a later stage in the matter, that is between 1994 and 1998, and it is not, I think, relevant to any issue before the court.
22. The evidence for Sandwell apart from the oral evidence of Mr Whiting was a written statement of Miss Marie-Louise Lambe, a law clerk in Sandwell's chief executive's department. She exhibited a number of documents including the notice dated 4th April 1989, and copies of the electoral roll, showing that the residents in 1986, 1987 and 1988 were Colin Farrell, Stephen Farrell and Trudy Reid.
23. For the purposes of Schedule 24 Part I the critical period is from 11th October 1986 to 11th October 1988, the latter date being the "relevant date" for statutory purposes. Most of the documentary evidence which I have summarised points to an unusual but undisputed written agreement for a sale by instalments entered into on 12th July 1985. It also suggests that that agreement was completed, a little ahead of schedule, by the transfer (for a stated consideration of £9,500) which was executed on 1st July 1988. However, Mr Fletcher, for Sandwell, submits that between those two undisputed facts there is a yawning gap on which he says First National fails to make out its case with the result that the Lands Tribunal was, he says, justified to reject the claim for a Schedule 24 payment. It seems to me that all the evidence (with the single possible exception which I have mentioned) points to Mr Farrell having been continuously resident in the property and having treated himself as the owner (although with other persons living in the house) from 1985. Indeed his occupation seems not really to be in dispute. What is in dispute is the nature of the interest entitling him to that occupation.
24. The Lands Tribunal, as I have just indicated, rejected First National's claim to more than site value, a claim which admittedly depends (under sections 14 and 15 of the Compulsory Purchase Act 1965) on the success of Mr Farrell's claim. The evidence which casts doubt on his claim comes down, it seems to me, to three items. First, there was a Land Registry transfer form, completed and at one stage produced to Sandwell but never submitted to the Land Registry, which purported to be dated 1st November 1985. That was patently a false document since it was a printed form with the heading "HM Land Registry Land Registration Acts 1925 to 1986." It appears to have been signed by Mr Sander and Mr Farrell.
25. Secondly, there was the date 1st August 1988 specified in the notice of 4th April 1989 which I have mentioned. I can say at once that I would attach no importance to that. It was a close approximation to the date of the final transfer and was not seriously inconsistent with the terms of the instalment contract, which is specifically covered by Schedule 24, paragraph 5(3) as amounting to a sufficient interest for the statutory purposes.
26. The third item, to which the Lands Tribunal attached most importance, was copies of two letters from Miss Trudy Reid which seem to have been extracted from the files of Sandwell's Rating Department. These letters do not appear to have been formally exhibited to Miss Lambe's witness statement and there is some doubt as to how precisely they were put before the Lands Tribunal. However it is accepted that they were put before the Lands Tribunal for what they were worth. Mr Fletcher submits that the President was entitled to attach significance to them. Miss Smith for her part submits that they were of no real evidential value at all. The first letter is dated 14th October 1987; it is a typewritten letter to the rate office at Smerthwick, apparently signed by Miss Reid, giving her home address as 40 Frederick Road, Stechford and referring to "a recent change of ownership, that being of 37 Old Park Lane, of which I am now the sole owner." Then there is an undated manuscript letter, probably written at the end of January or in February 1988, referring to a summons for non-payment of rates of the property. That summons was apparently issued on 28th January 1988, which is the best guide to the dating of the letter. Having referred to the summons, Miss Reid wrote:

"But some months ago when I was trying to purchase the above house [that is the property, whose address appears at the top of the letter] I found out that I was pregnant and could no longer proceed with the purchase, although I had signed some papers for the house.

So the house is now back in possession of Mr S Sander, who I am now paying rent to.

The reason I am now living at 37 Old Park Lane, is because I had to leave my parents home when they found out that I was pregnant."

27. There is nothing else material in the letter.
28. The conclusion of the President of the Lands Tribunal on this issue was as follows:

"I am not satisfied on the evidence before me that the contract of 12 July 1985 continued in force until 11th October 1988 as Miss Smith submits. Miss Smith is quite right to point out that there is no direct evidence of any default on the claimant's part under the agreement or of any termination of the contract by Mr Sander. I accept for the most part her submission that the inconsistencies between the various documents relating or purporting to relate to the transfer of the property are explicable by an anxiety on the part of the claimant and Mr Sander to prove that there had been a transfer, either in 1985 or in 1988, and do not bear upon the question whether the 1985 agreement continued in effect up to the time of the 1988 transfer. It is to be noted, for example, that the unstamped transfer form, purportedly signed on 1 November 1985, refers to the Land Registration Acts 1925 to 1986 and thus could not have been available before use before 1986. The 1988 transfer for £9,500 could, as Miss Smith submits, have been made under a variation of the 1985 agreement, but there is no documentary evidence to connect the two transactions.

In the absence of any evidence on the part of the claimant and Mr Sander, the letters of Miss Reid in 1987 and 1988 must in my view carry some weight. These suggest that at that time Miss Reid had been negotiating with Mr Sander for the purchase of the property and was paying rent for it to Mr Sander. In the absence, as I say, of any evidence from the claimant or Mr Sander on the matter, the inference to be drawn in my judgment is that by 14 October 1987 Mr Sander was treating the 1985 contract as no longer subsisting. He was accordingly prepared to sell the property to Miss Reid and was prepared later to receive rent from her as a tenant. While there is no evidence that the claimant did default on his payments to Mr Sander under the 1985 agreement, thus giving Mr Sander the right to terminate the contract, it seems not unlikely that he may have defaulted in view of his almost total failure to make any payments under his loan agreement with the mortgagee. I therefore conclude, on the first issue, that the mortgagee has failed to establish that the claimant had the necessary interest throughout the qualifying period to satisfy para 2(1)(b) of Schedule 24."

29. Miss Smith has challenged this conclusion in her written and oral submissions. The Tribunal did not identify any evidence of any agreement, or indeed any sort of communication between Mr Sander and Mr Farrell bringing the instalment contract to an end. Indeed the tribunal expressly acknowledged that there was no evidence that Mr Farrell did default in his payments to Mr Sandwell.
30. Mr Fletcher against that has understandably emphasised that the burden of proof was on First National, and there was, he submitted, a reasonable basis for the Lands Tribunal to conclude that the burden of proof had simply not been discharged. He said, in effect, that it was First National's misfortune that it had to try and prove a case depending on matters which were really within the knowledge of persons who were not before the Lands Tribunal; that is Mr Farrell, and no doubt also Mr Sander and Miss Reid. He submitted that there was enough doubt to justify the conclusion that the case had simply not been proved. Against that Miss Smith said in reply that the First National as mortgagee was in effect being asked to prove a negative; that is, to prove that there had not been some interruption of an unexplained sort occurring between the two fixed points which are not in dispute, that is the instalment agreement in 1985 and the transfer in 1988.
31. Miss Smith has referred to the principles of law governing the circumstances in which a contract is discharged. It is understandable that she should do so, since the only appeal to this court from the Lands Tribunal is on the ground of error in point of law. However it can be an error of law to reach a conclusion which was not reasonably open to the tribunal on the evidence before it. Despite Mr Fletcher's vigorous and determined submissions I have come to the respectful conclusion that the tribunal erred in law when, after acknowledging that there was no evidence of default, it reached a conclusion based on the supposition that:

"It seems not unlikely that he may have defaulted in view of his almost total failure to make any payments under his loan agreement with the mortgagee."

32. However his failure to keep up his mortgage occurred in and after 1990; there was evidence before the Lands Tribunal that in 1987 Mr Farrell had been in steady employment for six years; and there is the undisputed - and to my mind most important - fact, which the Tribunal does not refer to in that part of the decision, that Mr Sandwell did transfer the property to Mr Farrell in 1988, for a stated consideration of £9,500, about a year ahead of when completion would have taken place under the instalment timetable. It is hard to know what to make of Miss Reid's letters, but in my judgment the Tribunal did err in attaching too much importance to letters written in circumstances which were quite unexplained and produced apparently from a file in a different department of Sandwell. It seems to me that he attached too much importance to two letters which really had virtually no evidential value, and too little importance to the undisputed facts as to the 1985 agreement, the 1988 transfer and the fact of Mr Farrell's continued occupation of the property throughout the intervening period.
33. I would therefore allow the appeal on the first issue and remit the matter to the Lands Tribunal to award the full agreed net sum of £29,250 (that is the agreed sum of £30,000 less the agreed site value of £750).
34. In those circumstances the second issue (of First National's right under sections 14 and 15 to a payment under schedule 23) does not arise, since under section 588 of the Housing Act 1985 there could not in any event be a double recovery of compensation. We have not heard argument on that point. It seems to be one of some difficulty on which it is neither necessary nor desirable to express any view.
35. LORD JUSTICE LONGMORE: I agree, and although we are disagreeing with the decision of the Lands Tribunal in this case there is nothing that I can usefully add.
36. MR JUSTICE CARNWATH: I also agree. The tribunal had a difficult task faced with unsatisfactory and incomplete evidence. However the error, in my respectful view, was in attaching any weight at all to the two letters of Trudy Reid, having regard to the obscurities to which my Lord has referred. In my view those letters should have been treated as having no weight. As a result there was no evidence to support the inferences drawn by the President at paragraph 12. That is an error of law which entitles this court to interfere.
(Appeal allowed with costs).