COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE UPPER TRIBUNAL (LANDS CHAMBER)
ACQ/447/2007,  UKUT 102 (LC)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE SULLIVAN
LORD JUSTICE TOMLINSON
| Ridgeland Properties Limited
|- and -
|Bristol City Council
Neil King QC and Rupert Warren (instructed by Ashurst LLP) for the Respondent
Hearing date: 18th April 2011
Crown Copyright ©
Lord Justice Sullivan :
This is the judgment of the Court written by Sullivan LJ
"The parties agree that sections 14 to 16 of the Land Compensation Act 1961 are relevant to the assessment of compensation in this case and that it should be assumed that planning permission would have been granted for a scheme of redevelopment of the Reference Land."
Part 5 of the Statement of Facts described the three schemes of redevelopment which the parties agreed should be considered, for the purposes of valuation, by the Tribunal. They were the "Claim Scheme", the "Baseline Scheme" and the "Bristol Scheme". Under the sub-heading "Office Conversion" paragraph 6.1 said:
"The parties agree that the value of the Reference Land for one of the Three Schemes exceeds its value based on use as offices either in its actual condition or following a scheme of renovation."
Part 11 of the Statement of Facts dealt with "Valuation Issues" as follows:
"The matters that are agreed and the issues that are in dispute between the parties in respect of valuation are summarised in Schedule 4 to the Statement. Save as set out in Schedule 4, there is no formal agreement of the valuation issues.
Scott Schedules showing the comparative valuation assumptions of the parties in respect of each of the Three Schemes are set out in Appendices 7, 8 and 9 of this statement."
Under the sub-heading "Methodology", paragraph 1.1 of Schedule 4 said:
"It is agreed that the Reference Land is to be valued on the residual valuation basis. The parties have both carried out their valuation using Circle Developer, a computer based programme."
"292. We have found that the value of the Bristol Scheme is £1.25m more than that of the Baseline Scheme. We therefore agree with Mr. Owen [the Respondent's valuation expert] that the Bristol Scheme is the most viable, although we disagree with him that the Baseline Scheme shows a negative value. This is a significant difference and, in our opinion, the extra value attaches to a scheme which is inherently less risky as well as being cheaper and quicker to build. Given these figures we do not believe that a developer would have based his bid upon the Baseline Scheme specification as at the valuation date. The claimant did not devote much evidence to the assessment of the value of the Bristol Scheme but we are satisfied, having had to examine the Baseline Scheme in exhaustive, and at times minute, detail that our conclusion is based upon a rigorous and complete analysis of all the available evidence.
293. Finally we would draw the parties' attention, as we did several times during the hearing, to the need to consider pragmatically and sensibly how much information a developer would expect and require in order to formulate an open market bid at the valuation date using the residual method of valuation. This Tribunal has repeatedly stressed its reluctance to use this valuation method. Its enforced use in this reference does not mean that its faults are any the less; it remains a valuation method of last resort which is inherently very sensitive to even small changes in the input variables. We have therefore had to spend what we consider to be a disproportionate amount of time in assessing the detail of the parties' arguments in order to ensure the robustness of our decision. We have acknowledged the reasons why the parties felt it was necessary to go into such detail (see for instance paragraphs 47 and 94 above), but we were not helped in our task by the seeming inability of the parties to agree upon a common approach to some aspects of the costing and valuation processes; for example Mr Hewetson [the Appellant's valuation expert] valued each scheme by capitalising the residential element either as units (penthouses) or as floors (flats) whilst Mr Owen valued it by reference to area. Such differences were time consuming to check and were, in our opinion, unnecessary. On future occasions we would hope that the respective experts of all disciplines in a reference such as this will be able to agree upon a larger number of variables at an earlier stage without, as here, pursuing an attritional battle of details which descended to the farcical level of the council specifying the cost of, inter alia, shaver sockets on a scheme costing over £40m. We understand that the President has it in mind to issue practice guidance designed to ensure that, in future, disproportionate demands area not placed upon the Tribunal's resources in cases such as this.
294. We determine the compensation payable in the sum of £4,500,000. The parties are now invited to make submissions on costs, and a letter relating to this accompanies this decision, which will only become final when the question of costs has been determined."
The Supporting Statement
"8. In fact there existed what the Claimant contend is valuable comparable evidence by way of three offers made for the Claimant's interest in Tollgate House in the period 2002-2003. The valuation date was 13 September 2005. In summary the offers were as follows.
(i) On 7 August 2002 Wilson Connolly Home Counties made a written offer to purchase the freehold interest of the Claimant in Tollgate House for £19.5 million. The offer was subject to contract and subject to agreed terms of deferment of capital payment, etc.
(ii) On 12 August 2002 Columbia Estates made two alternative written offers to the Claimant to acquire the Claimant's interest, namely (a) £15,300,000 unconditionally and (b) £23 million conditional upon a satisfactory planning consent being granted as per the documents submitted to the offeror.
(iii) On 16 April 2003 Barratt made two alternative written offers to purchase the Claimant's interest, namely (a) £21 million subject to planning permission being granted for a scheme as then designed and submitted and (b) £20 million subject to planning permission being granted for a reduced scheme providing 170,000 sq. ft. net saleable floor area equating to 250 flats.
9. The Claimant, Ridgeland Properties Limited, are a company within the Comer Homes Group, a developer of luxury homes throughout the United Kingdom and Europe. Mr. Luke Comer is a director of the Group and was the recipient of the three letters just mentioned. Obviously the three letters were known to the Claimant's company. Information on them was made available to the Claimant's valuation witness, Mr. Hewetson, and to their Solicitors, Brecher. Save as is mentioned in this document the Claimant do not currently have complete knowledge of why the information was not provided in evidence to the Tribunal.
10. Since the decision of the Tribunal on 3 June 2009 the Claimant, through their current Solicitors, Berwin Leighton Paisner, have sought to ascertain from the Claimant's representatives at the hearing why the evidence of the offers was not put before the Tribunal. The obvious concern of the Claimant is that the compensation has been determined, subject to any reconsideration as now sought, at £4.5 million when four offers for the property for a residential conversion had been obtained in the range of £19.5 million to £23 million (together with an unconditional offer of £15.3 million based on a fallback position of the continued use of the building for office purposes). The investigation is ongoing, although understandably certain of the former representatives of the Claimant may be concerned as to their own position in relation to professional negligence claims. To date the following information has been obtained.
(i) Counsel representing the Claimant, Mr. Timothy Mould QC and Mr. Guy Williams, were not aware of the offers.
(ii) Mr Hewetson was aware of the offers. He states that he recalls being told of them but forgot or overlooked them when preparing and giving his evidence.
(iii) The Claimant have raised the matter with Brecher but at present have no information from this source.
It is undesirable that an application of the present nature should drag on and for that reason we have set ourselves a timescale of providing a full statement of the grounds of the application by today (24 July 2009), and for that reason we can only do our best to provide full factual information where we are dependent on responses from others.
11. The offers were also known to the Acquiring Authority. Indeed Ashurst have pointed out that at the inquiry into objections to the compulsory purchase order they were put in evidence. The Acquiring Authority relied on "the Bristol Scheme" as the only scheme which in their view would have obtained a planning permission and provided a positive value, a value which they put at £1,909,789. However, for reasons which we do not know they also chose not to refer in evidence to the three offers in the region of £15.3 million to £23 million."
"As soon as I learned of the Tribunal's decision I spoke to Mr. James Hewetson of Matthews and Goodman, Chartered Surveyors, who had appeared for Ridgeland to give valuation evidence before the Tribunal. I asked him how the compensation could possibly have been assessed at so low a figure given the existence of these offers. He told me that although he was aware of the letters in 2002/2003 he had not included them in this evidence and that they had not been put before the Tribunal. I was extremely surprised to hear this. The letters were important. I had assumed that they had been part of Ridgeland's case. It is clear from Mr. Hewetson's subsequent letter to me (attached as Appendix 2) that the explanation for the omission is that the letters were simply forgotten. Running a large group of property development companies I had not been actively involved in the case and had not seen the evidence that had been submitted on Ridgeland's behalf. I am frequently abroad on business and I entrusted the conduct of the case to our lawyers and other experts."
"I do of course now recall you receiving those offers in 2002/2003, although I could not be sure that I ever had copies of them, but I would have to say that until you raised the question after receipt of the Tribunal's Award, I had not given them any thought or consideration.
After I was reminded of their existence, and shown copies of them, I did comment that in my opinion, the Tribunal would expect to see additional commentary from the offerors to support their validity. I understand that you have now received just such endorsement from the two remaining parties still able to give you that support.
It is of course fair to say that those offers lend complete support to the valuation I prepared in January 2002, and if I had been reminded of their existence in the preparation of the case to the Tribunal, I would have felt that they demonstrated considerable support for my valuations, even though they had been prepared some years earlier, under a different social housing regime. In that interim period, values would be expected to have moved on, and those offers to have increased, despite the alterations to social housing policy, and there is no reason therefore why they would have undermined the valuations I presented.
In my cross-examination, I was asked what sort of buyer would have been interested in the Tollgate House site, and I cannot now recall whether I mentioned Wilson Connolly or Barratt as one of the likely parties. If I had seen or recalled the offer letters they had written, I would certainly have made a reference to them, as it would have given clear support for our approach."
"Considered both separately and together these offers are hard primary evidence of the market in Bristol at the time that they were written. They constitute the first step in arriving at a valuation of the property, and any valuer would see them as such. In my view there is no doubt that they have more probative force than a valuation arrived at by the residual method which is inherently vulnerable to a wide range of hypothetical variables."
"In these circumstances, I conclude that the following principles apply where a party is seeking to call fresh evidence on a new point after judgment has been given but before the order has been drawn up: (1) the court has jurisdiction to grant an application to amend the pleadings to raise new points and/or to call fresh evidence and/or to hear fresh argument; (2) the court must clearly exercise its discretion in relation to such an application in a way best designed to achieve justice; (3) the general rules relating to amendment apply so that: (a) while it is no doubt desirable in general that litigants should be permitted to take any reasonably arguable point, it should by no means be assumed that the court will accede to an application merely because the other party can, in financial terms, be compensated in costs; (b) as with any other application for leave to amend, consideration must be given to anxieties and legitimate expectations of the other party, the efficient conduct of litigation, and the inconvenience caused to other litigants; (4) quite apart from, and over and above, those principles, because it is inherently contrary to the public interest and unfair on the other side that an unsuccessful party should be able to raise new points or call fresh evidence after a full and final judgment has been given against him, it would generally require an exceptional case before the court was prepared to accede to an application where the applicant could not satisfy the three requirements in Ladd v Marshall; (5) almost inevitably, each case will have particular features which the court will think it right to take into account when deciding how to dispose of the application before it; (6) the court should be astute to discourage applications which involve parties seeking to put in late evidence, but cases where new evidence is found after judgment is given and before the order is drawn up will be comparatively rare."
"First, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible."
"We mention as the first consideration a matter which is against us. It is that the information on the offers was available to the Claimant before and at the hearing. This situation is in contrast to a case where evidence was not available, and could not have been ascertained by reasonable diligence, at the hearing, in which event the case for allowing it to be presented later when it is ascertained is obviously that much stronger. Even so this is not a case in which evidence was deliberately not produced for some tactical or other reason. The fact is that the Claimant as a company wished and expected that the evidence would be adduced. They still do not fully understand why the evidence was not presented by their professional representatives even though (as explained in paragraph 10 above) they have made efforts to secure an answer to this question. The best explanation which at present we have is that the Claimant's valuation witness, Mr. Hewetson, simply forgot about the offers."
"The fourth consideration is that the offers were known to the Council before and at the hearing. As Ashurst have pointed out in their letter to the Tribunal of 1 July 2009 copies of the letters were sent by Mr. Luke Comer to the Council in April 2003. It would on the face of it be very pertinent to know why the Council and their advisers did not refer in evidence to the offers in the range of £15.3 million to £23 million. This consideration adds to the sense of injustice felt by the Claimant at the fact that their property has been valued without what now appears to be important evidence being known to the Tribunal, especially when it was evidence known to the Acquiring Authority. We believe that it will be relevant to know, and we think that the Tribunal will be interested to know, why the Bristol City Council valued this property at slightly less than £2 million in 2005 when to their knowledge offers for it in the range of £15 million to £23 million had been made in 2002-2003 and when they did not draw the attention of the Tribunal to these offers."
"When in Ladd v Marshall Denning LJ said that the first condition was "that the evidence could not have been obtained with reasonable diligence for use at the trial" he must have had in mind a case in which a party did not have the evidence available at the hearing but could have found it out. That is not the present case. The Claimant did have the evidence available at the hearing in the sense that they as a company knew of it. The situation is that they assumed that the evidence would be produced to the Tribunal but for reasons of which they are not at present fully aware (and of which in the present circumstances they may never be fully aware) that evidence was not in fact adduced. It would not be correct in law to hold the Claimant to a guideline which was not intended to cover the present unusual type of case. It was perhaps for this reason that Neuberger J said in the passage in the Charlesworth case cited in paragraph 14 above that in exceptional cases evidence might be admitted after judgment had been given even where the conditions in Ladd v Marshall were not fully satisfied. As we have just explained the present case does indeed reveal unusual and exceptional circumstances."
The Tribunal's Order
"In the present case, it is common ground that the value of the land cannot be ascertained by reference to sales of comparable properties, since there is no known evidence of such sales. That being the case, both parties' valuers have based their valuations upon a residual method."
"8. The key issue in this application, and one that we consider is fatal to it, is the fact that the 'new evidence' of the three offer letters was known to the claimant throughout the reference but not adduced. In the statement in support of the application Mr. Michael Barnes QC states at paragraph 9:
'Obviously the three letters were known to the claimant company. Information on them was available to the claimant's valuation witness, Mr. Hewetson, and to their solicitors, Brecher. Save as is mentioned in this document the claimant do[es] not currently have complete knowledge of why the information was not provided in evidence to the Tribunal.'
'9. We do not consider it necessary to inquire about why the claimant did not refer to or adduce this evidence in its statement of case, its expert's reports or at the hearing, or why it did not raise the issue in the six month's period from the receipt of closing submissions until the publication of our decision. Nor do we consider it necessary to investigate whether the offers would in any case constitute useful comparable evidence. The fact is that at all material times the evidence of the letters was available and, if it had been considered relevant, could have been adduced. It was not adduced and it seems to us that it would not serve the cause of justice for such evidence to be admitted at this late stage, following the publication of our decision. As Stuart-Smith LJ said in Imperial Chemical Industries v Montedison (UK) Limited  RPC 449 at 468:
'It is incumbent upon a party to adduce such evidence as he considers relevant and persuasive relating to the findings of fact which the judge may make. He cannot wait for the findings and then say 'Oh well, I could have called more evidence on that point.'
'10. This is not a case where the evidence could not have been obtained with reasonable diligence for use at the hearing. On this point Mr. Barnes argues that Denning LJ in Ladd v Marshall; [the Tribunal set out the extract from the sixth consideration referred to in para. 17 above].
We do not accept this argument. The unexplained failure of the claimant to adduce evidence that was available to it at all material times may be unusual but cannot, on our opinion, constitute an exception to the first requirement of Ladd v Marshall, even in a case where a final judgment has not been given and about which Neuberger J said in Charlesworth at 237:
'I incline to the view that the Court is entitled to be somewhat more flexible, and not to proceed on the strict basis that each of these three conditions always has to be fully satisfied before fresh evidence can be admitted before judgment.'
'11. Neuberger J continued in Charlesworth at 237:
'Of course, in many ways, an applicant seeking to persuade the judge to receive fresh evidence and/or argument on a new point is in a very similar position to an appellant seeking similar relief from the Court of Appeal. He has had a full opportunity to collect his evidence and to marshal his arguments, and there must be a strong presumption against letting him have a second chance, particularly after he has seen in detail from the judgment why he has lost.'
We have considered all the other arguments put forward by the parties, but none of them, in our opinion, justifies our taking a more flexible approach or outweighs this strong presumption against the claimant's application. We see no justification for a hearing and we therefore refuse the application."
"Although this Court is usually most reluctant to interfere with the exercise of a judicial discretion, such as the Tribunal's decision to refuse to admit late evidence, I am satisfied that the Grounds of Appeal are arguable and that they do raise an important issue of principle.
In particular, it is arguable that when applying Ladd v Marshall principles to disputed compensation claims in CPO cases account should be taken of the public interest in the Tribunal ensuring, on the best available evidence, that the correct amount of compensation (no more and no less) is paid by the public authority. The position under a CPO should, arguably, be distinguished from that in a private arbitration or claim in respect of the value of land where there is no such public interest.
There is a related point: the acquiring authority was under a duty as a public authority to argue for the correct, not the lowest possible, amount of compensation. If the acquiring authority knew of the offers, it is at least arguable on the material presently available that both parties were at fault in not drawing them to the attention of the Tribunal (and in the case of the acquiring authority explaining why they should not be relied upon)."
Mr Owen's Evidence
"in the light of the recent Barrett offer I see no reason why we should accept less than £25 million for this landmark opportunity."
"33. Throughout the period from the valuation date until the Lands Tribunal hearing I remained aware of the three letters in the sense that I had not forgotten them. However, at no stage did I consider that (apparently unsolicited) offers made in the period 2002/03 were of any assistance in determining the value of Tollgate House in September 2005 in accordance with the provisions of the compensation code because the offers:
(i) appeared to have been made on the basis that the scheme underlying the compulsory acquisition would go ahead;
(ii) were between 2 and 3 years old at the valuation date;
(iii) seemed to be based on planning assumptions that did not match those which BCC's planning expert considered appropriate in accordance with the provisions of the Land Compensation Act 1961;
(iv) were in part conditional; and
(v) were mere offer letters which did not constitute (nor did they refer to) evidence of any actual market transaction.
34. In the light of this, I did not consider it either necessary or appropriate to introduce the three letters as part of my evidence to the Lands Tribunal.
35. I was not then, and am not now, aware of any obligation when acting as an expert witness (whether in the Royal Institution of Chartered Surveyors guidance or the Practice Directions) to introduce as evidence material which I consider to be of no assistance in carrying out valuations of this kind. Furthermore, the claimant's valuer did not seek to introduce the three letters (although he had clearly been made aware of their existence) and had never suggested that the claim was supported by anything other than a residual valuation."
"As a general point, the relevance of offers to the comparative method of valuation is recognised within RICS Guidance. This states "comparable evidence should be from actual sales completed between unrelated parties where the valuer is aware of all the circumstances of the sale .. it may also be possible to gauge the level of value through analysis of asking (or offer) prices for similar properties". The offer letters related to the Property, and are summarised below."
"to be truthful as to fact, honest and correct as to opinion and complete as to coverage of relevant matters."
Having referred to that Guidance, Mr. Earl said in paragraphs 17-20 of his Witness Statement:
"17 ..It is my opinion that the 3 offer letters were relevant matters, which should have been referred to by Mr. Owen within his expert evidence submitted to the Lands Tribunal. My opinion is based upon two principal considerations:-
(i) The offers contained in the 3 letters were submitted in respect of the Property. As such, they represented offers to purchase the interest in land held by RPL which formed the subject of the Lands Tribunal Reference.
(ii) The parties acknowledged that there was not direct evidence of sales of comparable properties at or around the valuation date.
18. It is my opinion that in these circumstances, Mr. Owen owed a basic duty as expert witness to introduce the offer letters to the Lands Tribunal because firstly, they were material valuation particulars for the Property, and secondly, by their introduction Mr. Owen would have given both parties and the Lands Tribunal an opportunity to also consider a comparative approach to valuation which could have been applied by the Tribunal at least as a means of checking the residual approach, with its established shortcomings, when determining market value.
19. In the Statement of Agreed Facts and Issues in Dispute prepared for the Lands Tribunal hearing, in which the parties agreed to adopt the residual approach, it was expressly stated that the value of the Reference Land for one of the Three Schemes exceeds its value based on use as offices, either in its actual condition or following a scheme of renovation. Given that one of the offers was entirely unconditional (and might therefore reasonably have been perceived to be an offer based on existing use value even before the offeror later confirmed that fact). I find it difficult to see how a valuer with knowledge of that offer and with it in mind, could have reached that conclusion if his view of the Property's value based upon a residual valuation approach was a fraction of the offer figure (approximately 1/8th) as Mr. Owen's was.
20. Mr. Owen notes that Mr. Hewetson made no reference to the offer letters in their discussions over market value prior to the Lands Tribunal hearing. I am not convinced that this has any particular relevance to the conclusion which I have reached. Mr. Hewetson, by his own admission, overlooked the presence of the offers and has acknowledged in subsequent correspondence with the Appellant, that they would have "demonstrated considerable support for my valuations". In my view, Mr. Hewetson had an identical duty in acting reasonably as an expert witness to bring the offer letters to the attention of the Lands Tribunal. From what I have read the difference seems to be that Mr. Hewetson had forgotten about the letters whereas Mr. Owen had not."
"Would at the very least, enable a re-appraisal of the conclusions as to value which the Lands Tribunal Members reached using an approach to valuation, (residual method), which they considered to be not without faults. In this regard, at various points within the decision the presiding Members offered the view that they would expect a developer bidding for the Property to take a broad brush view in respect of costings and questioned how much information developers in the market would have as compared to the very detailed evidence adduced by the parties. In my opinion, consideration of the offer letters would at the very least have provided both expert witnesses and Members with a means of testing the outcome of the residual approach against a market based comparative approach and this in turn would have enabled a better informed and more reliable appraisal of market value."
In conclusion Mr. Earl expressed his opinion that:
"Any valuer behaving reasonably could not have concluded that the offers were of no assistance to the Lands Tribunal"
"to show that by reason of the further material the whole complex and unsatisfactory residual process could be replaced by what every valuer regards as a simpler valuation technique of higher probative value."
"It is also relevant that the offers were submitted by experienced house builders who were clearly unconnected to the Appellant and who approached the Appellant on an unsolicited basis. In the case of Columbia Estates and Barratt Homes it is evident from supplemental information provided that both parties on recollection were broadly aware of the Property's recent planning history and had carried out some due diligence in the course of preparing their offers. In the light of this, I can see no reason why the offers should not be considered to have at least some evidential value in determining the value of the Property. Accordingly, I do not accept that the offers can be dismissed simply because they do not represent completed transactions."
Apart from the fact that the three letters were written by experienced house builders, that information was not available to Mr. Owen when he formed the view that the offers would be of no assistance to the Tribunal. It is only with the benefit of hindsight that his view seems somewhat surprising.