England and Wales Lands Tribunal

[1999] EWLands ACQ_10_1997 (1 November 1999)

ACQ/10/1997

LANDS TRIBUNAL ACT 1949

COMPENSATION - mortgagee but not claimant appearing - unfit house - interior but not exterior well maintained - Housing Act 1985 Schedules 23 and 24 - whether entitlement to owner-occupier supplement - alternatively whether compensation to include well-maintained payment - evidence not establishing that claimant had interest in house throughout Schedule 24 qualifying period - no jurisdiction in Lands Tribunal to determine entitlement to well-maintained payment - site value compensation only

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN STEPHEN FARRELL Claimant

and

FIRST NATIONAL BANK PLC Mortgagee

and

SANDWELL METROPOLITAN Acquiring

BOROUGH COUNCIL Authority

Re: 37 Old Park Lane

Oldbury

West Midlands

Before: The President

Sitting at Birmingham Magistrates Court, 4 Newton Street, Birmingham

on Tuesday 12 October 1999

Julia Smith instructed by Davis & Co, solicitors of Harrow, for the Mortgagee.

Anthony Igbineyesi, solicitor, Sandwell MBC, for the Acquiring Authority.

The Claimant did not appear.

The following cases are referred to in this decision:

Heron v Sandwell MBC (1980) 40 P & CR 232

Shaikh v Bolton Metropolitan Borough Council (1996) 75 P & CR 1

Whittaker v Leeds Corporation (1964) 15 P & CR 222
 


DECISION

1. Notice of reference in this case was given by the acquiring authority, Sandwell MBC, who had acquired compulsorily a house owned by the claimant. The compulsory purchase order was made under section 290 of the Housing Act 1985 following the declaration of a clearance area which included the subject property. After confirmation of the CPO but before notice to treat the property was made subject to a legal charge in security for a loan granted to the claimant by First National Bank plc. The reference to the Lands Tribunal was the subject of a hearing on 12 August 1997, at which neither the claimant nor the mortgagee appeared. Following the issue of a decision, however, the mortgagee applied to have the decision set aside on the ground that it had not been made a party to the reference. Its application was not opposed by the council, and an order setting aside the decision was made on 22 May 1998. At the hearing before me the claimant again did not appear, and I was told that his whereabouts are not known. The mortgagee, however, did appear.
2. The underlying facts can be stated shortly. The subject property was a mid-terrace dwelling house on two floors. By a written agreement dated 12 July 1985 the owner, Mr Soukbir Singh Sander, agreed to sell the property to the claimant in consideration of £10,000 to be paid by way of a deposit of £1,000 and thereafter by quarterly instalments of £550 for 4 years, with a final payment of £750. On 11 October 1988 the council declared certain clearance areas, one of which included the subject property. On 23 November 1988 the property was registered in the name of the claimant at HM Land Registry, having been transferred to the claimant by Mr Sander, according to the entry, on 1 July 1988 for £9,500. On 17 July 1989, under section 290 of the Housing Act 1985, the council made the Sandwell (Old Park Lane, Oldbury) (Clearance Areas) Compulsory Purchase Order 1988, based on the clearance areas that had previously been declared. The subject property was included in the CPO. On 30 August 1989 the council notified the claimant under Schedule 23 of the 1985 Act that they were satisfied that the property had been well maintained but that the exterior had not been. On 2 April 1990 the claimant gave a legal charge over the property in favour of the mortgagee, who paid out a loan to him on 18 May 1990. The CPO was confirmed by the Secretary of State for the Environment on 23 November 1990. Notice to treat was served on the claimant on 14 February 1991 and he submitted a claim for compensation on 28 February 1991. Notice of entry was served on 4 July 1991 and the council entered on the property on 22 July 1991.
3. The provisions of the 1985 Act relevant to the claim were repealed by the Local Government and Housing Act 1989, but they continue to apply in the case of the subject property. Under section 585(1), where, as here, the land is acquired under section 290 and is comprised in a clearance area, compensation is payable on the basis of site value only, subject to any further payment that may fall to be made under section 586 and Schedule 23 (well-maintained houses) and section 587 and Schedule 24 (owner-occupied houses). Under Schedule 24 where, on the date when the clearance area was declared and throughout the period of two years ending with that date the house was wholly or partly occupied as a private dwelling and the person so occupying it was entitled to an interest in the house, a payment is to be made in respect of that interest consisting of its full compulsory purchase value less the amount payable as site value compensation: see paras 1(2), 2(1), 4(1) and 5(1) of the Schedule. The mortgagee and the council are agreed that site value is £750 and that full compulsory purchase value is £30,000. They are also agreed that the claimant was in occupation of the property throughout the period of two years ending on 11 October 1988, the date when the clearance area was declared. The first issue between them is whether, throughout that two year period, the claimant was entitled to an interest in the house. The mortgagee says that he was; the council say that he was not. If he was, he is entitled to a Schedule 24 payment and the total amount of compensation, including this payment, is £30,000.
4. The second issue between the parties only arises if the first issue is determined in the council's favour. Under Schedule 23 the council are required to make a payment under the schedule if they are satisfied that the house has been well maintained: see para 3(1). Where only the exterior or only the interior of the house has been well maintained the amount of the payment is 7 times the rateable value: see paras 4(1) and 5 of the Schedule; the Housing (Consequential Provisions) Act 1985 section 2(2), and the Housing (Payments for Well Maintained Houses) Order 1982. The amount of the payment must not exceed the amount by which the full value of the house exceeds its site value (see para 4(1) of the Schedule); and section 588 excludes such a payment if a payment under Schedule 24 falls to be made. Any question as to what the full value and the site value are is to be determined, in default of agreement, in the same way as a question of disputed compensation. The mortgagee says that, if no Schedule 24 payment falls to be made, I should determine whether a payment under Schedule 23 is due and include the amount in my award. The council say that the claim under Schedule 23 is statute-barred under section 9(1) of the Limitation Act 1980 since, they say, the cause of action accrued on 30 August 1989 (the date when they notified the claimant that they were satisfied that the interior of the house was well maintained) and the claimant had made no reference to the Tribunal within 6 years of that date.
5. The case as presented by Miss Smith on the first issue was straightforward. The agreement of 12 July 1985 under which the claimant was enabled to purchase the house created an equitable interest which satisfied para 2(1)(b) of Schedule 24. She referred to Heron v Sandwell MBC (1980) 40 P & CR 232 and to para 5(3) of the Schedule. There was no evidence, she said, that the agreement had been terminated at any stage prior to the transfer of the legal interest to the claimant in 1988. It was for the council to prove that the agreement had been terminated, and they failed to do so. She called Alan James Cox, a partner in the firm of Tom Giles and Co, estate agents of Oldbury, and she tendered a signed witness statement, which was agreed by the council, from Brian Arthur Spencer, employed as Investigations Manager by the mortgagee.
6. Mr Cox said that he received instructions from the claimant in October 1988 following the first resolution made by the council in relation to the declaration of a clearance area. The claimant produced to him copies of various documents and letters of various dates addressed to him at the property which were consistent with his assertion that he occupied the property as his private dwelling throughout the two year period ending on 11 October 1988. Mr Cox produced copies of these documents, which included correspondence relating to a proposed mortgage from Halifax Building Society in October 1987. He said that the claimant had shown him a letter dated 31 March 1989 from Mr Sander declaring "To whom it may concern" that he, Mr Sander, had sold the property to the claimant on 12 July 1985 for £10,000. The claimant had also shown him the actual agreement for sale. Mr Cox produced copies of both these documents. He had forwarded a copy of the agreement to the council on 3 November 1992; and on 26 January 1995 he had sent the council a copy of an unstamped Land Registry Transfer dated 1 November 1985 relating to the transfer of the property from Mr Sander to the claimant at a price of £10,000. He produced copies of these documents also. In cross-examination a copy of an offer of property to the council dated 4 April 1989 and signed by Mr Cox's firm on behalf of the claimant was put to him. It gave as the date of the purchase of the property 1 August 1988.
7. Mr Spencer's evidence related to the charge and the loan. The amount of the loan was £16,339.70 repayable over 180 months. The first repayment fell due on 18 June 1990, but following defaults by the claimant the loan was called in on 29 October 1990. By 24 May 1999 the amount of the principal and unpaid interest had risen to £128,152.72.
8. For the council Mr Igbineyesi proffered a signed statement by Marie-Louise Lambe, a law clerk with the council, which exhibited documents relating to the CPO and copies of those forwarded to the council on behalf of the claimant. He also called Allan William Whiting, a legal assistant with the council, who produced correspondence between the council and the mortgagee between 24 August 1994 and 1 April 1998. He stated that no claim for a well-maintained payment had been made by the claimant.
9. Mr Igbineyesi accepted that if the evidence established that the contract of 11 July 1985 was valid up till 10 October 1988 the claimant had an interest that was sufficient for the purposes of para 2(1) of Schedule 24. However, he said, the evidence strongly suggested that between 14 October 1987 and 20 January 1988 the contract of 11 July 1985 was no longer valid. The Register of Electors in force for the periods 16 February 1987 to 15 February 1990 showed three persons resident at 37 Old Park Lane - Colin Farrell, Stephen Farrell and Trudie M Reid. On 14 October 1987 Miss Reid wrote to the council's rates officer to say that she was "writing regarding the recent change of ownership that being 37 Old Park Lane, of which I am now the sole owner." Then, in a letter received by the council on 20 January 1988 Miss Reid said:

"I am writing to you as concerning a letter that I have received for a court summons on 28 January 1988, for non-payment of rates for the above address.

But some months ago when I was trying to purchase the above house 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."

10. It was clear from these letters, Mr Igbineyesi said, that Miss Reid had entered into an agreement to purchase the property from Mr Sander. This would be inconsistent with the contract of 11 July 1985 being valid. Moreover clause 5 of the contract, which gave the landlord power to re-enter the property in the event of non-payment of an instalment, was a nullity. In the event of such termination the claimant would have continued to occupy the property under a protected tenancy or a statutory tenancy under the Rent Act 1977. Mr Igbiniyesi referred also to the inconsistency between the various documents relating or purporting to relate to the transfer of property to the claimant.
11. I am not satisfied on the evidence before me that the contract of 11 July 1985 continued in force until 11 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 for 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.
12. 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.
13. On the second issue Miss Smith submits that the Tribunal has jurisdiction to include within its award of compensation any amount that it finds to be due under Schedule 23. That jurisdiction stems, she says, from section 15(1) of the Compulsory Purchase Act 1985 which applies where, as here, the value of any mortgaged land that is compulsorily purchased is less than the principal, interest and costs secured on the land. In such a case,

"...the value of the land, or the compensation to be paid by the acquiring authority in respect of the land, shall be settled by agreement between the mortgagee and the person entitled to the equity of redemption on the one part and the acquiring authority on the other part or, if they fail to agree, shall be determined by the Lands Tribunal."

Section 15(2) then provides:

"The amount so agreed or awarded shall be paid by the acquiring authority to the mortgagee in satisfaction or part satisfaction of his mortgage debt."

"Land" is defined in section 1(3) as including anything falling within any definition of that expression in the enactment under which the purchase is authorised, but the Housing act 1985, which is the enactment under which the compulsory purchase in this case was authorised, does not define "land". Therefore, says Miss Smith, section 5 and Schedule 1 of the Interpretation Act 1978 apply and "land" in section 15(1) will thus include "buildings and other structures, land covered with water, and any estate, interest, easement, servitude or right in or over the land".

14. Any payment due under Schedule 23 of the 1985 Act, Miss Smith submits, is compensation to be paid by the acquiring authority in respect of the land and, therefore, it is such compensation as is referred to in section 15(1) of the 1965 Act. A Schedule 23 payment is to be paid in respect of the house which was included in the land purchased, and it is "compensation" in the ordinary sense of the word; and she points out that the side note to section 588, which provides that no payment is to be made under Schedule 23 where a payment under Schedule 24 falls to be made, reads: "Avoidance of double compensation".
15. In my judgment, contrary to Miss Smith's submission, the Lands Tribunal has no jurisdiction to include within its award of compensation a Schedule 23 payment. Such a payment is not "compensation" within the meaning of section 15(1) of the 1965 Act. What Schedule 23 does is to create an entitlement to a payment the amount of which is ascertainable under a formula laid down by the legislation (see para 4(1)). That amount does not require to be assessed by this Tribunal, and there is no provision for the Tribunal to make any award of compensation under the Schedule. What is to be determined by the Tribunal, in default of agreement, is any question as to the full value and the site value (see para 4(5)), since these may limit the amount that is recoverable. No question as to the full value or the site value arises in the present case, however, because the parties are agreed that these are £30,000 and £750 respectively. There is thus nothing for the Tribunal to determine under the Schedule.
16. Moreover Schedule 23 does not confine the right to a payment to the person whose interest is being acquired. The payment is to be made to the owner-occupier, if there is one, or, if there is not, to the person liable under any enactment, covenant or agreement to maintain the house (see para 3(2)). The payment may thus fall to be made to a person who has no interest in the land and so has had nothing acquired from him. In this respect it stands clearly distinct from the entitlement to compensation, which arises where an interest is compulsorily acquired. It contrasts also with the provisions relating to owner-occupier supplements in Schedule 24, para 4(4) of which provides that the amount of any payment under the Schedule is to be determined "as if it were compensation payable in respect of the compulsory purchase of the interest and shall be dealt with accordingly." In Shaikh v Bolton Metropolitan Borough Council (1996) 75 P & CR 1 the Court of Appeal held that the predecessor of this provision (Housing Act 1969 Schedule 5 para 3(2)), which contained words not materially different from these, required the supplement to be dealt with as though it was compensation, so that it would carry the same interest as that payable on the substantive compensation. Pill LJ said (at 3):

"I accept that payments, including owner-occupier supplement, are kept distinct from compensation in the statute but because of the deeming provision that distinction does not determine the issue. It is common ground that the requirement in schedule 5 that the payment shall be dealt with as if it were compensation is appropriate to confer jurisdiction on the Lands Tribunal (Whittaker v Leeds Corporation (1964) 15 P & CR 222) and to introduce the procedures of that tribunal. I would not limit the 'dealing' to such procedural purposes. Interest is payable on compensation agreed or awarded and in my judgment the requirement to deal with owner-occupier supplement as if it were compensation, generally expressed as it is, includes a requirement to pay interest on the supplement. I can see no justification for limiting the method of dealing to cover only the procedure to be followed in the event of a dispute."

There is no equivalent "dealing" provision in Schedule 23, and thus the distinction, recognised by Pill LJ, between payments under the schedule and compensation for compulsory acquisition is preserved.

17. Having decided both issues in favour of the council, therefore, I determine the amount of compensation at £750, the agreed site value.
18. What I have said so far concludes my determination of the substantive issues in this case. It will take effect as a decision when the question of costs is decided and at that point, but not before, the provisions relating to the right of appeal in section 3(4) of the Lands Tribunal Act 1949 and Order 61 rule 1(1) of the Civil Procedure Rules will come into operation. The parties are invited to make submissions as to the costs of this reference and a letter accompanying this decision sets out the procedure for submissions in writing.

Dated 1 November 1999

George Bartlett QC (President)

ADDENDUM ON COSTS

19. I have received submissions on costs. I can see no reason why the mortgagee should not pay the full amount of the acquiring authority's costs from the date on which it became a party to the acquiring authority's reference. There is, however, no justification for making such an order in respect of costs before that date. I therefore order that the mortgagee shall pay the acquiring authority's costs from the date on which it became a party to the reference, such costs to be agreed and if not so agreed to be the subject of a detailed assessment on the standard basis by the Registrar of the Lands Tribunal in accordance with Rule 44.4 and Rule 44.7 of the Civil Procedure Rules. Any such detailed assessment will be conducted in accordance with Rule 52 of the Lands Tribunal Rules 1996 and not in accordance with Rule 47 of the Civil Procedure Rules.

Dated 7 January 2000

George Bartlett QC (President)