England and Wales Lands Tribunal

[2000] EWLands LCA_2_1998 (22 May 2000)

LCA/2/1998

LANDS TRIBUNAL ACT 1949

COSTS - coal mining - compulsory rights order - compensation - sealed offer accepted on first day of hearing - liability for costs before and after date of sealed offer - whether costs to be assessed on standard or indemnity basis - held compensating authority to bear claimants' costs incurred up to date of sealed offer - thereafter claimants to bear costs of compensating authority - claimants to receive two-thirds of their costs in connection with the costs hearing - all costs to be assessed on the standard basis.

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN JOHN ELVET PIERCE

and

PATRICIA MARY PIERCE Claimants

and

THE COAL AUTHORITY Compensating

Authority

Re: Aerodrome and agricultural land

totalling 63.15 acres at Ley Farm, Chirk,Wrexham LL14 5BG

Before: N. J. ROSE FRICS

Sitting in public at: 48/49 Chancery Lane, London WC2A 1JR on 22 and 23 May 2000

The following case is referred to in this decision:

Heaven and Kesterton Ltd v Sven Widaeus A/B [1958] 1 All ER 424

Richard McCombe QC and Timothy Evans, instructed by Nicholas Drukker and Co, Solicitors, of London, for the Claimants

Arthur Rumbelow QC and Nigel Clayton, instructed by Nabarro Nathanson, Solicitors, of Sheffield for the Compensating Authority.


 


DECISION OF THE LANDS TRIBUNAL

1. This is a reference to determine the compensation payable under the Opencast Coal Act 1958 ("the 1958 Act") to Mr. John Elvet Pierce and Mrs. Patricia Mary Pierce ("the claimants") by the Coal Authority ("CA") in respect of a compulsory rights order ("the CRO") made by the National Coal Board ("NCB") as predecessor to the CA for the purpose of working by opencast methods coal on land owned by the claimants at Ley Farm, Chirk, Wrexham ("the CRO land"). The name of NCB was changed to British Coal Corporation ("BCC") in 1987. I refer in this decision simply to "the compensating authority", without drawing any distinction between the NCB, BCC and CA.
2. Immediately before the hearing on 22 May 2000 the claimants accepted an offer of compensation for the claims which were the subject of the reference and the only issues for my determination relate to the costs of the reference.
3. Richard McCombe QC and Timothy Evans of Counsel appeared for the claimants and Arthur Rumbelow QC and Nigel Clayton of Counsel appeared for the compensating authority
4. The following facts are relevant:

i. On 27 September 1985 the compensating authority made an application for the necessary authorisation and for confirmation of the CRO under sections 1 and 4 (1) of the 1958 Act. The authorisation was made and the CRO confirmed on 8 July 1986, following an Inquiry on 24 May 1986.

ii. The compensating authority entered on the subject property on 26 September 1986.

iii. The Welsh Office entered on part of the CRO land on 19 April 1989 for the purpose of constructing the Chirk By-pass, pursuant to a compulsory purchase order ("the CPO") which had been made on 20 May 1987. The CRO land, excluding that affected by the CPO, was returned to the claimants on 26 March 1994.

iv. The claim for compensation arising from the CRO was referred to this Tribunal on 22 December 1997.

v. On 17 May 1999 the compensating authority made a sealed offer of £360,000 in settlement of all the claims which were the subject of the reference. The offer letter included the following sentence:

"In addition, provided that the above offer is accepted within 14 days of the date hereof our Clients will agree to pay the costs reasonably incurred by your Clients for the purposes of, or for purposes connected with, the preparation and prosecution of their claim pursuant to the Opencast Coal Act 1958, such costs to be assessed by the Registrar of the Lands Tribunal on the High Court standard scale in the absence of agreement."

5. Mr. McCombe submitted that the claimants were entitled to accept the sealed offer in its entirety, including the offer to pay their costs reasonably incurred until 14 days after the date of the offer. Thereafter, the claimants should pay the reasonable costs of the compensating authority. He said that this suggestion was in line with the standard procedure in references of this nature and the claimants should not be penalised further for their failure to accept the sealed offer earlier.
6. Mr. Rumbelow did not agree. His primary submission was that the claimants should pay the compensating authority's costs prior to, as well as after, the date of the sealed offer. Alternatively, he submitted that each party should bear its own costs up to that date. In addition, he asked that such costs as the claimants were ordered to pay should be paid on an indemnity basis.
7. Mr. Rumbelow relied on the following considerations in support of his submissions - the history of the matter, the grossly inflated amount of the claim, the nature of the sealed offer, the relationship between the CRO and the CPO and the costs which would be borne by the compensating authority if indemnity costs were not awarded.
8. The principal historical matters on which he relied were:

a) The CRO gave temporary rights of occupation from 26 September 1986 for 7½ years. The claimants were offered, and rejected a Working Rights Agreement before the compensating authority took entry.

b) In May 1986 the High Court appointed a receiver, for Barclays Bank, of Mr. Pierce's affairs pursuant to a charging order on his property made in 1984, arising out of a judgement, in favour of the bank, for £136,000 in April 1980. The receivership continued until March 1993; the receiver's solicitors did not actively pursue any compensation claim; Mr. Pierce made it extremely difficult for the District Valuer (and the receiver) to discover his entitlement to the CRO land and the validity of any compensation claim. Indeed, in the course of his judgment delivered on 9 October 1987 following litigation between Barclays Bank and Mr. Pierce, Mr. Justice Knox found that Mr. Pierce had dishonestly purported to dispose of his interest in the CRO land in order to avoid his liability to the bank.

c) When the receivership ended in 1993 the District Valuer unsuccessfully attempted to engage the claimants in negotiation; in 1994 the claimants incorrectly launched a compensation claim by a writ in the High Court; the claimants did not refer the matter to this Tribunal until December 1997; the claims for annual compensation were out of time, although the compensating authority later agreed not to take the point; the claimants did not serve their points of claim until 9 months after making the reference; thereafter they sought successive extensions of time and made very late delivery of large volumes of material.

9. Referring to the grossly inflated nature of the claim, Mr. Rumbelow said that it was based on commercial activities allegedly conducted on the CRO land prior to the compensating authority's entry, whereas in fact there had only been private use since 1981. If all the information relevant to use had been disclosed by the claimants, as it should have been, it would have significantly affected the size of the sealed offer.
10. The claim in the notice of reference was for £10 million, the points of claim sought about £4.5 million and the claimants' expert's report about £2.8 million. On the other hand, at the CRO Inquiry in 1986, Mr. Pierce had suggested his claim was worth £603,000 and in 2000 the claimants had accepted the sealed offer, which was equivalent to approximately £220,000 plus interest. Mr. Rumbelow submitted that where there was such a grossly inflated claim, it was an abuse of the procedure, which should not be supported by the Tribunal in the exercise of its discretion on costs. He referred to Heaven and Kesterton v Sven Widaeus A/B [1958] 1 All ER 424.
11. Mr Rumbelow then turned to the nature of the sealed offer. He accepted that, if such an offer were made without reference to costs, an offer of costs to that date may be implied, or was likely to be awarded at the discretion of the Tribunal. In fact, the compensating authority's sealed offer did make reference to costs, and offered to pay the claimants' costs if it was accepted within 14 days. Where, however, one party made an offer of compensation and costs which should have been accepted by the other party, which consciously rejected that offer, then that other party should not receive the Tribunal's support in the exercise of its discretion. Otherwise, he submitted, the claimants would be able to "have their cake and eat it".
12. The compensating authority had made, on the information it then had, a generous sealed offer in an endeavour to bring about a quick end to the litigation. There was also a public interest in the prompt dispatch of litigation, which the Tribunal should support. Against this background, an award of costs to the claimants would effectively rob a respondent of a legitimate commercial stance.
13. Mr. Rumbelow also submitted that the claimants had been unreasonable in pursuing the compensating authority for losses incurred on all the CRO land, despite the fact that the Welsh Office had taken possession of part of that land pursuant to the CPO in April 1989. The Welsh Office had accepted the principle that it was liable, as from the date of its entry, for any loss established by the claimants which would, but for the CPO, have fallen on the compensating authority under the CRO. In these circumstances, the claimants should have limited their claim against the compensating authority to the period until April 1989. In fact they had claimed that, although there could not be double recovery, the compensating authority was primarily liable for all losses until the CRO expired on 26 March 1994. If the claimants were granted their costs incurred prior to the sealed offer, this would effectively include the costs of unnecessarily pursuing the compensating authority for matters arising after entry by the Welsh Office. That would be unjust to the compensating authority. Since disentanglement of the two sets of costs would be extremely difficult , the potential injustice would properly be avoided by the claimants not having their costs.
14. Finally, Mr. Rumblelow submitted that the claimants' method of conducting the reference had caused the compensating authority's solicitors an enormous amount of work since the date of the sealed offer. As a result, there would be a substantial shortfall between costs assessed on the standard basis and those that were actually incurred by the compensating authority. This would be unjust to the compensating authority and the injustice should be remedied by awarding indemnity costs since the sealed offer. It was a matter for the Tribunal's discretion whether, if the claimants were ordered to pay the compensating authority's costs prior to the sealed offer, those should be on the standard or the indemnity basis.
15. In reply, Mr. McCombe argued that, since the reference had not proceeded to a full hearing, it was not possible to judge the merits of the two parties' positions, as Mr. Rumbelow had tried to do, by reference to a series of "snapshots", taken from a long and complicated history. The claimants accepted the costs consequences of having agreed to the sealed offer very late in the day. However, when it made the sealed offer in May 1999, the compensating authority was aware of all the matters which had occurred by then and about which it was now complaining. In the knowledge of those matters it had considered it appropriate to offer to pay the claimants' costs by then incurred. Nothing had happened since then to suggest that that offer was no longer appropriate.
16. Heaven and Kesterton related to an award after the arbitrator had heard all the evidence, whereas the present reference was settled without a hearing. Moreover, the judgment of Diplock J. specifically made it clear that he would not necessarily have made the same award on costs as the arbitrator.
17. Mr.McCombe commented on the historical matters raised by Mr. Rumbelow as follows:

i. The offer of a Working Rights Agreement did not provide an excuse for the non-payment of compensation once statutory powers had been invoked.

ii. The receiver did actively pursue a claim for compensation. His agent, Strutt and Parker, submitted a detailed claim on 8 December 1987. By then, the judgment of Mr. Justice Knox was available. That judgment did not go to the question of whether the compensating authority would have to compensate the claimants and, if so, for how much. It was irrelevant to the present dispute.

iii. The receiver was discharged on 30 March 1993. Two weeks later the claimants' solicitors, Nicholas Drukker & Co., wrote to the District Valuer suggesting a very early meeting to discuss the compensation claim. The litigation in the High Court was still extant and directions had been given very recently for the further conduct of the action. The decision by the compensating authority to extend the time for referring the matter to this Tribunal was not made altruistically, but having regard to the provisions of paragraph 4 of the Opencast Coal (Claims) Regulations 1959. Moreover, the extensions of time for serving the claimants' pleadings were granted by this Tribunal without objection from the compensation authority.

18. As far as the exaggerated claim was concerned, Mr. McCombe said that the remedy had been in the hands of the compensating authority. Instead of waiting until May 1999, it could have made an offer without prejudice as to costs after Strutt and Parker had submitted a claim for compensation in 1987, or a sealed offer following the reference in 1997. Although some information regarding the use of the claimants' land as an airfield was submitted late in the day, there was a considerable amount of information on the subject which should have been available to the District Valuer at an early date.
19. As for the nature of the sealed offer, Mr. McCombe reiterated that the points now being made against the claimants' entitlement to costs were known when the sealed offer was made. If they were material to the liability for costs already incurred, that should have been made clear at the time. Moreover, if additional information subsequently available to the compensating authority had suggested that the sealed offer was over-generous, the proper course to adopt would have been to withdraw it. In any event, the hearing had not taken place and so one would never know whether the sealed offer had been generous.
20. Mr. McCombe also suggested that the claimants had pursued the compensating authority for losses incurred after 19 April 1989 because the legal position as to the respective liabilities of the compensating authority and the Welsh Office was not entirely clear. There was also a danger that an early settlement with the compensating authority could have resulted in the claimants forfeiting their entitlement to certain items of compensation.
21. Finally, Mr. McCombe submitted that there was nothing about the present litigation that should distinguish it from the multitude of cases where a claimant had failed to beat the payment into Court or sealed offer. There was no justification for requiring the claimants to be penalised to a greater extent than the normal rule applying to such cases.

Decision

22. The claimants accepted the sealed offer at a very late stage in the proceedings. In consequence, a substantial costs burden will fall upon them. That burden will include such additional costs, if any, as have been incurred by the parties in the 12 months preceding the commencement of the hearing resulting from the exaggerated size of the claim; the inclusion in it of items which were the responsibility of the Welsh Office and the claimants' approach to the conduct of the reference.
23. I agree with Mr McCombe that this Tribunal should be slow to draw conclusions as to the conduct of the parties to a reference, when it has not heard the detailed evidence that would have been given if the hearing had proceeded. In particular, I am unable to conclude that the sealed offer was necessarily excessive, or that the other matters referred to by Mr Rumbelow definitely increased the compensating authority's costs prior to the date of the sealed offer. Against that background, and in view of the adverse consequences which will fall on the claimants in any event as a result of their late decision to accept the sealed offer, I have not been persuaded that a departure from the general rule on costs would be justified.
24. The compensating authority will pay the claimants' costs of the reference incurred up to the date of the sealed offer (not 14 days later). Thereafter, the claimants will pay the compensating authority's costs incurred up to and including the first day of the hearing. The compensating authority will also pay two-thirds of the claimants' costs of and incidental to the costs hearing on 23 May 2000. All such costs, if not agreed, are to be the subject of a detailed assessment on the standard basis by the Registrar of the Lands Tribunal in accordance with rules 44.4 and 44.7 of the Civil Procedure Rules. The procedure laid down in rule 52 of the Lands Tribunal Rules 1996 will apply to such detailed assessment.

Dated:

(Signed) N.J. Rose