UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2009] UKUT 242 (LC)

LT Case Number: ACQ/96/2006

 

                                                                                                                                                     

                            TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

                                                                             

COMPENSATION – compulsory purchase – preliminary issues – freehold interest acquired by agreement in advance of CPO – whether claimant entitled to compensation in respect of underlease – held it was not underlessee – whether Tribunal had power to determine compensation for freehold interest – held it did not since interest transferred at agreed price – whether claimant could claim compensation for disturbance – held that it could

                                                                             

                             IN THE MATTER OF TWO NOTICES OF REFERENCE

                                                                             

 

BETWEEN                                        SOLARTRACK PLC                                      Claimant

 

                                                                           and

 

                                             LONDON DEVELOPMENT AGENCY                      Acquiring

                                                                                                                                      Authority

 

                                                           Re: Haegil House,

                                                                  42-44 New Road,

                                                                  Dagenham,

                                                                  Essex, RM9 6YS

 

 

                                                           Before: The President

 

 

                  Sitting at Procession House, 110 New Bridge Street, London EC4V 6JL

                                                            on 17-19 March 2009

 

 

 

Matthew Horton QC instructed by Charles Russell for the claimant

James Pereira instructed by Hammonds for the acquiring authority

 

The following cases are referred to in this decision:

 

Hughes v Doncaster MBC [1991] 1 AC 382

Horn v Sunderland Corpn [1941] 2 KB 26

DHN Food Distributors Ltd v Tower Hamlets LBC (1976) P & CR 240

 

The following further cases were referred to inargument:

 

City Permanent Building Society v Miller [1952] Ch 840

Milford Haven UDCv Foster (1961) 13 P & CR 289

Re the Local Government Superannuation Act 1937 and 1939, Algar v Middlesex County Council [1945] 2 All ER 243

Covell v Sweetland [1968] 2 All ER 1016

Hopgood v Brown [1955] 1 All ER 550

Holt v Markham [1923] 1 KB 504

Prasad v Wolverhampton BC [1983] RVR 55

Chamberlain v The West End of London and Crystal Palace Rly Co (1865) 2 B & S 617

J Evans & Sons (Portsmouth) Ltd v Andrea Merzano Ltd [1976] 1 WLR 1078

Brikom Investments Ltd v Carr [1979] QB 467

The Moorcock (1889) 14 PD 64

Johnstone v Bloomsbury Health Authority[1992] QB 333

Hamlyn & Co v Wood & Co [1891] 2 QB 488

Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130

Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84

Rogers v Kingston-upon-Hull Dock Co (1864) 11 LT 463

Holloway v Dover Corpn [1960] 1 WLR 604

                                                                    DECISION

Introduction

1.           On 21 June 2006 two notices of reference were made on behalf of Solartrack Plc by Mr N J Winbourne FRICS in respect of land at 42-44 New Road, Dagenham, Essex RM9 6YS.  Each was stated to be a claim for compensation following a compulsory purchase order.  The first was in respect of the freehold interest.  The approximate amount claimed was stated to be £2,800,000.  It stated as the statutory provision under which the reference was made: “Land Compensation Act 1961, Compulsory Purchase Act 1965, Section 7 (possibility of land Compensation Act 1973, S 30”.  It indicated that it was a “claim for compensation following a compulsory purchase order”.  It answered “No” to the question whether the acquiring authority had taken possession.  And it said, “(NB Part payments have been made)”.

2.            The second notice was stated to relate to “Unexpired underlease from 24 June 1964 for 42 years”, and the approximate amount of the claim was given as £700,000.  It stated the same statutory provisions as in the first notice.  It indicated that it was a “claim for compensation following a compulsory purchase order”, and answered “No” to the question whether the acquiring authority had taken possession.  It added, “(NB An advance payment has been made)”.

3.           The factual background is somewhat complex.  Put shortly it is this.  Between March 2001 and March 2003 there was negotiation between Solartrack and the London Development Agency which resulted in a conveyance on 28 March 2003 to the LDA of the freehold interest in the property, pursuant to a contract of the previous day, for the sum of £445,000.  On 14 October 2003 the LDA made the London Development Agency (Chequers Corner, Dagenham) Compulsory Purchase Order 2003.  The CPO was confirmed by the Secretary of State for Trade and Industry on 22 July 2005.  Included within it were all the interests in 42 and 44 New Road, the LDA being given as the owner, and the occupier was given as Solartrack plc “(as to the Ground Floor and Basement)”.  On 23 September 2005 Solartrack and the LDA entered into an agreement under which the LDA paid Solartrack £100,000 as an advance payment towards its disturbance costs.  On 12 December 2005 the LDA made a general vesting declaration.  Included in the schedule of interests in land and buildings so vested were “42 and 44 New Road … except those interests of the Authority … Seco-Larm (UK) Ltd, Solartrack Plc and the National Westminster Bank Plc.”  As I will explain more fully, National Westminster Bank Plc was the head-lessee of part of the premises under a lease dated 18 February 1965 for a term of 42 years from 24 June 1964 and Seco-Larm (UK) Ltd, an associated company of Solartrack, had been the underlessee under a lease dated 28 June 1983 of the “shop and room at 42 New Road, Dagenham” and the “single storey extension and strongroom at the rear thereof”.  The term of the underlease was 23 and a quarter years less three days from 25 March 1983, expiring on 21 June 2006.  Solartrack claims that the underlease was assigned to it on 1 November 1996.

4.           The LDA, having received copies of the notices of reference, considered that the claimant had no right to compensation for the underlease: that it had not compulsorily acquired the freehold of the property but had purchased it by agreement; and that the claim for disturbance was premature since it had not, at that time (June 2007) taken possession of the property pursuant to the compulsory purchase order.  It therefore applied for the references to be struck out.  Following exchanges of statement of case and reply, on 15 April 2008 I ordered that the following issues be determined as preliminary issues:

(a)     Whether the claimant is entitled to compensation in respect of the underlease dated 28 June 1983.

(b)     Whether the claimant is entitled to compensation for the freehold interest in 42/44 New Road, Dagenham. 

(c)     Whether the claimant is entitled to claim compensation for disturbance under section 37 of the Land Compensation Act 1973.

5.           Although there is a large measure of agreement on the primary facts there are disputes as to the alleged assignment to Solartrack of the Seco-Larm lease; on certain aspects of the negotiations between the parties; and on certain aspects of the occupation of the premises.  Evidence for the acquiring authority was given by Steven Kidd, a senior development manager at the LDA, who was involved in negotiations with the claimant from February 2003, and by Colin Cottage, a chartered surveyor and member of the Glenny LLP, who was the surveyor instructed on behalf of the LDA to negotiate the acquisition of the freehold with the claimant’s advisers.  Evidence for the claimant was given by Anthony Leslie Pipkin, a director of Solartrack Plc and also of Solartrack Leisure Limited and Solartrack Installations Limited.  He had also been a director of Seco-Larm (UK) Limited.  The facts set out below are derived from the agreed statement and the evidence of the witnesses, including the documents appended to their witness statements.  Following the hearing closing submissions in writing were received dated 31 March 2009 and 1 June 2009 respectively.

The reference property

6.           Numbers 42 and 44 New Road were built as the semi-detached components of a three-storey building.  Each has a shop front, and it appears that, before occupation by the claimant, 42 had been a bank and 44 the offices of an insurance company.  Number 42 contains a ground floor and basement of approximately 153 sq m and a rear extension with its own entrance, arranged as an office with ancillary space.  It has the use of half the rear car park, the front forecourt and a rear service yard.  There is a front door.  The ground floor of number 44, is about 103 sq m in area.  Inside the front entrance is a corridor and stairway leading to the first and second floors, each spanning across numbers 42 and 44, the first floor being offices, the second floor residential.

The interests

7.           The freehold was formerly owned by Liverpool and Victoria Friendly Society and was sold by the Society to the claimant.  The transfer was completed on 19 May 1997.  The freehold interest was then conveyed, as I have said, to the LDA for £445,000.  The transfer was completed on 28 March 2003 and was registered on 28 March 2003.

8.           I have already referred to the lease of the ground floor, basement and rear extension of number 42.  It was a lease for 42 years from 24 June 1964, expiring, therefore, on 23 June 2006, between the Society and Westminster Bank Limited.  On 22 March 2004 the tenant’s interest under the lease was surrendered to the LDA.  The underlease of 28 June 1983, to which I have also referred, was to Seco-Larm Ltd for a term expiring on 21 June 2006.  Mr Pipkin and a Mr Hwang were sureties under the underlease for the performance of the tenant’s covenants.

9.           On 16 April 1999 the claimant entered into an agreement with Members Only Clothing Company Limited (“Members Only”) for the lease of the ground floor of 44 for a term of 5 years at a rent of £7,000.  Then on 2 December 1999 it entered into an agreement with Chip Option Limited (“Chip Option”) for a term of 5 years at an annual rent of £5,000.  The premises the subject of this latter underlease were described as “all that part of the first floor of the premises … fronting New Road … known as 44 New Road Dagenham.”  The status of the purported lease is not agreed.  In a letter of 11 April 2001 Mr Pipkin described it as a licence.

The negotiations and transfer and taking possession

10.        As described in the agreed statement of facts, the negotiations leading to the transfer and taking of possession by the LDA were as follows.

11.        On 25 March 2001, the LDA approached the claimant to discuss the acquisition of the freehold of numbers 42 and 44 New Road.  By letter dated 11 April 2001 Mr Pipkin informed Mr Cottage, the LDA’s surveyor, that the parts of the premises in commercial use were occupied as follows:

“The ground floor of 42, half of the first floor and the whole of the second floor is occupied by Solartrack Plc.  The ground floor of 44 is occupied on a five year lease at an annual rental of £7500.00 per annum by a company ‘Members Only’.  There is three and a half years remaining on their lease.  The other half of the second floor is occupied on an annual license at a rental of £5,000.00 per annum by ‘Chip Option Ltd’.”

12.        Negotiations between the parties progressed over time. By letter dated 7 January 2003 Mr Cottage wrote on behalf of the LDA to the claimant offering the sum of £427,500 on the basis of the price per square foot “agreed with TGWU for their building”.  The amount offered was an increase of £52,500 on the previous offer.  The TGWU building was the building immediately adjacent to the claimant’s premises.  The letter stated: “disturbance compensation will be paid in addition to this to reflect the costs of relocation”.  By letter dated 8 January 2003 Mr Pipkin stated that the claimant was prepared to accept an offer of £90 per sq ft totalling £444,960.00.

13.        On 13 January 2003 Mr Cottage wrote to Mr Pipkin on behalf of the LDA offering to purchase the freehold of numbers 42 and 44 for £445,000 and offering Solartrack an 18-month licence of the premises to be entered into once completion had taken place.  The letter records that the LDA believed the first and second floors of the premises to be separately let at that time and that the LDA would receive the rents from those tenants if they were still in occupation at the date of completion.  The offer was made expressly “without prejudice to any future negotiations surrounding any claim for disturbance subsequently agreed between the LDA and Solartrack to reflect the costs of relocation”.

14.        On 16 January 2003 the LDA wrote to the claimant confirming the agreed heads of terms for the transfer of the freehold subject to a 12-month licence to occupy the premises, which would be granted by the LDA to the claimant upon completion of the purchase.  The heads of terms recorded that the purchase price was agreed “without prejudice” to settlement of any future claim made by the claimant in respect of disturbance compensation.  The heads of terms were expressed to be “Subject to contract”.

15.        It was subsequently agreed that the parties would try to secure the surrender of the head lease prior to the purchase of the freehold.  In the event surrender of the head lease could not be secured in time to allow the conveyance to be completed by the end of March 2003, which was the completion date that had been agreed by the parties.  As a result, it was agreed that the conveyance would take place subject to the head lease, which would be surrendered after the conveyance had completed and following this a 12 month lease would be granted by the LDA either to the claimant or to Seco-Larm.  On 21 February 2003 Mr Pipkin completed the general enquiries before contract on behalf of the claimant.

16.        In a conversation between Mr Kidd and Mr Pipkin on 20 March 2003 Mr Pipkin stated that Chip Option had surrendered their lease and vacated the second floor the previous year and that Members Only were to vacate on 24 March 2003.  By letter dated 26 March 2003 the claimant’s then solicitors, F Barnes & Son, confirmed that Chip Option Ltd and Members Only Ltd had surrendered their interests and vacated the premises.

17.        On 2 April 2003, after completion of the transfer, the LDA’s agents, DTZ, secured possession of the premises, except for all of the ground floor (including the rear extension) and the basement of number 42 New Road.  It is the claimant’s position that by reason of this taking of possession the claimant and its associated companies, Solartrack Installations Limited and Solartrack Leisure UK Limited, were dispossessed of 44 New Road and the upper part of 42 New Road.  The claimant in fact remained in occupation of those parts of the premises until possession was taken on 3 October 2008.  It continued to pay rent to the National Westminster Bank Plc.  The claimant contends that it was paying this rent pursuant to the terms of the underlease.  After the surrender of the head lease on 22 March 2004, the claimant ceased paying rent.

The underlease of 28 June 1983

18.        The first of the preliminary issues to be decided is whether the claimant is entitled to compensation in respect of the underlease of 28 June 1983 to Seco-Larm of the basement, ground floor and rear extension of number 42.  The claimant says, relying on the evidence of Mr Pipkin, that the interest of Seco-Larm was transferred to the claimant by an exchange of letters dated 1 November 1996 between the two companies.  The acquiring authority say that Mr Pipkin’s evidence on this should not be accepted.

19.        It is agreed that Seco-Larm was incorporated on 22 November 1982.  Its registered office was 9 Cavendish Square, London W1M 9HA.  Mr Pipkin was at all material times a director of both the claimant and Seco-Larm.  On 7 August 1989 Seco-Larm changed its registered office to 42 New Road, Dagenham.  The underlease was registered with the Land Registry under title number EGL 133108.  No transfer of the underlease was ever registered and this title number continued to show Seco-Larm as the lessee at all material times.  On 15 December 1998 Seco-Larm was dissolved.  The acquiring authority did not become aware of this until December 2003.

20.        On 15 January 2004 Mr Pipkin sent to Mr Kidd a copy of the letter purportedly written on 1 November 1996 by Solartrack Plc to Seco-Larm; and on 11 May 2004 Mr Pipkin sent to Mr Kidd a copy of a letter purportedly written on the same date from Seco-Larm to Solartrack.  Each letter is in precisely the same terms, as follows:

“1^st November 1996

Dear Sirs,

It is herewith agreed that Solartrack Plc, will acquire the assets of Seco-Larm UK Ltd, including the lease of the premises at 42 New Road Dagenham from the above date.  It is also agreed that Solartrack Plc, will pay to the U.K. Directors the sum of £30,000 in full and final settlement for the said assets including share capital.

Yours faithfully

Anthony L. Pipkin

Managing Director”

The signature of Mr Pipkin appeared on each letter.

21.        On 19 July 2004 Hammonds, the acquiring authority’s solicitors, wrote to the Treasury Solicitor asking that consideration be given to the status of the underlease.  Hammonds’ letter enclosed a copy of the letter of 1 November 1996 purporting to be from Solartrack Plc to Seco-Larm Ltd, but by reason of an oversight the Treasury Solicitor was not sent the letter purporting to be from Seco-Larm Ltd to Solartrack Plc.

22.        By letter dated 22 July 2004 the Treasury Solicitor informed Hammonds of his view that the legal title to the underlease had not been transferred because there was no deed of transfer and that the equitable interest in the underlease had not been transferred because there was no letter signed by Seco-Larm as transferor.  The letter provides that “it may be that Solartrack Plc has additional document to record the purported assignment and I would be grateful if you could please make enquiries as to whether or not this is the case”.

23.        On 6 August 2004 the Treasury Solicitor formally disclaimed the underlease on behalf of the Crown, following which title number EGL133108 was closed.  It is the claimant’s position that the Crown had no interest to disclaim, as the underlease had been assigned to the claimant.  The claimant contends that this is evidenced both by the exchange of letters dated 1 November 1996 between Solartrack Plc and Seco-Larm, in the same terms, and by the payment and acceptance of rent by the Claimant and NatWest Bank.

24.        In his first witness statement Mr Pipkin asserted that, in accordance with the letters, copies of which he produced, Solartrack had acquired the assets of Seco-Larm, including the underlease.  Hammonds, in a letter to the claimants’ solicitors of 31 July 2008, questioned the authenticity of the Solartrack and Seco-Larm letters of 1 November 1998.  In relation to the Solartrack letter they pointed out:

“2.2  There is an accreditation mark displayed in the bottom right hand corner of the letter with certificate no.1505/97.  We have confirmed the origin of the mark with ISOQAR and it has informed us that the certificate number relates to the year 1997 when Solartrack made its application to ISOQAR.  We have also received confirmation from ISOQAR that Solartrack should not have been displaying the ISOQAR accreditation symbol until registration was confirmed by issue of the certificate, which in fact occurred on 9 April 1998.

2.3  The telephone and fax numbers presented at the top of the letter have ‘020 prefixes which, according to Ofcom, only came into operation in April 2000.  We have seen correspondence on Solartrack headed paper pre-dating 2000 which displayed ‘0181’ prefixes.”

25.        In relation to the Seco-Larm letter Hammonds said:

“3.2  We note that on this letter the registered office of Seco-Larm appears as 6 Cavendish Square, London W1M 9HA.  The records at Companies House indicate that this address ceased to be the registered office of Seco-Larm on 14 August 1989.  We find it most puzzling that over 7 years after the registered office changed Seco-Larm should not be using the correct registered office details in correspondence as is required by law.”

26.        In the light of this letter Mr Pipkin made a further witness statement dated 5 August 2008.  He said that he had prepared two letters dated 1 November 1996 for the companies’ auditors in order to provide the documentary evidence of the transfer so as to satisfy accountancy requirements.  He said that two copies of each letter would have been printed, one for the auditors for their records and one for retention on his for his own purposes.  It was at that time his general practice to sign copy letters kept on his file

27.        The activities of Seco-Larm had been in decline for some time prior to the transfer, Mr Pipkin said.  As a consequence they had not printed new headed paper for the company when the registered office address changed.  It would have been a costly and pointless exercise.  When he printed the Seco-Larm letter in 1996, therefore, the headed paper used was the only Seco-Larm headed paper that the company had.  Mr Pipkin said that he was not concerned about the incorrect registered office address as the letter was only being sent to Solartrack and not to an unconnected third party who could have been misled.

28.        Mr Pipkin said that he had carefully recalled his recollection of the events in 1996 in the light of the allegations made in Hammonds’ letter of 31 July 2008.  He said that he confirmed that the position in relation to the Solartrack letter was as follows.  The one exhibited to his first witness statement was not the original letter but a version that had been produced about 6 years later at around the time the freehold of 42-44 New Road was to be sold to the LDA.  The Solartrack headed notepaper then in use was used for the copy.  That explained the “020” prefix and the accreditation mark.  He had been unable to locate the original letter due to the constraints on storage space and their policy to destroy paperwork after 6 years’ storage.  He said there was no attempt in any way deliberately to mislead the Tribunal or the LDA.

29.        Mr Pipkin said that, following the transfer of the underlease to Solartrack, Solartrack continued to pay rent to National Westminster Bank and this was accepted until the surrender of the headlease to the LDA.  In answer to Hammonds’ query as to why, if the underlease had been transferred to Solartrack, the heads of terms for the sale of the freehold to the LDA contained a provision for a licence to Solartrack following the disposal, Mr Pipkin said that at that time he was acting for himself without legal advice and he only subsequently became aware that such a licence was unnecessary.  Solartrack continued to pay rent to National Westminster Bank’s agents following the transfer of the freehold.

30.        Exhibited to Mr Kidd’s third witness statement was a copy of a letter dated 27 October 2006 from Mr Pipkin to Mr Winbourne of Winbourne Martin French & Co, the claimant’s agents.  It enclosed photographs of the premises as proof, it was said, of occupation by Solartrack Installations Ltd (an associated Solartrack company) and Seco-Larm (UK) Ltd.  It said that “the ground floor of 42 New Road was and is still occupied by Solartrack plc and Seco-Larm (UK) Ltd.”  The explanation for that, Mr Pipkin said in his third witness statement, was that Seco-Larm products were continuing to be produced and sold by Solartrack plc.

31.        Mr Kidd in his third witness statement produced a file note that he had made on 20 March 2003.  It said:

“… it has been agreed that the LDA will buy the freehold subject to the existing NatWest lease and also subject to the Seco-Larm lease.  Seco-Larm (who are the same as Solartrack) will then continue to occupy basically on the same terms as at present.

At the same time, Solartrack/Seco-Alarm will enter into an agreement with the LDA whereby they will surrender their lease simultaneously with NatWest surrendering its lease, whereupon Solartrack will be granted a new lease by the LDA for a term up to 12 months in line with the original terms.

I spoke to Mr Pipkin at Solartrack, who agreed that this was an appropriate and acceptable way forward”

32.        In cross-examination Mr Pipkin said that the Seco-Larm letter, a photocopy of the original, was in his desk with other historical records.  He said that he could not explain why that and the Solartrack letter were not together.  He accepted that at no time in the course of dealings with the acquiring authority on the purchase of the freehold did he assert that Solartrack had any interest in the underlease.

33.        The evidence leaves me in no doubt that there was no transfer of any interest in the underlease from Seco-Larm to Solartrack in 1996 or at any other time and that the letters purporting to show such a transfer were created by Mr Pipkin in an attempt to deceive the acquiring authority.  The continued reliance on them in the proceedings and Mr Pipkin’s evidence were a flagrant attempt on his part to mislead the Tribunal.  I am satisfied that Mr Kidd’s note of 20 March 2003 was an accurate record of the conversation between him and Mr Pipkin.  Mr Kidd, whose evidence I accept, said that it was a contemporaneous note taken shortly after the telephone call had been made and that he had made it with care because he knew that he would have to justify the proposals for the acquisition to his managers.  It is clear from this that Mr Pipkin allowed the acquiring authority to believe that Seco-Larm still existed when, as he well knew, it had been dissolved in 1996.  Had there been a transfer to Solartrack of the lease it is inconceivable that that he would not have said so and would not have said that Seco-Larm had been dissolved. 

34.        Initially Mr Pipkin sought to pass off the Solartrack letter as an original document made on the date that it bore, 1 November 1996.  It was only when it was pointed out to him that the ISOQAR accreditation symbol and the telephone number showed that the document could not have been created in 1996 that he acknowledged that it had in fact been created later.  He said that it was produced 6 years later during the time of negotiations on the sale of the freehold of 42-44 New Road to the acquiring authority.  It was thus created for the purpose of passing it off as genuine, when it was not.  He gave no satisfactory explanation of why the Seco-Larm letter, which he claimed to have been created in 1996, could be found but the original Solartrack letter could not be found. 

35.        An examination of the letters suggests strongly that they were produced from the same typed document, with just a different name and address being inserted in each case.  Every detail is the same, whereas other Solartrack letters produced in evidence show variations in formatting details.  The inference that I draw from the evidence is that the two letters were produced at the same time, when in early to mid 2004 the question of the underlease was being investigated by the acquiring authority’s solicitors following their correspondence with the Treasury Solicitor.  There is no evidence that the Seco-Larm lease was transferred to Solartrack.

36.        The first preliminary issue is therefore determined in the acquiring authority’s favour.  The claimant is not entitled to compensation in respect of the underlease dated 28 June 1983.

37.        In his closing submissions Mr Horton contended that, if the claimant was not the transferee of Seco-Larm’s leasehold interest, at the date when possession was taken its status was that of an occupier holding over pursuant to a quarterly tenancy with the security of tenure protection of the Landlord and Tenant Act 1954.  There is no need for me to consider this.  Before the claim could be put on this basis it would be necessary to amend the notice of reference.  No application to do this has been made, and, in view of the claimant’s conduct in flagrantly seeking to mislead the Tribunal on its leasehold interest claim, I would think it highly unlikely that any such application, were it to be made, would be granted.

The freehold interest

38.        The notice of reference relating to the freehold interest seeks compensation for the value of that interest in the sum of £2,800,000 in spite of the fact that the freehold was conveyed to the acquiring authority for the agreed price of £445,000 on 28 March 2003 some months before the compulsory purchase order was made.  The claimant considers that the amount that was agreed and paid was inadequate and it claims that the Tribunal has power to determine the amount of compensation to which, it says, it is entitled.  As advanced by Mr Matthew Horton QC for the claimant the basis of the contention that the Tribunal has this power is that disturbance compensation remains to be determined and therefore the Tribunal has jurisdiction to determine the totality of the compensation payable, including the market value of the freehold interest.

39.        Mr Horton said that the negotiations between the parties leading to the conveyance of the freehold interest clearly contemplated that compensation would be paid for disturbance as if a compulsory purchase order had been made and this was confirmed by the agreement of 23 September 2005 for an advance payment.  He contended that the effect of the negotiations was one of four possible ones.  Firstly they could have created a collateral contract that disturbance (and all other heads of compensation) would be paid as if the acquisition of the freehold land had been pursuant to a CPO, with the authority being estopped from acting inconsistently with such contract.  Secondly, a term could be implied in the contract for sale of the freehold that in addition to the purchase price the acquiring authority would pay compensation in respect of other heads of compensation that would have been payable to the claimant if the acquisition of the freehold land had taken place pursuant to a confirmed CPO and that, in the event of failure to agree such other heads of compensation, the dispute should be referred by consent to the Lands Tribunal.  Such a term was clearly necessary to give business efficacy to an agreement for the sale of land in the shadow of compulsory purchase powers as without it an owner would not agree to sell.  Thirdly, the effect could have been to create a promissory estoppel.  The fourth possibility was the creation of an estoppel by convention.  Both parties had acted on the basis that the acquisition of the freehold land had taken place as if it had been pursuant to a CPO.

40.        Whichever of these possibilities was the right one, said Mr Horton, it left for determination the amount of compensation payable for disturbance.  Since disturbance compensation was simply one element in the value of the land rather than a distinct and independent head of compensation (and Mr Horton relied for this proposition on Hughes v Doncaster MBC [1991] 1 AC 382) it followed that in determining the disturbance element it was lawful also to consider the open market value of the land itself.

41.        The claimant’s contention that the Tribunal has power to determine compensation for the value of the freehold interest is in my judgment unsustainable.  The notice of reference put the claim on the basis of a statutory entitlement to compensation, but it was clearly misconceived in this respect.  The transfer of the freehold interest had taken place some months before the CPO was made, and at the time the acquiring authority exercised its compulsory powers under the confirmed order by taking possession of the premises it was they that were the owners of the freehold interest rather than the claimant.  The Tribunal thus has no jurisdiction pursuant to the Land Compensation Act 1961 and the Compulsory Purchase Act 1965 to determine compensation in respect of the freehold interest because that interest was not compulsorily acquired.

42.        If the Tribunal does have any jurisdiction to determine the amount of compensation payable for the freehold interest, or any component of that compensation, this can only be under its power to act as arbitrator under section 1(5) of the Lands Tribunal Act 1949.  The question, therefore, is whether there is an agreement between the parties that the Tribunal should act as arbitrator in the determination of compensation and, if so, whether the compensation that the Tribunal has to determine includes the market value of the freehold interest.

43.        The claimant places reliance on the agreement reached for the transfer of the freehold and the agreement of 23 September 2005 relating to the advance payment of compensation for its contention that there was a collateral contract for the payment of compensation for disturbance.  The Heads of Terms agreed for the purpose of the transfer of the freehold contained in addition to the purchase price and the completion date “Other Terms” which were expressed as follows:

“1)  Upon completion of the purchase the London Development Agency will grant Solartrack plc a licence to occupy the property for a period of twelve months.  The licence fee will be payable monthly and equate to £5,000 per annum.

During the twelve month term Solartrack plc will be able to terminate the licence at any time, having given two months prior notice in writing.

Following expiring of the twelve month period Solartrack will be allowed to remain in occupation under licence on the basis that either the London Development Agency or Solartrack plc can terminate the licence, having given two months prior notice in writing.

2)  The purchase price is agreed ‘without prejudice’ to settlement of any future claim made by Solartrack plc in respect of the disturbance compensation.

3)  Solartrack will not object to any subsequent Compulsory Purchase Order raised by the London Development Agency or any other body in accordance with their statutory powers.”

44.        The agreement of 23 September 2005 recited the making of the CPO, the transfer of the freehold to the Agency from Solartrack and that “The Agency has agreed to make an advanced payment to Solartrack Plc in respect of costs and expenses it will incur pursuant to Section 5 Rule 6 of the Land Compensation Act 1961 (‘the disturbance payment’) in relocating its business to alternative premises on the terms hereinafter agreed.”  The amount of the sum that the Agency agreed to pay was £100,000.  Among the terms were the following:

“(ii) The advance payment is entirely without prejudice to the disturbance claim for compensation submitted to the Agency by Solartrack.

(iii)  Solartrack hereby undertake that in connection with its disturbance claim for compensation it will provide a breakdown of all or any part of the expenses incurred and paid with the advance payment.  The Agency shall be entitled to accept or reject such payments in accordance with the terms of Section 5 Rule 6 Land Compensation Act 1961 and shall be entitled to offset any payment rejected under this paragraph against any final payment for the disturbance claim.

(iv)  Any decision by the Agency in respect of the above paragraph is entirely without prejudice to the right of Solartrack to challenge the decision by reference to the Lands Tribunal for an adjudication of the disturbance claim either in whole or in part.”

45.        The following matters are in my judgment implicit in this agreement, read in the context of the earlier agreed heads of terms for the transfer.  Firstly, Solartrack was to be treated as entitled to compensation for disturbance as though its freehold interest had been compulsorily acquired and it had been disturbed as a consequence of such acquisition.  This is the necessary consequence, it seems to me, of the reference to rule 6, which only has application where an interest is compulsorily acquired, and the reference in the recitals to the transfer of the freehold.  Secondly, Solartrack was to be entitled to refer to the Lands Tribunal any dispute as to the amount of the disturbance compensation.  That is the effect of term (iv). 

46.        I can see no basis for Mr Horton’s contention that, because there was agreement that Solartrack could pursue a claim for disturbance compensation, it could also pursue a claim on the value of the freehold interest.  The amount payable under the transfer was unqualified, and the value of the interest could not have been dependent on the amount that might be agreed by way of disturbance compensation.  Clearly, if the market value reflected the value of the land for development this might eliminate an entitlement to compensation for disturbance (see Horn v Sunderland Corpn [1941] 2 KB 26 ).  But the market value could not be increased by what was agreed or determined as disturbance compensation.  The second preliminary issue is therefore decided in the acquiring authority’s favour.  The Tribunal has no jurisdiction to entertain a claim for the value of the freehold interest.

Disturbance compensation

47.        The third preliminary issue as set out in the order of 15 April 2008 was whether the claimant is entitled to claim compensation for disturbance under section 37 of the Land Compensation Act 1973.  The issue was expressed in this way to reflect the terms in which the acquiring authority’s application for the determination of preliminary issues was framed.  The notices of reference had each referred to the “possibility” of section 30 of the Land Compensation Act 1973 applying, and it is to be assumed that what was meant was section 37.  That section provides for compensation for persons without compensatable interests who have been displaced from land in consequence of its compulsory acquisition.

48.        As I have said earlier, each notice of reference answered “No” to the question whether the acquiring authority had taken possession.  A claim under section 37, the basis of which is that the claimant has been displaced, would therefore have been inconsistent with this.  The acquiring authority, however, accepted in the light of the evidence given at the hearing that part of the reference premises of which it took possession on 2 April 2003 (specifically the rear ground floor meeting room) was being used by the claimant.  It follows that the claimant is right in contending that, if it has no compensatable interest which entitles it to claim disturbance compensation, it will have a claim for compensation under section 37.

49.         However, the acquiring authority say that they have never denied that they would pay compensation for disturbance, and they accept that under the heads of agreement and the agreement of 23 September 2005 any claim for disturbance compensation would fall to be determined as though it had arisen under section 5 of the 1961 Act.  They nevertheless express resistance to the claim being made under the notice of reference relating to the freehold interest on three bases.  Firstly they contend that, to the extent that such claim is based on the disturbance of Solartrack’s associated companies, Solartrack Leisure Limited and Solartrack Installations Limited, it is estopped from relying on any losses incurred by those companies because their existence was not disclosed to them by the claimant.  Secondly, they say that by failing to alert the acquiring authority to the occupation of parts of the premises by these companies in advance of their dispossession the claimant failed to mitigate its loss.  Thirdly, they say that the reference was in any event premature because there had been the claimant had not been disposed at the time that it was made.

50.        I will take the third contention first.  Notice of reference was given on 21 June 2006.  The acquiring authority took possession of part of the premises on 2 April 2003 and of the rest of the premises on 3 October 2008.  Since it is now accepted that the claimant occupied part of the premises of which possession was taken at the earlier date, the rear ground floor meeting room, there had clearly been dispossession at the time that the reference was made.  Even if the later date were the material one, however, I would not regard it appropriate now to dismiss the reference on the ground that it was made prematurely.  All that would then happen is that the parties would be put to the expense and inconvenience of a fresh reference of precisely the same claim.

51.        A more significant formal obstacle is that the notice of reference was given on the basis of the actual exercise of statutory powers of compulsory acquisition, whereas the freehold interest was not acquired under compulsory powers and the claim as advanced is a contractual one.  Any jurisdiction of the Tribunal lies not, therefore, under the Land Compensation Act 1961 and the Compulsory Purchase Act 1965 but under section 1(5) of the Lands Tribunal Act 1949, which gives it power to act as arbitrator under a reference by consent.  The effect of the agreement of 23 September 2005, as I have said, is to give the claimant a contractual right to refer any claim for disturbance compensation to the Lands Tribunal for determination as though it had arisen under section 5 of the 1961 Act.  I do not understand the acquiring authority to dissent from this.  Accordingly, despite the wrong basis of the reference, it is in my view clearly now right to treat the reference as having been made under section 1 of the 1949 Act.

52.        That conclusion is not one that specifically relates to the preliminary issues in the terms in which they were expressed, but it arises from the submissions of the parties.  The contentions of the acquiring authority on estoppel and mitigation similarly do not arise for consideration directly on the preliminary issues, but the parties evidently wish the points to be decided and have addressed them in their submissions.  I think it appropriate to deal with the estoppel point but not the issue of mitigation.

53.        The acquiring authority, abandoning an earlier contention to the contrary, now accept that both Solartrack Installations Ltd and Solartrack Leisure Ltd are related to the claimant in such a way as to enable the claimant’s claim for disturbance to include disturbance to these two companies in accordance with the principle in DHN Food Distributors Ltd v Tower Hamlets LBC (1976) P & CR 240.  What they say, however, is that when the acquiring authority negotiated with the claimant and agreed to buy its interest no mention was made by the claimant of these two companies and their use of the premises.  The facts as to the occupancy of the premises, they say, were peculiarly within the knowledge of Mr Pipkin.  On 21 February 2003 the claimant’s response to the pre-contractual inquiries about occupancy did not mention the two companies; and when on 20 March 2003 Mr Kidd asked Mr Pipkin about the occupancy of Chip Option and Members Only, Mr Pipkin made no mention of them.  The claimant thus allowed the acquiring authority to enter into the transfer of the freehold, to agree to its continued occupation of part of the premises and to take possession of the premises, as to part on 2 April 2003 and as to the rest on 3 October 2008, in the belief that it was the claimant alone that was in occupation.

54.        Mr Kidd in evidence said that from the discussions he had with Mr Pipkin in 2002 and 2003 it must have been apparent to Mr Pipkin that the LDA was willing to accommodate his companies that were in occupation of the premises, since that was the basis on which the sale was progressing.  Had he ever raised the presence of the related companies, he was in no doubt that they would have been allowed to remain in the premises just as Solartrack Plc was and, as he believed at the time, Seco-Larm were.  No mention, however, was made of the associated companies.

55.        Mr Pipkin said that he saw no need in the discussions to distinguish between the different Solartrack companies.  Solartrack Installations Ltd created and installed security equipment, which was used amongst other things for night clubs and car park security.  Solaratrack Leisure had designed a high profile range of electric bicycles and manufactured and distributed them, together with its range of heart monitors and exercise machines.  All the financial transactions of the companies were processed through Solartrack Plc.  The first floor of 42 and 44 New Road was used as an office for meetings by all the Solartrack companies and as a showroom which contained various exercise machines and other equipment such as heart monitors that had been developed by Solartrack Leisure.  The ground floor of number 44 was occupied by all three companies.  Solartrack Leisure used the ground floor for the sale and distribution of its electric bicycles, and this would have been clear from the boxes of these bicycles that were there.  Mr Pipkin considered that this would have been clear to Mr Cottage and Mr Kidd, who came to the premises on several occasions during the negotiations.  The signs on the outside of the property showed that Solartrack Installations and Solartrack Leisure were occupying number 44, and there were brass plates for both companies prominently displayed adjacent to the door.  

56.        Mr Cottage said that he inspected the property on 24 April 2001 to form an initial view of the property and the nature of the business, and subsequently he visited the property to discuss matters with Mr Pipkin.  He would come in through number 42 and they would meet in the room at the rear of number 44.  The only other time that he carried out a full inspection was on 6 February 2003.  He asked about the nature of the business and Mr Pipkin explained the types of product and the types of markets.  Alarm systems, heart monitoring machines and electric bicycles were mentioned.  No specific indication was given as to separate processes in different parts of the building.

57.        In the light of the evidence I conclude that the premises, both 42 and 44, were being used for the businesses of the Solartrack companies.  I accept that for the purpose of his dealings with Mr Kidd and Mr Cottage Mr Pipkin saw no need to distinguish between the different operations of the companies and that there was no intention on his part to hide the existence of Solartrack Installations and Solartrack Leisure.  Indeed it is clear that the signs revealed their existence.  There would have been no purpose in Mr Pipkin seeking to hide the existence of those two companies, and in any event, as Mr Kidd said, the acquiring authority were willing to make provision for the business that was accommodated in the building.  I therefore reject the acquiring authority, contention that the claimant is estopped from claiming that the associated companies were in occupation of the premises.

58.        It is unnecessary, and indeed inappropriate, for the purpose of deciding the preliminary issues to determine the precise nature of the different companies’ use of the premises at particular times.  It is sufficient to conclude that their operations were accommodated in the building.  Questions of mitigation similarly do not arise at this stage.  The loss suffered by the companies as a result of the acquisition of the freehold interest is to be assessed in the light of established principles as to causation and reasonableness.

Conclusion

59.        I conclude as follows:

(a)   No claim lies in respect of the Seco-Larm underlease, which was not transferred to the claimant.

(b)  It is not open to the claimant to seek compensation for the market value of the freehold interest.  The interest was transferred to the acquiring authority at a price that was in this respect unqualified

(c)   The claimant is entitled to pursue a contractual claim for compensation for disturbance, and the claim may encompass losses suffered by Solartrack’s associated companies as a result of the acquisition of the freehold interest.

60.        The reference in respect of the leasehold interest (ACQ/97/2006) is dismissed.  The reference in respect of the freehold interest (ACQ/96/2006) is to stand as a reference by consent of the claim for compensation for disturbance in consequence of the acquisition of the freehold interest.

61.        The parties are now invited to make submissions on costs, and a letter dealing with this accompanies this decision, which will become final when the question of costs has been determined.

                                                                                    Dated 30 November 2009

 

                                                                                    George Bartlett QC, President

Addendum on costs

62.        I have now received submissions on costs from each party, including responses.  The acquiring authority ask to be allowed to make a further response.  This request is refused.  In view of the conclusions that I have reached it is not needed and the acquiring authority will not be prejudiced by my refusal.

63.        The claimant submits that, having been successful in relation to the disturbance issue (and two matters related to it – the treatment of the claim as having been made under section 1(5) of the Lands Tribunal Act 1949 and estoppel in relation to the occupation of the premises) it should have its costs of this issue.  It says that, alternatively, it should have the whole of its costs relating to all the issues, save as to any adjustment that might be appropriate to reflect Mr Pipkin’s attempt to mislead the Tribunal, and it advances a number of points on this.  The acquiring authority say that they should have their costs of the underlease reference on an indemnity basis or alternatively the standard basis and of the freehold reference on the standard basis, except for the costs relating to the disturbance claim, which they say should be costs in the reference.

64.        I can see no reason why the acquiring authority should not have their costs of the leasehold reference (ACQ/97/2009) and of the claim for the value of the freehold interest (in ACQ/96/2009).  It was clearly appropriate that these should have been disposed of as preliminary issues.  The claim for indemnity costs is resisted by the claimant on the basis that Solartrack had paid the rent due pursuant to the underleases to National Westminster Bank Plc before the possibility of compulsory purchase arose.  The only rational explanation for this, it is said, was a belief that the underlease had been transferred, so that the creation of the two letters was less reprehensible than it would have been if Mr Pipkin had never believed that Solartrack had acquired the underlease.

65.        The payment of rent by Solartrack shows no more, in my view, than that Mr Pipkin wished that company to be treated as having had the underlease transferred to it.  But nothing turns on this for present purposes.  The fact is that Mr Pipkin created two documents for the purpose of deceiving the Treasury Solicitor and, seeking to mislead the Tribunal also, maintained in his evidence that one was genuine which the other was the re-creation of a genuine document that had previously existed.  In view of this, the case for an award of indemnity costs is manifest.  Because the claim for indemnity costs is limited to the leasehold reference there is no need for me to consider whether the freehold reference was not tainted also by Mr Pipkin’s conduct.  It is sufficient for me to say that there is, in my judgment, the clearest possible case for the award of costs in the reference ACQ/97/2009 on an indemnity basis.

66.        This leaves the disturbance claim under the freehold reference.  On this it seems to me that the claimant should be awarded its costs.  It has succeeded on the point raised by the acquiring authority, and I cannot see any need to reserve the question of costs until quantum has been determined.  The claimant in replying to the acquiring authority’s submissions on costs says that it should have its costs on an indemnity basis because of the conduct of the authority.  None of the matters raised seem to me to justify the award of costs on this basis. 

67.        Accordingly I order that:

(a)    The claimant must pay the acquiring authority’s costs in reference ACQ/97/2006 on an indemnity basis.

(b)    The claimant must pay the acquiring authority’s costs in reference ACQ/96/2006, other than those relating to the disturbance claim, on the standard basis.

(c)    The acquiring authority must pay the claimant’s costs in relation to the preliminary issue of the disturbance claim on the standard basis.

In each instance the costs if not agreed are to be the subject of detailed assessment by a Registrar.

Dated 11 January 2010

 

George Bartlett QC, President