UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2010] UKUT 24 (LC)

ACQ/469&470/2007

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – compulsory purchase – costs – sealed offer accepted by claimants – reasonable time for acceptance of sealed offer – issue determined in claimants’ favour

IN THE MATTER of NOTICES OF REFERENCE

BETWEEN                              L & B HOLDINGS LIMITED (1)

L & B HAULAGE & CIVIL ENGINEERING

CONTRACTORS LIMITED (2)               Claimants

and

LONDON BOROUGH OF BRENT        Respondent

Re: Land at Hannah Close, Great Central Way, Neasden

London NW10

Before: P R Francis FRICS

Sitting at: 43-45 Bedford Square, London WC1B 3AS

on

25 January 2010

Barry Denyer-Green, instructed by Pinsent Masons, solicitors of Birmingham, for the claimants

Richard Harwood, instructed by Brent Council – Legal and Democratic Services, for the acquiring authority

The following case is referred to in this decision:

Chapter Group PLC v London Regional Transport and Another [2006] RVR 242

The following cases were also referred to in argument:

Purfleet Farms Ltd v Secretary of State for Transport, Local Government and the Regions [2002] EWCA Civ 1430

Stanford Marsh Ltd v Secretary of State for the Environment [1997] 1 EGLR 175  

DECISION

Introduction

1. This was a consolidated reference to determine the amount of compensation payable to L&B Holdings Limited and L&B Haulage and Civil Engineering Contractors Limited for the compulsory acquisition of land at Hannah Close, Great Central Way, Neasden NW10 under the London Borough of Brent (Wembley Park Estate Access Corridor) Compulsory Purchase Order 1998 (the CPO), by London Borough of Brent.   The CPO was made on 15 September 1998 and confirmed by the Secretary of State on 30 November 1999.   Following service of Notice to Treat and Notice of Entry, possession was taken by the council on 22 October 2001, that being the date of valuation for the purposes of the references.

2. The land, which included an area of railway sidings, was used as a commercial vehicle workshop, waste transfer station, a crushing and recycling plant and offices.   Part of it was required for the construction of a new access road for the Wembley Park Estate.   The claimants claimed compensation for the value of the land taken and diminution in value of the retained former railway sidings, and the remainder of the retained land due to the loss of a private roadway.   They also sought loss of profits and other disturbance items and the claim totalled approximately £3.3 million.

3. A hearing was set down for 7 days to commence on 25 January 2010, but the claimants accepted a sealed offer on 18 January 2010, in the sum of £450,000 to include pre-reference costs, that had been made by the acquiring authority on 18 December 2009 (but received by the claimants on 24 December).   The sole issue before me related to the question of costs in the reference.  The claimants said they should have their costs up 18 January 2010, but the acquiring authority said the cut-off date should be 8 January 2010, after which the claimant should pay the authority’s costs.  Costs between the two dates had been substantial due to the imminent substantive hearing, with the claimants incurring approximately £45,000 and the council about £22,000.   The parties proposed a draft consent order upon which the only matter in issue was the question of costs.

Claimants’ case

4. Mr Denyer-Green said that the acquiring authority’s offer letter of 18 December 2009 was not received by the claimants until 24 December (it having been sent in the DX).  That offer, in essence, said:

“Brent has now had the opportunity to consider your clients’ claim as currently constituted.

We take the view that there is no realistic prospect of your clients being able to establish any continuing loss, leaving your clients to a claim made up of land-take, injurious affection to the sidings land, disturbance costs, and some direct loss during the period of disruption.  Our experts’ best guess is that the value of that claim could be as little as £250,000.

In order however to avoid the costs of the trial (including preparation) we offer £450,000 in full settlement of the claim including professional costs prior to the reference, and subject to statutory interest.   This is an unconditional offer pursuant to section 4(1) of the Land Compensation Act 1961.

If the offer is accepted by 4pm on Monday 4 January 2010, Brent agrees to pay your clients’ costs of the proceedings on the standard basis up to today’s date (except as covered by previous orders of the Tribunal), and subject to assessment by the Registrar of the Tribunal if not agreed.   However, if the offer is accepted after 4pm on Monday 4 January 2010 Brent will ask the Upper Tribunal for an order that your clients pay Brent’s costs from today’s date.” 

5. Immediately that offer was received, Mr Damms of Pinsent Masons replied to the council in the following terms:

“I have received today (Christmas Eve) your sealed offer letter dated 18 December 2009 about which I received no advance notice from you.

For the avoidance of doubt I point out that trial preparation has already commenced given the hearing date so soon after the holiday break and indeed I mentioned to you in our telephone conversation on Monday the 21st December that I was considering the extent of (and indeed putting together) the trial bundle.

In this regard I refer you to the case of Chapter Group PLC v London Regional Transport (CON/87/2004), copy attached.

By analogy High Court Rules state that from April 2007 Part 36 a 21 day period should be given for acceptance of a sealed offer.

We are now in the Christmas holiday season and no-one is available for appropriate consideration of your offer. I am away from the office from today until 4 January 2010. Mr Chase and Ms Herbert are already away until 4 January 2010. Counsel is away until the New Year. A deadline date of 4 January 2010 is therefore completely ridiculous. By analogy with Part 36 of the High Court Rules I consider an acceptable deadline to be 27 January 2010.

However, we shall be meeting counsel on 14 January 2010 and I shall be in a position to revert to you on 15 January 2010.

A copy of this email by letter will be sent to the Lands Tribunal.”

That letter was sent by email at 12.32pm and a copy was emailed to the Tribunal shortly afterwards.  It was also sent by post/DX.

6. At 3.04pm on 5 January 2010, the council (Mr Levett) sent an email letter to the claimants’ solicitor apologising for the delay relating to the 18 December letter.   He went on to say:

“As has previously been discussed, the compression of the timetable has been very largely the result of your clients’ delays.   As it was, Brent had to take a view on the strength and validity of your clients’ claim without seeing your clients’ rebuttal reports.

I certainly do not agree with the analogy with Part 36 [of the CPR] demands an extension of time for the acceptance (with costs to acceptance) until 27 January, a date some 34 days after you received the offer, and two days into the trial; strict analogy would suggest 14 January 2009 (sic).    

 Given the delay in the letter leaving this office, I will take instructions on extending the agreed time for acceptance (with costs to acceptance) to the end of this week, 8 January 2010.”

Mr Denyer-Green said that no substantive confirmation as to whether or not that extension of time had been granted was ever received.

7. He said that the initial period to 4 January for acceptance of the sealed offer was clearly unreasonable in the light of the ensuing Christmas and New Year Break.  The claimants had no access to professional advice during this time, and they advised the council immediately of the conference with counsel planned for 14 January.   By analogy with the CPR, a 21 day period for acceptance would have been reasonable (taking it to 14 January), and the unreasonableness of the council’s proposal was impliedly accepted by them in their email of 5 January.   

8. Furthermore, the council could hardly criticize the claimants when it had received the claimants’ detailed claims in August 2008 and the primary expert witness reports (both valuation and accountancy) on 14 September 2009.   Their own experts’ reports were served on 3 and 4 November.   They had thus had ample time to formulate their proposals as to an appropriate sealed offer without leaving it until so close to the hearing when it was inevitable considerable costs would continue to be incurred, and just before an extended holiday break.   The rebuttal proofs (all bar the council’s waste report rebuttal) were exchanged on 21 December, with that being due on 15 January 2010, but never served.   As it transpired, Mr Denyer-Green said, the claimants’ counsel was not available until 11 January at the earliest and a round of conferences took place on 13 and 14 January.  

9. The question of an undertaking had to be considered, and getting that resolved, he said, was a critical element of the decision whether or not to accept the sealed offer.   Mr Damms wrote to the council on 13 January 2010 asking them to confirm their position in respect of the land included within the Notice to Treat and Notice of Entry, as identified in plans prepared by Mr Earl, that was not permanently taken, or required by L B Brent.   Advice was given to Mr Thomas Lee, a director of the claimant companies, on 14 January along with further clarification on 15^th.  As his parents were the shareholders of the company, he said that they “needed the weekend [16^th and 17^th] to consider the sealed offer and the advice they had received.”   

10. The draft undertaking, which confirmed that the council would not enforce its right to purchase any land arising under the CPO other than that which was required in connection with the scheme was sent to the claimants as an email attachment at 1.12 pm on Monday 18 January.   Mr Denyer-Green said that the letter accepting the sealed offer was emailed to the council at 2.50 pm the same day, less than two hours after the undertaking had been received.    It was clear, he said, that once the claimants had had the opportunity to consider matters upon which they had received advice, and were in possession of the draft undertaking, there had been no delay in communicating their acceptance to the council.    In response to Mr Harwood’s suggestion that the parties’ experts had been aware of the undertaking issue since August 2009, Mr Denyer-Green said that whilst that fact was accepted, the original proposal had referred to a much smaller area of land and, crucially, there was no plan.

11. As to the law on costs, he accepted that the CPR rules do not have direct application in the Upper Tribunal, but the same overriding objective is followed: see the Interim Practice Directions and Guidance at para 2.1.  Further, in Chapter Group PLC v London Regional Transport and Another [2006] RVR 242, his Honour Michael Rich QC said at para 13:

“In my judgment it would be difficult for a claimant to argue that the period allowed for acceptance of an offer made under Part 36 of the Civil Procedure Rules, namely 21 days, was less than reasonable.”

That period must, it was submitted, provide the strongest guide to what is a reasonable time.   

12. Although counsel for the acquiring authority pointed out that the period between the making of the offer in Chapter Group and its acceptance was much longer than 21 days, Mr Denyer-Green pointed out that costs were awarded in the claimant’s favour for the 21 days from the date of the offer (2 August 2005) to 24 August 2005 (see para 15).

13. Mr Denyer-Green also referred to para 14 of that decision which made reference to Purfleet Farms Ltd v Secretary of State for Transport, Local Government and the Regions [2002] EWCA Civ 1430, in which the court of appeal had explained the proper approach to the Tribunal’s exercise of its discretion on costs.   HH Michael Rich said:

“… It is that a “successful claimant” “is entitled [to] the costs in the proceedings in the absence of some ‘special reason’ “(see per Waller LJ at 29).  In my judgment a claimant whose claim is satisfied by an offer which he accepts is [a] successful claimant.   The reason for so treating him is set out in para 20(3) of the Practice Directions as follows:

“the general rule is that the successful party ought to receive his costs.   On a claim for compensation for compulsory acquisition of land, the costs incurred in establishing the amount of disputed compensation are properly seen as part of the expense imposed on him by the acquisition.   The Tribunal will, therefore, normally make an order for costs in favour of a claimant who receives an award of compensation unless there are special reasons for not doing so.” 

14. Mr Denyer-Green said finally that any suggestion by the acquiring authority that the claim had been exaggerated, and that that fact should be taken into account in the award of costs was irrelevant.   The Tribunal had not heard any of the evidence relating to the substantive issues, and was not, therefore, in a position to make any judgment on that issue.

Acquiring authority’s case

15. Mr Harwood said that although the offer, made on 18 December 2009, offered the claimants their costs up to that date, in the light of the delay in their receiving it, and the impending Christmas/ New Year break, it was proposed that 8 January 2010 should be the relevant date.   He said that the 4 days from 29 December were normal business days, and the week commencing 4 January 2010 was a full working week.  The council considered that bearing in mind the proximity of the full hearing, and the substantial costs that would be incurred in the run up to 25 January, the claimants should have accepted the offer by no later than Friday 8 January.

16. He referred to the relevant paragraphs of the Tribunal’s Interim Practice Directions and Guidance, which provide:

“23.2 … Subject to what is said below the discretion will usually be exercised in accordance with the principles applied in the High Court and county courts.   Accordingly, the Tribunal will have regard to all the circumstances, including the conduct of the parties; whether a party has succeeded on part of their case, even if they have not been wholly successful; and admissible offers to settle (see paragraphs 23.3 and 23.6 below).  The conduct of a party will include conduct during and before the proceedings; whether a party has acted reasonably in pursuing or contesting an issue; the manner in which a party has conducted their case; and whether or not they have exaggerated their claim.    

23.3 [as para 20.3 of the earlier PDs – para 13 above]”

17. Whilst the offer was made under section 4(1) of the Land Compensation Act 1961, Mr Harwood said, the presumption as to costs in that section does not apply as the offer had been accepted.   Costs are, therefore, at the discretion of the Tribunal.   Although it was accepted that, in the light of the delay in the offer being received by the claimants, the originally proposed date of 4 January 2010 was unreasonable, it was the council’s view that the proposed revised date of 8 January (and for the claimants to have their costs to that date rather than the date of the offer), was sufficient time for a decision to have been made.  The claimants should, he said, have applied their minds to the offer over the Christmas break.   Instead, they continued to expend considerable sums preparing for the hearing.

18. The offer that was eventually accepted was more than seven times less than the amount being claimed, and the claimant’s eventual acceptance of it was an implicit admission that it had been wildly exaggerated.   If the Tribunal was minded, Mr Harwood said, to apply the 21 days as per the CPR rules, that would take it to 14 January as the Christmas holidays must be included.   However, neither party was, in fact, seeking that date.

Conclusions

19. The relevant provisions of Part 36 of the CPR are:

36.2 – (1)   An offer to settle which is made in accordance with this rule is called a Part 36 offer.

            (2)  A Part 36 offer must –

                   (c)  specify a period not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36(1) if the offer is accepted.

36.3 – (1)(c)      ‘the relevant period’ means-

(i)   in the case of an offer made not less than 21 days before trial, the period stated under rule 36.2(2)(c) or such longer period as the parties agree.

36.10 – (1) Subject to paragraph (2) and paragraph (4)(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror.”

If the CPR rules were, therefore, to be adopted as drawn, Mr Denyer-Green accepted that the expiry of 21 days from when the offer was received by the claimant would be 14 January 2010.   However, Mr Harwood pointed out that, in fact, neither party had sought that date in their submissions.

20. The Tribunal’s position is clearly set out in para 23.2 of the Interim Practice Directions and Guidance and thus, whilst it is not bound by the CPR, it will be mindful of its principles.   Unless there are good reasons for adopting a different approach it is, as HH Michael Rich said in Chapter Group (see para 11 above), likely that a 21 day period for acceptance will be considered reasonable.

21. I have carefully considered the claimants’ submissions, and am satisfied that they were not, in any way, unreasonable in not accepting the offer before 18 January 2010.   Once the offer had been received, the claimants’ solicitor immediately informed the council of their position and that they would respond by 15 January, following conferences with counsel.   Were it not for the matter of the undertaking, I would have concluded that that should have been the “end-date” for acceptance.  However, in accepting the argument that the issue was a crucial factor that the claimants needed to consider before deciding whether or not to accept the offer, and noting that the acceptance was sent to the council less than three hours after the draft undertaking had been received, I conclude that they were reasonable to wait until then before doing so.   

22. I do not think that the claimants can be criticised, or penalised, for the fact that considerable extra costs were incurred by both sides during the intervening period.  That was undoubtedly necessary considering the close proximity of what was listed to be a 7 day hearing, and if either party had “pulled the plug” at an earlier date there would have been a risk that, had the offer not been accepted, for whatever reason, the start date for the hearing could have been seriously jeopardised.     

23. Mr Harwood referred to the decision of Mr P H Clarke FRICS in Stanford Marsh Ltd v Secretary of State for the Environment [1997] 1 EGLR 175, where a period of 5 days had been allowed for consideration of the offer that had been made, but I conclude that the circumstances there were sufficiently different to make them less than persuasive in this case.  

24. As to the allegations that the claim was exaggerated, I made clear at the hearing that it would, indeed, be inappropriate for the Tribunal to consider arguments on that issue.  The evidence, which would have been before me at the substantive hearing, had not been heard, and with no trial bundle or skeleton arguments having been lodged, I had not even had the opportunity to familiarise myself fully with the issues.

25. No oral submissions were made regarding the costs of this hearing.  However, the draft consent order produced by the parties provided, on the claimants’ basis, for the acquiring authority to pay the costs of it.  The acquiring authority proposed that the claimant be responsible for the acquiring authority’s costs between 9 and 25 January – thus including this hearing.  Having found in favour of the claimants, I determine that they should have their costs of the January 25 costs hearing.        

26. I therefore determine:

(a)     That, by consent, the compensation payable by the acquiring authority to the claimants is determined in the sum of £450,000 in these two references, subject to interest at the statutory rate.

(b)     That the acquiring authority shall pay the claimants’ costs in these references on the standard basis until 18 January 2010 (except as covered by previous orders of the Tribunal), together with those relating to this costs hearing, such costs to be assessed by the Registrar if not agreed.

                           DATE: 3 February 2010

                           P R Francis FRICS