UT Neutral citation number: [2011] UKUT 84 (LC)

LT Case Number: LCA/579/2010

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – water – disturbance resulting from installation of water main across agricultural land – surveyor’s fee – all other surveyor’s fees in connection with the works based on Ryde’s scale (1996) plus 20 per cent – whether claimant’s surveyor entitled to a higher fee based on amount of time spent – surveyor’s fee determined on time basis at £3,219.50 – Water Industry Act 1991, s159.

IN THE MATTER OF A NOTICE OF REFERENCE

BETWEEN ROBERT POOLE Claimant

and

SOUTH WEST WATER LTD Compensating

Authority

Re: Land at Fentonfenna Farm

Ruthvoes

Near Indian Queens

St Columb

Cornwall

TR9 6HT

Before: N J Rose FRICS

DETERMINATION BASED ON WRITTEN REPRESENTATIONS

The following cases are referred to in this decision:

Matthews v Environment Agency [2002] 3 EGLR 168

Newman v Cambridgeshire County Council ACQ/485/2010, 14 February 2011, unreported

DECISION

Introduction

1.           This is a reference to determine the compensation payable for loss or damage attributable to the exercise by the compensating authority of its power to construct and install a new water main across the claimant’s property, known as Fentonfenna Farm, in the hamlet of Ruthvoes, near Indian Queens, Cornwall.  The works were carried out pursuant to section 159 of the Water Industry Act 1991.  The claimant is Mr Robert Poole and South West Water Limited (SWW) is the compensating authority.  The works commenced in or about May 2008 and were substantially completed at the end of October 2009.

2.           Compensation was agreed on 15 July 2010 in the sum of £12,940.25.  This figure included all heads of claim, apart from the fees payable to the claimant’s surveyor for negotiating the claim.  The amount of those fees forms the sole issue in this reference, which the parties have agreed is to be determined under the Tribunal’s written representations procedure.  Written submissions have been received from Mr Gareth Rowe BSc(Hons), MRICS, FAAV, an associate partner of Messrs Stags, chartered surveyors of Truro and elsewhere on behalf of the claimant and from Mr Oliver Denne, estates surveyor with the compensating authority.

Facts

3.           In the light of the evidence I find the following facts.  Fentonfenna Farm is an 82 acre mixed livestock farm in the freehold ownership of Cornwall County Council and let to the claimant under a farm business tenancy agreement.  During the construction of the A30 Indian Queens – Innis Downs dual carriageway, a large water main (Cornwall Spine Main) was damaged by excavation works which resulted in a major leak and severe disruption to the water supply in Mid/West Cornwall.  As a result of this major incident, SWW decided to lay an additional water main (Cornwall Spine Main Replacement) to enable them to maintain water distribution should such an incident recur.  The proposed route of the Cornwall Spine Main Replacement was through the middle of Fentonfenna Farm, crossing seven different enclosures over a total length of approximately 860m.

4.           On 26 October 2007 SWW served formal notice on the claimant that it proposed to construct and install a 650mm diameter new water main across the holding.  Mr Denne met the claimant at the farm on 6 November 2007 to discuss losses likely to be incurred as a result of the works.  Following this meeting an interim payment of £2,500 was made to the claimant, based on 90% of Mr Denne’s assessment of the likely losses. 

5.           On 11 February 2008 a further statutory notice was served on the claimant.  This again related to the proposed laying of a 650mm main, but this time on a slightly different route.  The claimant was advised that SWW would enter the holding to commence works on or after 14 May 2008.  The projected timescale was six months, affecting one growing season. 

6.           On 20 October 2008 Mr Denne wrote to the claimant’s landlord.  He said that the pipe had been successfully installed, apart from “a couple of particularly problematic areas (most notably the railway crossing at Fentonfenna)”.  Since that crossing is situated in the middle of the claimant’s holding, the pipe installation works could not be completed in this area.  Mr Denne also explained that the works were not as straightforward as had been hoped.  They had also been delayed by environmental legislation relating to the protection of dormice.  For this reason, together with the delay in crossing under the railway line, the planned reinstatement could not be undertaken in autumn 2008 as originally planned.

7.           On 20 November 2008 the claimant instructed Mr Rowe to act on his behalf in respect of all compensation matters relating to the Cornwall Spine Main Replacement scheme, apart from those matters that concerned only the landlord.  Mr Rowe provided Mr Denne with a copy of his firm’s Standard Terms and Conditions for Professional Work and informed him that his standard hourly charge rate was £120 per hour.  There then followed lengthy correspondence between Mr Rowe and Mr Denne concerning the basis on which the former’s fee would be calculated.  This continued until 14 May 2009 but without agreement. 

8.           Work on the scheme was more or less completed at the end of October 2009, some 12 months behind schedule.  Mr Rowe submitted a detailed statement of claim for compensation to SWW on 25 January 2010.  It totalled £24,274.65 including the advance payment already received.  After lengthy negotiations, which included the undertaking of further reinstatement works by SWW’s contractors, the total compensation figure of £12,940.25 (including the advance payment) was agreed on 15 July 2010.  At the same time Mr Rowe sent SWW an account of his firm’s charges for representing the claimant, based on his standard rate of £120 per hour.  This produced a fee of £3,156 which, together with out of pocket expenses, totalled £3,219.50 excluding VAT. 

9.           Messrs Stags received a cheque for £10,440.25 in respect of the balance of the agreed compensation on 23 August 2010.  On 6 September 2010, since his firm’s account was still outstanding, Mr Rowe wrote again to Mr Denne asking if it would be settled or whether there was a dispute.  On 16 September 2010 Mr Denne replied that he was only prepared to consider a fee in line with “the old Ryde’s scale (1996) plus 20%”, which he calculated produced a figure of £1,274.22.

Claimant’s case

10.        Mr Rowe contended that a reasonable surveyor’s fee should be calculated on a quantum meruit basis.  He said that his charge-out rate of £120 per hour was in accordance with his firm’s Standard Terms and was reasonable.  He also contended that the time of 26.3 hours he had spent monitoring works, inspecting the reinstatement, preparing a detailed statement of claim and negotiating a settlement was also reasonable, particularly bearing in mind the extent of the project overrun.

11.        Mr Rowe produced a copy of the results of a survey undertaken by the Central Association of Agricultural Valuers in 2009 (the 2010 survey results were not yet available).  It showed that the hourly charges made by “associates and qualified valuers” ranged from £80 to £126.  His charge-out rate, as an associate partner, fell within this range.

12.        Mr Rowe said that other utility companies and statutory undertakers reimbursed claimants’ professional charges on a quantum meruit basis.  They included the Environment Agency, Cornwall County Council, Western Power Distribution and Railtrack UK.  SWW themselves agreed to pay professional charges on a time basis on compensation claims in connection with mains rehabilitation schemes.  The time for which he had charged included an initial visit to meet the client and inspect the works on 16 January 2009, a further inspection on 13 November 2009 when the works were supposedly completed and an additional site meeting on 27 April 2010 with Mr Denne (at the latter’s request) to discuss specific issues of reinstatement for which compensation had been claimed.  As a result of this meeting SWW’s contractors carried out further reinstatement works, which in turn reduced the claim for compensation.  All three site meetings were essential for the proper preparation and negotiation of the claim.  Following preparation and submission of the statement of claim, SWW agreed to remove some of the temporary fencing themselves.  They also agreed to clear up slurry/sludge which had been dumped on an access track.  This reduced the claim by £1,250 to £23,024.65.

13.        Mr Rowe considered that his detailed statement of claim was entirely appropriate, particularly given the poor quality of the reinstatement effected by SWW.  He pointed out that the advance payment – based on Mr Denne’s estimate of compensation – was £2,500, the total claim prepared on behalf of the claimant was £23,024.65 and the final settlement figure was £12,940.25.  He said that this range of figures was in line with other claims he had settled with SWW.

14.        Mr Rowe said that, throughout the negotiations, he had merely sought to represent his client properly and ensure that the claimant was in the same position as if his land had not been disturbed, so far as the payment of monetary compensation could do this.  He suggested that, if SWW had taken more care in planning the scheme, the works would not have been held up by a dispute with Railtrack in connection with the crossing of the railway line, and by the need for further wildlife surveys.  The works were originally programmed for approximately six months.  In fact the claimant’s organic farm business was disturbed for nearly 18 months.

Compensating authority’s case

15.        Mr Denne said that 37 claims for compensation were submitted by various landowners and tenants in connection with the laying of the additional water main.  In the case of 36 claims surveyor’s fees were agreed on the basis of Ryde’s scale (1996) (Ryde) plus 20%.  He wrote to the claimant as soon as he was informed of the terms of engagement of Messrs Stags to advise that he did not accept that the hourly rate being charged was competitive.  The letter also made clear that there was no contract between Messrs Stags and the compensating authority.  A number of letters were exchanged between Messrs Stags and the compensating authority where the issue of fees was disputed.  Mr Denne did not accept that time spent by Mr Rowe in connection with his firm’s fee structure was recoverable from the compensating authority.

16.        Mr Denne made the following additional points.  The number of hours charged was excessive to resolve a claim settled at £12,940.  The total fees claimed were disproportionate to the amount of money involved and the relative importance of the case.  This type of claim was common and would be familiar to Messrs Stags.  If it had been advanced at the correct level from the beginning, considerably less time would have been spent preparing the claim and achieving settlement.  Surveyors of equivalent experience to that of Mr Rowe charged between £80 and £100 per hour.  This was not a complicated claim, however, and could have been dealt with by a more junior surveyor charging a lower hourly rate.  A reasonable rate would have been £80 per hour.  Mr Rowe’s second site meeting was unnecessary.  A discussion with the claimant on the telephone would have been adequate.  A total of 4 hours 42 minutes was charged for preparing the statement of claim, which was wholly exaggerated, as reflected in the eventual settlement figures.  Had the correct figures been advanced initially, the claim would have been settled at a much earlier stage.  The compensating authority should not be responsible for time spent producing an over-inflated statement of claim.  SWW had to produce a lengthy and detailed reply to the claim.  The time spent by Mr Rowe in responding to that reply would have been proportionately reduced had the original claim been advanced on a reasonable basis.  Indeed, it might not even have been necessary for any reply to have been served if the claimed figures had been reasonable, as the matter could have been agreed by telephone.  The third site visit would also not have been necessary if the original claim had been reasonable.  Any outstanding issues could have been dealt with by a telephone call to the claimant and a further call to Mr Denne.  Expenses totalling £63.50 were claimed.  They included travel, based on 97 miles at 50p per mile.  This presumably related to the three site visits undertaken by Mr Rowe.  One visit would have been sufficient and a reasonable mileage rate was 40p, not 50p per mile.  A reasonable payment for expenses was £12.93.

17.        In deciding the amount of costs which would be reasonable, Mr Denne said that regard should be had to the Civil Procedure Rules.  He referred to CPR 44.3 – Circumstances to be taken into account when exercising discretion on the award of costs, and in particular (i) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (ii) the manner in which a party pursued his case; (iii) whether the claimant who succeeded exaggerated his claim.  Mr Denne also relied on CPR 44.5 – Factors to be taken into account in deciding the amount of costs.  In particular (i) were the costs proportionately and reasonably incurred; (ii) were the costs proportionate and reasonable in amount.  Mr Denne said that all these factors were very relevant where a claim was advanced at £24,274.65 and settled at £12,940.25.

The Civil Procedure Rules and the RICS Guidance Note

18.        As I have said, Mr Denne drew support for his approach from the Civil Procedure Rules.  Mr Rowe also referred to those rules.  He quoted from a costs decision by the Registrar of the Lands Tribunal in J E Perkin v South West Water (LCA/91/2006), which stated that account had to be taken of the provisions of CPR 44.5.

19.        Having considered the parties’ submissions, I caused a letter to be written to both on 15 February 2011, which said

“I have been asked to write to the parties by Mr N J Rose FRICS, the Member to whom this reference has been allocated.  Mr Rose has noted that the parties have referred to the provisions of CPR 44.5.  As at present advised, he is of the view that those provisions apply to the assessment of the costs of proceedings in the Tribunal (Upper Tribunal (Lands Chamber) Practice Directions, 29 November 2010, paragraph 12.2).  So far as surveyor’s fees forming part of the disturbance claim are concerned, however, the appropriate test would appear to be that contained in the RICS Guidance Note, which was quoted in paragraph 12 of Newman v Cambridgeshire County Council (ACQ/485/2010, unreported).  If you wish to make any submissions on this point, would you please file them with the Tribunal, and serve a copy on your opposite number, not later than 4pm on 25 February 2011 …”

20.        The decision in Newman was dated 14 February 2011.  Para 12 contained the following quotation from the current RICS Guidance Note on the calculation of fees relating to the exercise of statutory powers in connection with land and property: 

“The fee should in all cases be proportionate to the size and complexity of the claim, and be commensurate with the time, effort and expertise required to deal with the case.”

21.        Mr Rowe replied that he had borne the Guidance Note in mind in calculating his firm’s fees.  The time spent had been precisely and comprehensively recorded, as recommended by the RICS.  The resulting fees corresponded directly with the extended timescale of the scheme, the poor quality of general reinstatement and the resulting level of snagging, together with the effect on the claimant’s business of the extended duration of the scheme.  In accordance with the Guidance Note he had made every effort to agree a reasonable fee basis from the outset of the instruction.  He had submitted a copy of his firm’s standard terms to the compensating authority at the earliest opportunity.  This action was taken in an endeavour to avoid a dispute at a later date, again as recommended by the RICS.

22.        In response to the Tribunal’s letter, the compensating authority expressed the view that, in determining the amount of surveyor’s fees payable, the Tribunal should have regard both to the Civil Procedure Rules and to the appropriate RICS Guidance Note.  The authority referred to para 12.2 of the Tribunal’s latest Practice Directions.

23.        I am satisfied that the provisions of CPR 44.5 are not relevant to the ascertainment of a reasonable surveyor’s fee, incurred in consequence of the exercise of statutory powers by an undertaking such as SWW.  The Tribunal’s Practice Directions apply to proceedings before it, which include the present reference.  Para 12.1, which immediately precedes the paragraph on which the compensating authority relied, reads as follows:

“(1) Under section 29 of the Tribunals, Courts and Enforcement Act 2007 the Upper Tribunal has power to order that the costs of any proceedings incurred by one party shall be paid by any other party or by their own or the other party’s legal or other representative …”

Para 12.2 states that, subject to certain qualifications, the Tribunal’s

“discretion will usually be exercised in accordance with the principles applied in the High Court and county courts.”

24.        That Practice Direction, as is clear from para 12.1(1), applies to the costs of any proceedings in the Tribunal.  It does not, and was not intended to apply to decisions of the Tribunal on substantive issues which fall to be determined in the proceedings themselves.  The fact, on which the compensating authority relied, that in awarding costs of any proceedings the Tribunal will have regard to all the circumstances, including the conduct of the parties before the proceedings are commenced, is nothing to the point.

25.        Mr Rowe referred to my decision in Matthews v The Environment Agency [2002] 3 EGLR 168.  In that case I decided that, on the facts, a fee based on Ryde plus 50%

“would result in the claimants receiving less compensation than the loss they have suffered.  It would therefore not represent full compensation.”  (para 75).

In para 76 I quoted from a paper setting out proposals for changes to compulsory purchase powers and processes, including compensation arrangements, published by the Minister for Housing, Planning and Regeneration in December 2001.  The relevant proposal was contained in para 4.15, which said:

“We consider it important that no claimant should be deterred from pursuing a fair compensation settlement by the risk of incurring professional fees for which he would not be fully recompensed … While being aware of a body of opinion within the surveying profession that Ryde’s scale of fees should still prevail, we can see no justification for retaining a different approach to calculating the fees due to surveyors from that applicable to all other professional advisers.”

26.        Ryde was prepared by the Valuation Office Agency in 1996 on behalf of the Department of the Environment (Matthews, para 74).  Shortly after Matthews was published in 2002 the Office of the Deputy Prime Minister issued a statement that the scale was to be abandoned and it has not been reviewed since.  Subsequently, the RICS issued guidance as to the approach to be adopted following the abandonment of Ryde.  That guidance requires surveyor’s fees to be calculated on the basis stated in para 20 above.  It does not suggest that the fee should be calculated, as it was under Ryde, by reference to a scale of percentages applied to the amount of compensation eventually agreed.  That is not surprising, because any relationship between the fee calculated on such a basis and the “size and complexity of the claim” or “the time, effort and expertise required to deal with the case” is purely coincidental.

Conclusions

27.        The compensating authority relies on the fact that it has paid a fee based on Ryde in many other cases.  It is not possible to judge whether such fees were reasonable without knowing in each instance, firstly, how much time was spent by the claimant’s surveyor on the case before reaching agreement with the compensating authority and, secondly, whether any payment was made by a claimant to his surveyor in addition to the fee paid by the compensating authority. 

28.        I accept Mr Rowe’s evidence that the original statement of claim was reasonable and that three meetings on site were required to do justice to the claimant’s case.  I find that representation by an associate partner, the hourly rate of £120 applied to the time taken, and expenses based on 50p per mile, were proportionate to the size and complexity of the claim and commensurate with the time, effort and expertise required to deal with the case.  In my judgment Mr Rowe was justified in seeking to agree a time-related fee with Mr Denne, rather than one calculated by reference to the officially abandoned Ryde, and to charge for the time he spent doing so.  In short, there are no sound reasons for contesting Mr Rowe’s proposed charges of £3,156.00 plus disbursements of £63.50.  I therefore determine the claimant’s surveyor’s fees payable by the compensating authority in the sum of £3,219.50.  Since VAT is recoverable by the claimant, it is agreed that it should not be the subject of compensation.

29.        Costs are only awarded in references conducted by written representations in exceptional circumstances.  I do not consider that such circumstances exist in this case and I make no order as to costs.

Dated 9 March 2011

N J Rose FRICS