UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2015] UKUT 239 (LC)

UTLC Case Number: ACQ/422/2008

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

 

COMPENSATION – costs – application for disclosure of privileged material in context of detailed assessment refused – payment on account ordered - application for wasted costs order refused

 

 

IN THE MATTER OF A NOTICE OF REFERENCE

 

BETWEEN:                                                       

THOMAS NEWALL LIMITED

Claimant

and

LANCASTER CITY COUNCIL

Acquiring Authority

 

Re: St George’s Works

St George’s Quay

Lancaster LA1 5QJ

                                                                    

 

 

Determination by Written Representations

 

                                                                                                                                                        

 

 

© CROWN COPYRIGHT 2015

 

 

 

 

 

The following cases are referred to in this decision:

 

Buttes Gas and Oil Co v Hammer (No.3) [1981] QB 223

Derby v Weldon (No.7) [1990] 1 WLR 1156

Pamplin v Express Newspapers [1985] 1 WLR 689

 

 

DECISION

1.             There are a number of applications before the Tribunal, namely:

(1)   Applications by the claimant (a) for disclosure of the files of the acquiring authority and its professional advisers in connection with a detailed assessment of costs which is proceeding before the Registrar, (b) for reconsideration of an order of the Registrar that the claimant make a payment on account of its liability for costs, and (c) for further relief including a wasted costs order against Eversheds LLP, the acquiring authority’s solicitors.

(2)   Applications by the acquiring authority that the claimant be debarred from participation in the detailed assessment for its failure to make the payment on account or file its points of dispute.

2.             The background to these applications is sketched in outline in a previous decision of mine given on 14 March 2014 ([2014] UKUT 111 (LC)) and in full in the Tribunal’s substantive decision of 4 September 2012 supplemented by its revised decision and addendum on costs of 16 October 2013 ([2011] UKUT 437 (LC)).  In short, the claimant claimed compensation for the compulsory acquisition of its premises at St George’s Quay, Lancaster but (after an appeal by the acquiring authority to the Court of Appeal) obtained an award which was less than the sum it had previously been offered.  As a result, the claimant was ordered by the Tribunal to pay the acquiring authority’s costs of the reference after the date of the offer, such costs being reduced in respect of the main valuation hearing to 80% of the total incurred to reflect the Tribunal’s dissatisfaction with the conduct of one of the acquiring authority’s expert witnesses whom it considered had not adequately discharged his duties to the Tribunal.

3.             By my decision of 14 March 2014 I considered and refused the claimant’s application to set aside the Tribunal’s substantive decision and refused permission for a further appeal to the Court of Appeal.  The grounds of the claimant’s application to set aside the decision were that new evidence was available to it which, had it been deployed at the main valuation hearing, would have further damaged the credibility of the acquiring authority’s expert, Mr Massie, which would have improved substantially the prospects of the Tribunal preferring the evidence of the claimant’s own expert.  The claimants subsequently asked the Tribunal to review its refusal of the application or alternatively to grant permission to appeal from the decision of 14 March 2014 but both applications were refused on 30 May 2014.  I understand that an application is pending before the Court of Appeal for permission to appeal that decision.

4.                  On 27 January 2015 the parties appeared before the Registrar who gave directions for the detailed assessment of the acquiring authority’s costs, including an agreed timetable for the service of points of dispute by the claimant in reference to the acquiring authority’s detailed bill of costs.  The Registrar also made an order that within 14 days the claimant should make an interim payment of £340,100 on account of its liability for the acquiring authority’s costs (a sum which is about 45% of the total bill submitted for assessment).  At the same hearing the claimant sought but was refused additional directions for disclosure by the acquiring authority of all documents relating to the costs which it sought to recover.  These were to include “copies of all correspondence, emails, timesheets, none redacted, together with any other documents not already disclosed, with no exception.”    

5.             On 5 February 2015 the claimant applied to the Tribunal under Rule 4(3) of the Tribunal’s Rules for the Registrar’s decision to be considered afresh by a Judge.  Thereafter the claimant failed to make the payment on account by the required date of 11 February and on 6 March 2015 the acquiring authority applied for an order debarring the claimant from further participation in the detailed assessment process.  The claimant subsequently failed to file points of dispute by 18 March 2015 so on 30 April 2015 the acquiring authority applied for an order allowing its costs in full in the sum of £763,057.88 plus the costs of assessment.  By an application dated 12 May 2015 the claimant has also applied under rule 10(3) of the Tribunal’s Rules for a wasted costs order against Eversheds on the grounds that they acted improperly in the conduct of the reference.  The sum sought is £718,971 which is said to be the full amount of the costs incurred by the claimant in the reference.  Finally the claimant’s application of 12 May seeks exemplary or punitive damages against both the acquiring authority and Eversheds.  I can deal with that aspect of the matter summarily as the Tribunal has no jurisdiction to make an order for damages and I refuse to do so. 

6.                  I will begin with the application for reconsideration of the Registrar’s order of 27 January. Where a member of the Tribunal’s staff (including the Registrar) makes a decision in proceedings before the Tribunal, any party to those proceedings is entitled to have that decision considered afresh by a Judge under rule 4(3) of the Tribunal Procedure (Upper Tribunal)(Lands Chamber) Rules 2010.   In so far as the Registrar’s order provided directions for the conduct of the detailed assessment it was agreed between the parties and no issue arises.  The claimant’s dissatisfaction is with the Registrar’s refusal to order disclosure of all of the acquiring authority’s documents relating to the reference, including privilege documents, and his order for a payment on account of costs.

7.             The claimant prepared a note for the hearing before the Registrar in which it explained its application for disclosure.  The note began with a detailed rehearsal of the background to the acquiring authority’s acquisition of the claimant’s land under the general vesting declaration procedure, including the fact that there had been a prior agreement between the parties under which the authority agreed to pay the claimant £2m for its land in a voluntary sale which was never completed.  In a preliminary valuation estimate prepared in 2004 (referred to in paragraph 19 of the Tribunal’s decision of 14 March 2014) Mr Massie suggested that the value of the development site including the claimant’s interest plus compensation for disturbance totalled £3.2m. The claimant’s account suggests that, following the determination of the voluntary agreement without a sale, Mr Massie advice to the acquiring authority was that compensation in the order of £2m would be a reasonable outcome of a reference to the Tribunal.  As before, the claimant contends that Mr Massie was untruthful in his evidence to the Tribunal in at least two respects: first in expressing the view that the appropriate level of compensation was £650,000 when his original advice to the authority had been the value of the land plus compensation for disturbance would total £3.2m; and secondly in seeking to minimise the significance of his own previous inconsistent assessments on the grounds that they had been based on net internal floor areas whereas he was aware that the property had been measured on a gross internal basis. 

8.             That background provides the context of the claimant’s request that the Tribunal investigate allegations of wrong doing which it now levels against the acquiring authority itself and against its solicitors, Eversheds.  In paragraph 47 of its note for the hearing on 27 January the claimant’s position is explained in the following terms:

          “The claimant contends it would be unjust to be expected to pay any costs that are related to wrong doing given the magnitude of the sums involved and the potential devastating effect on the claimant company.  The directors of the claimant company would not be fulfilling their duties if they did not fully assess the acquiring authority’s costs and that it is in the interests of justice to investigate allegations of wrong doing.”

It is in order to make good its allegations of wrongdoing that the claimant seeks extensive disclosure of all of the documents which have come into existence in connection with the reference. 

9.             In response to the acquiring authority’s assertion that the documents which the claimant seeks are protected by legal professional privilege the claimant refers to advice from the Law Society that legal professional privilege does not extend to documents “which themselves form part of a criminal or fraudulent act or communications which take place in order to obtain advice with the intention of carrying out an offence.”

10.         The claimant has declined to waive privilege in its documents and points out that the Tribunal has no power to override privilege and cannot require their disclosure.  That submission is supported by the decision of Hobhouse J in Pamplin v Express Newspapers [1985] 1 WLR 689, 696.  The relevant privilege is that of the acquiring authority and it is entitled to assert it.  After the issues in a detailed assessment have crystallised through the service of points of dispute and points of reply, and if it is disputed that a particular item in the bill of costs was properly incurred it may be appropriate for a Court or Tribunal to put the receiving party to its election whether to waive privilege in the documents it relies on to establish the relevant item or to seek to prove it by other means.  If the receiving party refuses to waive privilege it cannot be required to do so, but as Hobhouse J made clear, the stage at which the receiving party may be put to its election does not arrive until after the documents lodged with the tribunal in support of the assessment have been considered by it. 

11.         I accept that the acquiring authority is entitled to rely on legal professional privilege and to refuse to disclose the documents requested by the claimant.  No issues have yet crystallised between the parties in the detailed assessment because the claimant has not yet filed its points of reply to the acquiring authority’s bill of costs.  Only once that has been done will it be necessary for the acquiring authority to lodge documents with the Tribunal to enable it to resolve such disputes as are then shown to exist.  It is normal practice for the assessment to be completed without the need for disclosure of privileged material, with both parties ordinarily being content to allow the costs judge to look at any such material without it being shown to the paying party.  Whether any other course is appropriate in this case is not a question which arises for consideration at this stage.   

12.         The claimant is nevertheless correct that, in certain circumstances, a claim for legal professional privilege will not be sufficient to prevent the making of an order for disclosure.  As Lord Denning MR explained in Buttes Gas and Oil Co v Hammer (No.3) [1981] QB 223 at 246: “No privilege can be invoked so as to cover up fraud or inequity.”  He added: 

          “But this principle must not be carried too far.  No person faced with an allegation of fraud could safely ask for legal advice.  To do away with the privilege – at the discovery stage – there must be strong evidence of fraud – such that the Court can say: “this is such an obvious fraud that he should not be allowed to shelter behind the cloak of privilege.”

13.         In Derby v Weldon (No.7) [1990] 1 WLR 1156 at 1172H-1173F Vinelott J emphasised that each case in which an allegation of fraud was relied on as justifying an order for disclosure of privileged documents must turn on its own facts.  In all circumstances, however, such an order would be exceptional:

          “An order to disclose documents for which legal professional privilege is claimed lies at the extreme end of the spectrum.  Such an order will only be made in very exceptional circumstances but it is, I think, too restrictive to say that the plaintiff’s case must always be founded on an admission or supported by affidavit evidence or that the Court must carry out the preliminary exercise of deciding on the material before it whether the plaintiff’s case will probably succeed, a task which may well present insurmountable difficulties in a case where fraud is alleged and the Court has no more than affidavit evidence.”

14.         Lord Denning MR and Vinelott J were concerned with applications for the disclosure of privileged material in the course of substantive proceedings, and not in connection with the assessment of costs after proceedings had been determined.  The context in which the claimant’s application is made is very different; the claimant’s entitlement to compensation has been determined by the Tribunal and a detailed assessment of the costs payable by the claimant to the acquiring authority has been ordered.  Any order for disclosure in those circumstances would be quite exceptional.  It could never properly be the purpose of such disclosure to provide material on which the claimant may rely to undermine the Tribunal’s assessment of compensation. 

15.         With those principles in mind I turn to consider the material on which the claimant now relies in support of its suggestion that the disclosure of privileged material is justified in this case. 

16.         The claimant first suggests in general terms that the timesheets provided with the acquiring authority’s bill of costs provide evidence to question their accuracy and suggest double counting in part of the bill.  Elsewhere it is suggested that the timesheets show that invoices were redacted and that this is evidence of collusion by Eversheds with wrong doing on the part of the acquiring authority.  Allegations of that general nature provide no basis for an exceptional order for disclosure of privileged material.  If a reasoned objection is provided to items in the claimant’s bill which the Registrar considers have not sufficiently been explained, the question may then arise whether the acquiring authority wishes to maintain its claim for privilege in those specific documents.   

17.         The claimant next asserts that the acquiring authority’s bill of costs provides evidence of collusion between its solicitors and valuers and certain public authorities (English Partnerships and the North West Development Agency) to procure evidence concerning the likelihood of public funding being available for a development of the reference land and the remainder of the development site on a phased or piecemeal basis.  In paragraph 69 of its application the claimant alleges that letters provided by the HCA and NWDA “were falsified and there was collusion and fabrication in their preparation, serious wrong doing.”  The evidence for this alleged wrong doing is a trail through the acquiring authority’s bill of costs showing that drafts of the letters from the HCA and NWDA were first prepared by the acquiring authority’s solicitor.  Nothing in the application goes any way towards supporting a suggestion that the contents of the letters relied on by the acquiring authority did not accurately reflect the views of the HCA or the NWDA.  I am satisfied that these allegations provide no basis for an order for disclosure.

18.         Next, the claimant returns to the issue of Mr Massie’s evidence and its inconsistency with previous advice he had provided to the acquiring authority.  The claimant says that the timesheets show that “it is inconceivable to consider that Eversheds were unaware of the values Mr Massie attributed to the claimant’s interest”.  Other timesheets are said to demonstrate that Mr Massie must have been aware of planning applications and assessments of the viability of the proposed development which are said to be inconsistent with evidence he gave on 5 June 2009.  All of this material is said to go to the strength of the claimant’s case at the hearing in June 2009 at which the Tribunal determined that planning permission would not have been granted for the claimant’s own proposals to develop the site.

19.         It is clear to me that the claimant does not properly appreciate the legitimate purpose of any request for disclosure in the context of a detailed assessment.  It seeks material in support of its continuing contention that the Tribunal reached the wrong conclusion on the reference as a whole and that it did so on the basis of evidence which was known by the acquiring authority and its advisers to be false.  The Tribunal has already dismissed two applications by the claimant seeking to set aside the determinations reached in the reference on the strength of similar allegations.  The sole purpose of disclosure at this stage is to enable the Tribunal to carry out a detailed assessment of the costs payable by the claimant to the acquiring authority.  The allegations made in relation to evidence presented at the hearing in June 2009 do not go to that issue but seek to challenge the basis of the Tribunal’s decision.  I am satisfied that none of the allegations in paragraphs 63-86 of the claimant’s note for the hearing on 27 January supports a wide ranging order for disclosure.

20.         The claimant returns in paragraphs 87-94 of its note to the inconsistency between Mr Massie’s evidence that the value of the claimant’s land was £650,000 and his previous expressions of opinion.  Further documents obtained (I assume) on the basis of a freedom of information request are said to show that Mr Massie had advised the acquiring authority that the figure of £2m represented the market value of the claimant’s land.  On that basis the claimant repeats its allegation that Mr Massie falsely represented his own view of the value of the property and that the evidence of the claimant’s expert ought to have been preferred.  In my judgment none of this material adds significantly to the material previously considered by the Tribunal.  When it determined the quantum of compensation to which the claimant was entitled the Tribunal took as its starting point Mr Massie’s view in 2005 that the land was worth £2m and that he was likely to have been correct (see paragraph 127 of the Tribunal’s decision of 15 December 2011).  The further material bolsters the conclusion that that was indeed Mr Massie’s true view but provides no additional evidence of wrong doing or any basis on which the Tribunal could order disclosure of privileged documents.

21.         Finally, in paragraphs 95-101 of its note the claimant returns to the issue of the disputed basis of measurement of the building at the time of Mr Massie’s 2004 preliminary valuation estimate.  Mr Massie’s timesheets have been scrutinised to identify how much time he spent in the building and how much time he and his colleagues had to undertake proper measurements.  This and other material is said to confirm that Mr Massie misled the Tribunal which was therefore wrong to accept his evidence that his measurements were on the basis of net areas.

22.         For the reasons already given this material does not seem to me to make out any case for a general order for disclosure.  Similar material was available to the claimant before the substantive hearing at which compensation was determined and the claimant had the opportunity to cross examine Mr Massie on his evidence.  That cross examination having taken place the Tribunal reached conclusions which it is not now legitimate for the claimant to seek to undermine in the course of the detailed assessment of costs.  The wide-ranging assault on the conduct of the acquiring authority and its advisers which the claimant now seeks the opportunity to make is wholly outside the scope of the assessment exercise. 

23.         I am therefore satisfied that the application for disclosure of all documents relating to the costs incurred by the acquiring authority was properly refused by the Registrar, and I also refuse it.

24.         I am also satisfied that the Registrar was right to make an order for a payment on account of the claimant’s liability for costs.  There is no doubt that the claimant’s eventual liability will exceed the figure of £340,100 directed to be paid on account.  There is no reason in principle why payment of the acquiring authority’s costs should be delayed longer than is necessary to enable them to be properly quantified and if the Tribunal can be confident that the claimant’s liability will not be less than a particular figure it should be paid without delay. There is also every reason why, if the claimant does not have the resources to enable it to make the payment on account, that should be made clear before further significant costs are incurred in the detailed assessment.

25.         Although the claimant has failed to make the payment on account required by the Registrar’s order of 27 January 2015 and has failed to serve points of dispute I do not propose to accede to the acquiring authority’s request that I debar the claimant from further participation in the detailed assessment.  The claimant made its application under rule 4(3) promptly on 5 February 2015.  On 6 May 2015 it wrote to the Tribunal suggesting that the application for wasted costs which it made on 12 March comprised its points of dispute served in accordance with the Registrar’s order. The claimant is now acting without legal representation and made no application for a stay of the Registrar’s order.  Had it done so it is likely that I would have suspended the need for compliance until the Tribunal was able to consider the application for the decision to be taken afresh by a Judge.  Rather than debarring the claimant I will direct that it must now make the payment on account in the sum of £340,100 by not later than 1 June 2015.  If the claimant fails to make the payment or fails thereafter to file and serve points of dispute responding to the acquiring authority’s bill of costs by 5pm on 15 June 2015 the claimant will be debarred from any further participation in the assessment and the acquiring authority’s costs will be summarily assessed in the full sum claimed of £763,057.88 plus the costs of the assessment process.

26.         The final matter which it is necessary to consider is the claimant’s application for an order for wasted costs against the acquiring authority’s solicitors, Eversheds.  The Tribunal’s jurisdiction to make such an order is under section 29(4) of the Tribunals, Courts and Enforcements Act 2007 and rule 10(3) of the Tribunal’s rules which permit it to order the legal or other representative of a party to meet the whole of any wasted costs.  “Wasted costs” for this purpose are defined in section 29(5) and include any costs incurred by a party:

“As a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of any such representative.”

27.         The claimant’s application runs to 31 pages and asks that the whole of the costs which it incurred in the reference, totalling £718,971 should be ordered to be paid to it by Eversheds.  The basis of that contention is, essentially, that Eversheds were aware of information concerning the viability of the acquiring authority’s scheme, the true views of Mr Massie, the availability of public funding to support alternative development schemes and a catalogue of other matters, and that it colluded with the acquiring authority in concealing that information from the Tribunal in order to defeat the claimant’s entitlement to proper compensation.  A great deal of the material relied on has already been deployed in support of the claimant’s applications for the Tribunal’s decision to be set aside and for disclosure in the detailed assessment.  Additional material is also relied on but the overall effect of the document is to revisit many of the issues investigated by the Tribunal in the two substantive hearings in this reference with a view to demonstrating that the Tribunal was deceived in the evidence given on behalf of the acquiring authority. 

28.         I do not propose to consider the material relied on in any detail.  The application is a further attempt to mount a collateral attack on the Tribunal’s conclusions in the reference.  It provides no basis for a conclusion that Eversheds have or may have acted improperly, unreasonably or negligently let alone that the whole of the costs incurred by the claimant in this reference were occurred as a result of such conduct.  The Tribunal has already considered the conduct of the claimant’s expert witness in being less than frank about his previous valuations of the claimant’s property.  The Tribunal marked its disapproval of that conduct by reducing the costs awarded to the acquiring authority by 20% (see paragraphs 231 and 235 of the Tribunal’s decision in costs of 16 October 2013).  The suggestion that a sanction against the claimant’s solicitors is also appropriate is untenable and I dismiss the application.

 

 

                                                                                    Martin Rodger QC,

                                                                                    Deputy President

 

                                                                                    14 May 2015