Compulsory acquisition of two churches – Council agreeing compensation figure based on cost of rebuilding one of them – Council meeting building cost by staged payments – Whether interest payable on agreed compensation figure – Whether interest period ended on date of practical reinstatement – Whether interest claim partly statute barred
In 1972 a slum clearance order made by the respondent council included two churches ( the B site and the C site) owned by the Manchester and Salford Methodist Mission (the mission). Pursuant to notices of entry served on June 9 1972 entry was effected on April 4 1974. After much discussion, the council agreed to meet the cost of constructing a single replacement church on the C site upon which work was commenced on December 8 1980 by builders engaged by the mission. Although the works were completed in February 1983, the mission began to use the new church in 1982. Between April 1980 and November 1986 the council made 23 stage payments totalling £718,420, which was formally agreed on November 25 1985 (the agreement date) to be the full compensation payable save for the question of interest, as regards which the mission issued a writ on May 21 1990. It was common ground that the gross amount of compensation fell to be determined on the basis, laid down by section 5(5) of the Land Compensation Act 1961, of equivalent reinstatement (r 5 basis) as distinct from the open market basis laid down by subsection (2) (r 2 basis). In December 1993 the judge ordered the council to pay £783,950, representing arrears of interest owing up to the date of the writ. The council appealed, contending inter alia that the award, by failing to distinguish a r 5 case from a r 2 case, had resulted in a windfall for the mission, thus violating the principle of “equivalence” as enunciated in Birmingham CorporationvWest Midland Baptist (Trust) Association (Inc) [1970] AC 874, HL.
Held The appeal was dismissed.
1. By Section 11(1) of the Compulsory Purchase Act 1965, ” any compensation agreed or awarded for the land . . . shall carry interest . . . from the time of entry until compensation is paid”. In the face of such clear words the council could not claim that no interest was payable nor could they contend that, if it was payable, it should be calculated only after discounting the figure agreed in 1985 so as to arrive at its (much lower) equivalent as at the 1974 date of entry. From that date until reinstatement, during which period the council were free to use the land for their own purposes, the mission had neither the land nor its value and consequently had not enjoyed a windfall as a result of the award.
2. Given that interest is carried “until compensation is paid” the council could not contend that they ceased to be liable when the mission achieved practical reinstatement in October 1982.
3. Since the statutory right to interest cannot arise before the amount of compensation is awarded or agreed, no cause of action accrued in favour of the mission until the 1985 agreement date. Consequently the council could not contend that by virtue of section 9(1) of the Limitation Act 1980 the mission’s claim was statute barred save as regards interest claimed after May 21 1984, six years before issue of the writ.
Charles George QC and Peter Keenan (instructed by the solicitor to Manchester City Council) appeared for the appellants; Andrew Gilbart QC and Mark Harper (instructed by Pannone & Partners, of Manchester) appeared for the respondents.
