Compulsory purchase – Compensation – Applicant selling freehold interest to acquiring authority prior to making of compulsory purchase order – Applicant later claiming sum paid for freehold inadequate – Whether entitled to claim compensation for freehold interest – Whether outstanding claim for disturbance compensation enabling Lands Tribunal to determine totality of compensation payable including market value of freehold – Whether applicant entitled to claim as underlessee – Whether disturbance claim premature – Application allowed in part
In March 2001, the acquiring authority approached the applicant to discuss acquiring from it the freehold interest in a three-storey property that contained commercial units with residential accommodation above. In March 2003, the applicant sold the freehold to the authority for £445,000. In April, the authority took possession of the property with the exception of the ground floor and basement, which the applicant continued to occupy. In October, the authority made a compulsory purchase order to acquire all interests in the property. Subsequently, pursuant to an agreement of September 2005, the acquiring authority made an advance payment of £100,000 to the applicant towards its disturbance costs. A general vesting declaration was made in December 2005.
By two notices of reference issued in June 2006, the applicant claimed compensation for the compulsory purchase of the freehold interest in the property and a leasehold interest under an underlease, in the sums of £2.8m and £700,000 respectively; there were also claims for disturbance under section 37 of the Land Compensation Act 1973. The underlease in question was for an unexpired term of 42 years. The applicant maintained that it had taken an assignment of it from an associated company, which had since been dissolved, by an exchange of letters in 1996, although the transfer had not been registered and the registered title continued to show the associated company as the underlessee. As to the freehold, the applicant contended that the sum paid for the freehold had been inadequate and that, since disturbance compensation remained to be determined, the tribunal had jurisdiction to determine the totality of the compensation payable including the market value of the freehold.
The acquiring authority disputed the applicant’s entitlement to compensation and sought to have the references struck out, on the grounds that: (i) the freehold interest had not been compulsorily acquired but had been purchased by agreement; (ii) the applicant was not the underlessee; and (iii) any claim for disturbance was premature since the authority had not yet taken possession of the property at the date of the reference. The authority finally took possession of the entire property in 2008.
Held: The application was allowed in part.
The tribunal had no jurisdiction to determine compensation in respect of the freehold interest pursuant to the Land Compensation Act 1961 or the Compulsory Purchase Act 1965 since that interest had not been acquired compulsorily. Although it was implicit in the terms of the agreement for the sale of the freehold that the applicant should be treated as being entitled to compensation for disturbance, and that it could refer any dispute as to the amount to the Lands Tribunal, that did not mean that it could also pursue a claim for the value of the freehold interest. The amount payable under the March 2003 transfer was unqualified and the value of the interest did not depend on the amount that might be agreed by way of disturbance compensation. The market value could not be increased by what was agreed or determined as disturbance compensation.
On the evidence, no transfer of the interest in the underlease had taken place either in 1996 or at any other time. The letters purporting to show such a transfer had been created subsequently in order to deceive the acquiring authority.
The applicant had occupied part of the premises of which possession was taken in April 2003, such that there had been dispossession at the date when the reference was made. Even if the later date of 2008 were the material one, it would not now be appropriate to dismiss the reference in respect of disturbance compensation on the ground that it had been made prematurely, since that would merely put the parties to the expense and inconvenience of a fresh reference of the same claim. Further, other parts of the property had been in occupation of companies that were associated with the applicant in such a way as to enable the applicant’s claim for disturbance to include disturbance also to those companies.
Matthew Horton QC (instructed by Charles Russell, of Guildford) appeared for the applicant; James Pereira (instructed by Hammonds LLP, of Leeds) appeared for the acquiring authority.
Sally Dobson, barrister
