Compensation – Arbitration – Costs – Upper tribunal (UT) – Claimant entitled to compensation for injurious affection of land – Parties unable to agree compensation – Reference made by consent to UT under section 1(5) of Lands Tribunal Act 1949 – Tribunal awarding costs of case management hearing – Issue arising as to jurisdiction of UT – Whether UT having power to award costs where acting as arbitrator in reference by consent – Issue determined accordingly
Under the terms of a deed of grant entered into in 2001, the claimant’s predecessor in title granted easements over land in her ownership to enable the respondent’s predecessor to construct and maintain a section of pipeline over a strip of land 13m wide. It also prevented the grantor or her successors from erecting any building within that strip. The respondent was the current owner of the pipeline and was entitled to the benefit of the deed of grant.
The prohibition on building within the easement strip was coupled with a right to compensation if the owner of the land was prevented in future from carrying out development for which planning permission had been granted. The respondent was required to pay compensation under the terms of the deed arising out of the claimant’s inability to implement certain planning permissions.
The parties were unable to agree on compensation and the determination of the sum payable was referred to the Upper Tribunal. It was agreed that it was a reference by consent under section 1(5) of the Lands Tribunal Act 1949.
Following a case management hearing, the tribunal made an order requiring the respondent to pay the claimant’s costs of that hearing. The respondent did not accept that the tribunal had jurisdiction to award costs against it. An issue arose whether the UT had power to award costs where it acted as arbitrator in a reference by consent under section 1(5) of the 1949 Act. The matter was determined on written representations.
Held: The issue was determined accordingly.
(1) The general position was that under the Arbitration Act 1996 an arbitrator might award costs, subject to any agreement of the parties, while under the Tribunals, Courts and Enforcement Act 2007, the UT might award costs (including when it acted as arbitrator), subject to the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010.
Rule 10 of the 2010 Rules stated that the UT might make an order for costs on an application or on its own initiative. In its original form, that power was of general application to most proceedings in the UT. But with effect from 1 July 2013, the general power was qualified by rule 10(2) which limited the circumstances in which an order for costs might be made.
Rule 10(6) identified a closed list of proceedings in which the UT might make orders for costs including proceedings for compensation for compulsory purchase (rule 10(6)(a)); and for “injurious affection” of land (rule 10(6)(b)). The claimant’s claim to recover loss sustained by its inability to develop its land was pleaded as a claim for injurious affection. The term “injurious affection” was not defined in statute but referred to any factor which depreciated the value of a claimant’s retained land.
(2) The claimant acknowledged that the right to lay the pipeline and the protections and restrictions which surrounded it, were granted consensually and not compulsorily. However, the parties had agreed that the claimant should be entitled to compensation on the basis that the rights were obtained by the use of compulsory powers. The question was whether in those circumstances, the present refence by consent fell within the scope of rule 10(6)(b).
The existence of statutory powers was a feature of all cases in which the UT was required to obtain compensation. The term “injurious affection” was to be given a wide meaning which did not depend on its use in a particular statute. It was wide enough to apply to damage which was the result of the exercise of contractual rights. Rule10(6)(a) and (b) were not intended to exclude a power to award costs in all cases where compensation was payable under an agreement rather than as the result of the exercise of statutory powers. The classification of jurisdictions which eventually found their way into rule 10(6) were intended to be broad and there was no indication (so as far as (a) and (b) were concerned) that they were restricted to particular statutes or procedures: BPP (Farringdon Road) Ltd v Crossrail Ltd [2015] UKUT 356 (LC); [2015] PLSCS 195 considered.
(3) When it acted as arbitrator in a reference by consent, the UT’s jurisdiction was conferred by section 1(5) of the 1949 Act, whether or not a compulsory purchase order had been made. The claim in the present reference was pleaded under section 7 of the 1965 Act, as a claim for injurious affection of land other than the land over which the respondent acquired rights. Such a claim fell within the language of rule 10(6)(b) as one of the types of case in which the UT had the power to make orders for costs. It could be said that the same claim also fell within rule 10(6)(a) as it arose only where land had been compulsorily acquired. There was no principled reason for treating references by consent in which compensation was claimed only for compulsory purchase differently from those in which compensation was claimed only for injurious affection, and many references, including references by consent, would include both types of claim. Therefore, the UT had power to make orders for costs in this reference: Leech Homes v Northumberland County Council [2021] EWCA Civ 198; [2021] PLSCS 36 distinguished.
(4) Whether the costs powers in section 61 were available depended on the combined effect of rule 3(2) and rule 30 of the 2010 Rules. Rule 3(2) provided that Part 1 of the 1996 Act did not apply to proceedings before the UT. Rule 30 then provided exceptions to that rule if the reference was by consent under section 1(5) of the 1949 Act and the parties had not agreed otherwise. Rule 3(2) was to be read as meaning that the 1996 Act did not apply to proceedings in the UT except where it was applied by rule 30. That treated rule 30 as a whole as identifying the extent to which the 1996 Act applied: Goldstein v Conley [2001] EWCA Civ 637 considered.
Accordingly, when the UT acted as arbitrator to determine this reference by consent under section 1(5) of the 1949 Act, it had no power to award costs under section 61 of the 1996 Act, but it did have power to do so under rule 10(6)(b) of the 2010 Rules.
Eileen O’Grady, barrister