Compulsory purchase — Agreement — Offer to acquire — Acquiring authority offering £0.5m “subject to contract” — Offer accepted — Claimants purchasing new property in reliance upon representations by acquiring authority that offer remaining extant — Acquiring authority denying that it was bound by offer — Whether binding contract — Whether suspensive condition — Whether “subject to contract” meaningless in compulsory purchase situation — Whether acquiring authority estopped from advancing value of property other than as £0.5m — Whether any deduction for post-valuation-date damage
The respondent claimants were the owners of a dwelling-house and some 35 acres of adjoining land that lay across the route of the Channel Tunnel Rail Link. Between December 1998 and March 1999, the appellant acquiring authority, exercising powers of compulsory purchase under the Channel Tunnel Rail Link Act 1996, served notices to treat and notices of entry on the claimants. On 12 March 1999, B, acting for the acquiring authority, sent a letter to the claimants, headed “subject to contract and without prejudice save as to costs”, offering to purchase the claimants’ property for £500,000, together with the usual heads of claim and subject to certain conditions. On 17 March, the claimants served a counternotice requiring the acquisition of their entire property. The acquiring authority accepted the counternotice as valid under para 11 of Schedule 4 to the 1996 Act, under which the original notice to treat was deemed to have been a notice to treat in addition for the remainder of the land subject to the counternotice. On 17 May, the acquiring authority took possession of part of the property. On 10 June, the claimants’ solicitor accepted the offer of 12 March.
On 15 October, the first claimant wrote to B, contending that the acquiring authority’s valuer was attempting to renege on the price of £500,000, and, on 26 October, B replied, confirming that the valuer had had no instructions to renege. The claimants contended that, at a meeting on 2 November, the acquiring authority’s representatives stated that the price would be £500,000 less a discount to reflect a title defect. The claimants, on 4 November, entered into a contract to acquire a property for £650,000. They vacated the property in dispute in January 2000. After that date, it suffered damage, which, it was agreed, would have reduced the value of the property by £8,500. The claimants referred their claim for compensation for the value of the property and disturbance claims to the Lands Tribunal. They contended that they were entitled to £500,000 for the property on the basis of a binding contract, or that the acquiring authority was bound by the £500,000 offer, less a discount for the defective title, by an equitable estoppel arising from representations made on behalf of the authority. The authority denied that it was so bound.
The tribunal did not find a binding contract, but it did find an estoppel, in that the claimants had relied upon representations made in the letter of 26 October and at the meeting of 2 November in committing themselves to the acquisition of their new property. It also held that the property should be valued in its condition as at the date of entry, and that no deduction should be made for any damage occurring after that date. The acquiring authority appealed both on the estoppel and the post-valuation-date damage issues. The claimants cross-appealed in respect of the decision that no binding contract existed on the ground that “subject to contract” was either suspensive or meaningless in a compulsory purchase situation.
Held: The appeal was allowed on the estoppel point and dismissed with regard to the post-valuation-date damage; the cross-appeal was dismissed. No binding contract existed and no waiver of the suspensive “subject to contract” condition had occurred. The expression “subject to contract” was not meaningless, even though a compulsory purchase situation did not envisage any further formal contract. The acquiring authority was not estopped from adducing evidence that the value of the property was other than £500,000; the offer to settle was still “subject to contract” at the date upon which the tribunal had found that representations had been made on behalf of the acquiring authority: Attorney-General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] 1 AC 114 applied. Because of the continuing “subject to contract” status of the communications between the parties, it was not open to the tribunal to conclude that the representations relied upon were capable of creating an estoppel binding the acquiring authority to pay £500,000 for the property. Because the acquiring authority had agreed that there was a single date for valuation, even though it had not entered the whole of the property until a later date, the property had to be valued in its condition on that date; the post-valuation-date damage should therefore be disregarded. Each side was ordered to pay its own costs.
The following cases are referred to in this report.
Attorney-General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] 1 AC 114; [1987] 2 WLR 343; [1987] 2 All ER 387; (1987) 54 P&CR 96, PC
Birmingham Corporation v West Midland Baptist (Trust) Association Inc; West Midland Baptist (Trust) Association Inc v Birmingham Corporation [1970] AC 874; [1969] 3 WLR 389; [1969] 3 All ER 172; (1969) 67 LGR 571; 20 P&CR 1052, HL
Chilton v Telford Development Corporation [1987] 1 WLR 872; [1987] 3 All ER 992; [1987] 1 EGLR 12; (1987) 281 EG 1443, CA
Michael Richards Properties Ltd v Corporation of Wardens of St Saviour’s Parish, Southwark [1975] 3 All ER 416; [1976] 1 EGLR 163; (1975) 237 EG 803
Munton v Greater London Council sub nom Munton v Newham London Borough Council [1976] 1 WLR 649; [1976] 2 All ER 815; (1976) 32 P&CR 269; 74 LGR 416;[1976] 2 EGLR 5; 239 EG 43, CA
Salvation Army Trustee Co Ltd v West Yorkshire Metropolitan County Council (1980) 41 P&CR 179
Tiverton Estates Ltd v Wearwell Ltd [1975] Ch 146; [1974] 2 WLR 176; [1974] 1 All ER 209; (1973) 228 EG 2123, CA |page:6|
This was an appeal by the acquiring authority, the Secretary of State for Transport, and a cross-appeal by the claimants, George William Christos and Maureen Ellen Christos, from a decision of the Lands Tribunal determining the claimants’ compensation following a compulsory acquisition by the acquiring authority.
Jonathan Gaunt QC and Barry Denyer-Green (instructed by Houghtons Solicitors Ltd, of Eastcote) appeared for the claimants; Guy Roots QC and Michael Humphries QC (instructed by Cripps Harries Hall, of Tunbridge Wells) represented the defendant.
Giving the first judgment, Mummery LJ said:
[1] This appeal concerns the assessment of compensation on the compulsory acquisition of residential property and surrounding land in Kent for the purposes of the construction of the Channel Tunnel Rail Link between St Pancras in London and Castle Hill in Folkestone. The appellant Secretary of State for Transport, formerly the Secretary of State for the Environment, Transport and the Regions (the acquiring authority), exercised powers of compulsory purchase under the Channel Tunnel Rail Link Act 1996 (the 1996 Act) to acquire property belonging to the respondents, Mr George Christos and Mrs Maureen Christos.
[2] On 1 May 2001, Mr and Mrs Christos gave notice of reference to the Lands Tribunal (the tribunal) to determine the amount of compensation. By an order dated 8 November 2002, the tribunal determined the amount of compensation payable in respect of the compulsory acquisition of the freehold interests of Mr and Mrs Christos in their property at the sum of £618,945. The determination was made by Mr Norman J Rose FRICS following a 10-day hearing in April and May 2002.
[3] On 6 January 2003, Schiemann LJ granted the acquiring authority permission to appeal. By an order dated 24 March 2003, Laws LJ granted the respondents permission to cross-appeal.
Facts
[4] Mr and Mrs Christos were the owners of a freehold dwelling-house with 35 acres of land at Torver Beck, Sittingbourne Road, Detling, near Maidstone (the property). The house consisted of two bungalows knocked together into a large single dwelling. There was a heated outdoor swimming pool and a stable block. In addition to 35 acres of surrounding land, Mr and Mrs Christos also claimed title by adverse possession to an area of 3.6 acres of woodland (the blue land). Their claim to register possessory title to the blue land had been rejected by the Land Registry in letters dated 15 October and 25 October 1999. It is common ground that the property was difficult to value.
[5] Between 18 December 1998 and 2 March 1999, the acquiring authority issued notices to treat and served notices of entry in respect of part of the property.
[6] On 10 March 1999, the acquiring authority, represented by Mr Stephen Bowman FRICS of Union Railways Property, attended a “without prejudice” meeting with Mr and Mrs Christos and their solicitor, Mr Tony Houghton, in order to discuss the range of prices appropriate on the compulsory purchase of the property. On 12 March, Mr Bowman wrote two letters to Mr Houghton. The first letter was headed “subject to contract and without prejudice save as to costs”. Mr Bowman referred to the discussions on 10 March:
I confirm that in order to settle this matter I am prepared to offer to purchase the whole of your clients’ property in the sum of £500,000 (five hundred thousand) together with the usual heads of claim for disturbance and fees.
This offer is made subject to the following conditions:
(1) It is open for acceptance for a period of 3 months from the date of this letter.
(2) If it is necessary to take action to achieve forcible possession of the property then the offer is deemed to have been withdrawn.
(3) Your client is able to show good and marketable title to the property as shown on the attached plan…
[7] The second letter on the same date was also headed “subject to contract”. The letter referred to the meeting of 10 March at Mr Bowman’s offices, and stated that he agreed that “looking at the whole property, it is unique and difficult to value”. The letter concluded:
I must advise that we will be taking possession of the property on or after 18 March. I hope that we can do this by agreement and work together with your client to limit the impact of our works upon him and his family.
I confirm the view expressed at our meeting that in the event of forcible possession action being needed and if the site is occupied by protestors who are on the site at the instigation or invitation of your client then we will seek to recover the costs from your client. I confirm that it is our wish to work with your client and to reach agreement by negotiation on the various issues that were raised but we are governed by the rules of compulsory purchase and cannot submit to blackmail or threats such as were made at our meeting.
This is an open letter and I reserve the right to refer to it in any future litigation.
[8] On 17 March, Mr Houghton, on behalf of Mr and Mrs Christos, served on the acquiring authority a counternotice to take the whole property. Although the counternotice referred to section 8(1) and (2) of the Compulsory Purchase Act 1965, the right to serve such a counternotice was in fact conferred by para 11 of Schedule 4 to the 1996 Act, which applies instead of section 8 of the 1965 Act. The acquiring authority has, however, accepted that it was a valid counternotice and that, by virtue of para 11(4) of Schedule 4, the effect of the service of the counternotice was that the notice to treat already given by the acquiring authority is “deemed to be a notice to treat in addition for the remainder of the land subject to the counter-notice”.
[9] On 17 May, the acquiring authority entered onto that part of the property specified in the original notices to treat. Mr and Mrs Christos continued to occupy the house on the remaining part of the property; 17 May is a crucial date in these proceedings because, as recorded in the tribunal’s decision, it was the agreed valuation date. Although there is no written record of the terms of the agreement reached between the representatives of the parties, it was not disputed on the appeal that the tribunal accurately referred to the agreement to the following terms (para 61):
Whilst possession of the subject property was taken on two different dates it was clearly appropriate to value the property as a single entity at a single date. The parties had agreed that that single date should be 17 May 1999, the date when the acquiring authority entered the first part of the land. The acquiring authority accepted that the property should be valued at prices prevailing at that date, but they did not accept that the condition of the entire property should be taken as at that date.
[10] On 10 June, Mr Houghton wrote to Mr Bowman, confirming that he had been instructed by Mr and Mrs Christos:
to accept the offer made by you in your letter dated 12 March 1999 to purchase the whole of their property as shown on the plan attached to that letter in the sum of £500,000 (Five Hundred Thousand Pounds) together with the usual heads of claim for disturbance and fees.
[11] In the following months, “subject to contract” correspondence took place between Mr Houghton and the solicitor acting for the acquiring authority, Cripps Harries Hall. It should be noted that the acquiring authority had already obtained a valuation of the property for compensation purposes from Knight Frank. It had inspected the property on 14 April 1999. In its opinion, the open market value of the property freehold with vacant possession as at the date of inspection could be fairly represented in the sum of £350,000.
[12] On 15 October, Mr Christos wrote personally to Mr Bowman about the difficulties that he was having in dealing with Bruton Knowles (the acquiring authority’s valuer) and in arranging a meeting to discuss aspects of his case. He said:
it would seem that they are trying to renege and renegotiate on the original agreed purchase of my house of £500,000.
At this stage I feel this is totally unethical and unfair to put us through still further Torment.
[13] Mr Bowman replied by letter on 26 October, saying: |page:7|
I have discussed your letter with Colin Smith of Bruton Knowles in view of the serious allegations that you are making.
I am advised by Mr Smith that he has not been aware of requests for a meeting until recently and this has now been set up with yourself and your valuer for the 2nd November.
I would confirm that Bruton Knowles have no instructions to renege and re-negotiate the original agreed price of your house at £500,000 and I do not know what has given rise to this particular concern.
I would suggest that following your meeting on 2nd November, I receive a full report from Colin Smith on the situation and if necessary you and I can meet to review any outstanding issues.
I do appreciate the fact that living adjacent to a major construction site will be noisy and disruptive which is the reason we agreed to purchase the whole property from you at the outset.
[14] On 2 November, a meeting took place. It was attended by Mr Colin Smith, of Bruton Knowles, Mr Neil Altman (the surveyor acting for Mr and Mrs Christos), and Mr and Mrs Christos and their solicitor, Mr Houghton. One of the matters discussed at the meeting was the decision of the Land Registry, of 25 October, to cancel the application of Mr and Mrs Christos for first registration of the blue land based upon adverse possession. Mr Smith advised Mr and Mrs Christos that the acquiring authority wished to amend the price payable for the property to reflect the title defect, and would be seeking appropriate valuation advice. It is contended on behalf of Mr and Mrs Christos that representations were advanced at the meeting of 2 November to the effect that the price of the property, previously agreed to be £500,000, would be that sum, less some small discount to reflect the defective title.
[15] On 3 November, Mr Houghton wrote to the acquiring authority:
to confirm that we anticipate being in a position to exchange contracts for the purchase of the alternative property that George and Maureen [Christos] have now found very shortly.
We are hopeful of agreeing a completion date on or around 23rd November 1999 and I will write to you again once contracts have been exchanged.
You will appreciate that George and Maureen will be keen to synchronise completion of the purchase of their new property with finalising the outstanding aspects of the compensation claim as they will be reliant on the money being available to complete the purchase.
[16] On 4 November, Mr and Mrs Christos entered into a contract to purchase another property, Oak Manor, Newington, near Sittingbourne, at the price of £650,000.
[17] Also on 4 November, Mr Smith wrote to Mr Houghton referring to his undertaking at the meeting of 2 November to provide an overall figure for the property and disturbance payable in accordance with the compensation code, having due regard to the title defect in respect of part of the woodland.
[18] On 26 November, Mr Smith wrote to Mr Altman making a “without prejudice” offer to pay a full and final settlement figure to Mr and Mrs Christos in the sum of £565,000. That included compensation for disturbance and a home-loss payment, as well as a figure of £480,000 for “the house, buildings and land (subject to defective title on part) as at date of entry understood to be May this year”.
[19] He confirmed that the purchase was proceeding on the basis of the counternotice and, as a result, interest at the varying statutory rate was payable from the date of entry. He also stated that he had been advised that the continued occupation of the property by Mr and Mrs Christos since the date of entry had been as licensees, and that the rental implication arising from that would have to be considered as part of the overall settlement.
[20] On 9 December, Mr Houghton wrote to the acquiring authority’s solicitor, saying that it was absolutely vital for it to confirm that the acquiring authority would be releasing the sum of £400,000 to his clients in order to complete the purchase of their alternative property, the completion date being 17 December.
[21] An advance payment to the sum of £405,411.67 was made.
[22] On 7 January 2000, Mr and Mrs Christos vacated the property. It remained vacant until the acquiring authority entered the remainder of the property on 12 October 2000. The solicitor for the acquiring authority had written to Mr Houghton on 3 February 2000, recording its understanding that Mr and Mrs Christos had left the property and were living elsewhere, and stating:
Until the transfer of the property is completed, your clients will remain responsible for it. Your clients should, therefore, maintain their existing insurance arrangements and we recommend that appropriate steps are taken to ensure that the property is not broken into; that pipes do not burst; the water is turned off, etc.
Just before completion of the transfer, our client’s surveyor will need to re-inspect the property to ensure that on completion of the transfer, the property is in the state our client would expect to find it.
[23] Unfortunately, the property suffered damage in the interim period. It was discovered by the acquiring authority in August 2000 that the property had suffered water damage. The parties’ valuers agreed that the damage would have reduced the price paid for the house on the property by £8,500. The occurrence of that damage has given rise to a dispute between the parties about its relevance to the assessment of compensation for the property.
[24] No formal contracts were exchanged between the parties in relation to the sale of the property by Mr and Mrs Christos to the acquiring authority. The negotiations between the parties collapsed. As already indicated, on 1 May 2001, Mr and Mrs Christos gave notice of reference to the tribunal to determine the amount of compensation payable to them, contending, inter alia, that £500,000 should be paid in respect of the value of the property by reason of the agreement reached on that figure between them and Mr Bowman.
Decision of the Lands Tribunal
[25] The tribunal determined the value of the land to be £485,000. That figure had been reached by taking the sum of £500,000, that being the sum offered by the acquiring authority in its letter of 12 March, and then deducting £15,000 in respect of the inability of Mr and Mrs Christos to show good title to the entire property. The tribunal found that the effect of the defect in the title to the blue land on the value of the property was £15,000. The tribunal rejected the contention of the acquiring authority that an agreed figure of £8,500 should also be deducted from the compensation to reflect the deterioration of the condition of the property caused by water damage subsequent to the agreed valuation date of 17 May.
[26] The case of Mr and Mrs Christos, that they were entitled to £500,000 in respect of the acquisition of the property, was put to the tribunal in two ways. First, it was contended that there had been a binding contract that the acquiring authority would purchase the property from them for £500,000. The tribunal held, in para 30, that:
there was no binding contract for a sale at £500,000, because the agreement was at all times “subject to contract”. Alternatively, if there was a contract, it was subject to the condition precedent relating to title, which was never waived. This condition was never satisfied.
[27] That conclusion had been reached after detailed reference to the meetings, the correspondence and the oral evidence of the parties, including the evidence of Mr Christos himself that he knew that “subject to contract” meant that the matter was not binding until a contract had been signed: para 22.
[28] Equitable estoppel was the second plank of the case, namely that the acquiring authority was bound by the figure of £500,000, less only a small deduction for defective title of part. The tribunal held that, because of representations made on its behalf, the acquiring authority could not rely upon its valuation evidence to show that the value of the property, assuming good marketable title, was other than £500,000: para 54. The tribunal arrived at that conclusion by the following route:
(1) It was common ground that a legal relationship existed between Mr and Mrs Christos and the acquiring authority: para 33.
(2) The acquiring authority had made a promise or representation to Mr and Mrs Christos not to contend that the value of the property with |page:8| good title would be less than £500,000, which reflected the value of the property arrived at in accordance with the statutory compensation code: paras 34 to 51. The tribunal found that that representation or promise arose from the combination of the letter of Mr Bowman, dated 26 October, and the meeting with the parties on 2 November. In an important passage in para 50 of the decision, the tribunal stated:
50. In Salvation Army, Woolf J said:
“In the course of argument, Mr Godfrey rightly conceded that, so far as the district council was concerned, they having stood by while the new hall was built even though there was no binding contract of sale, the principle of proprietary estoppel would have prevented the district council from refusing to sell the new site to the Salvation Army.”
In my judgment similar considerations apply to the requiring authority in the present case. The claimants were not involved in ordinary commercial negotiations which left them free to refuse to sell. Their home was being acquired from them compulsorily. Entry had already been made on part of the land. They were led to believe that they would be paid £500,000, less a deduction to reflect title. The acquiring authority then stood by whilst the claimants exchanged contracts to buy an alternative property for a significantly larger sum. Against that background, the mere fact that there was no binding contract of sale does not entitle the acquiring authority as they sought to do until the ninth day of the hearing to adduce evidence to the Tribunal that the appropriate value was not £500,000 but £350,000. Nor does it entitle them to rely on the subsequent agreement that the market value of the property was £380,000.
(3) The tribunal had been satisfied that the acquiring authority had intended Mr and Mrs Christos to rely upon its representation, and Mr Christos did in fact rely upon the letter of 26 October and upon the fact that, at the meeting of 2 November, the acquiring authority had made it clear, through Mr Smith, that it wished to renegotiate the £500,000 figure to reflect the defective title: para 53. When Mr and Mrs Christos exchanged contracts, on 4 November, to purchase Oak Manor for £650,000, they and their solicitor were under the impression that the acquiring authority was not seeking to renegotiate the agreed value of £500,000, apart from a discount to reflect the defective title.
[29] Since the tribunal held that the four requirements of equitable estoppel had been satisfied, it concluded that the acquiring authority was estopped from producing evidence to show that the value of the subject property was other than £500,000 for good and marketable title to the property.
[30] The third point decided by the tribunal, against which the acquiring authority appeals, was that the figure for damage suffered by the property, agreed at £8,500, should not be deducted from the compensation payable. The acquiring authority contended that it should be deducted to reflect the deterioration in the condition of the property caused by the flooding of the house in around August 2000, that is, after Mr and Mrs Christos had vacated that part of the property, but before the acquiring authority had entered upon it. As already indicated, no contract had been entered into between the parties for the transfer of title to the property, and no transfer had in fact occurred, because of the continuing dispute as to the amount of compensation payable. The agreed figure of £8,500 reflected the cost of remedying the water damage to the house, which had existed at the date upon which the acquiring authority took possession of the remainder of the property on 12 October 2000.
[31] The tribunal held that the property was to be valued in its visible condition as at the date of valuation, that is, 17 May 1999. As already mentioned, the decision of the tribunal had recorded the fact that the parties had agreed that, although possession of the property had been taken on two different dates, it was appropriate to value it as a single entity as at a single date, and that date was agreed to be 17 May. The tribunal observed that if Mr and Mrs Christos were liable to the acquiring authority for the damage that had occurred subsequent to the valuation date, the tribunal was not the proper forum to resolve such a claim. It also noted Mr Christos’s offer to assign the benefit of his insurance claim to the acquiring authority.
Conclusion
[32] Although the contract point arises on the cross-appeal of Mr and Mrs Christos and the estoppel and post-valuation-date damage point arises on the acquiring authority’s appeal, I find it convenient to deal with the points in the order in which they were argued by Mr Guy Roots QC for the acquiring authority, rather than in the reverse order adopted (for quite understandable reasons) by Mr Jonathan Gaunt QC in his submissions for Mr and Mrs Christos.
[33] I have reached the conclusion that the cross-appeal on the contract point should be dismissed, that the acquiring authority’s appeal on the estoppel point should be allowed, but that the acquiring authority’s appeal on the post-valuation-date damage should be dismissed. In the absence of agreement between the parties, it would be necessary for the matter to be remitted to the tribunal in order for it to redetermine the amount of compensation payable in the light of this judgment.
A. Contract point
[34] In my judgment, the tribunal correctly held that no binding contract had been made between the parties for the payment of the sum of £500,000 for the acquisition of the property. The offer made by the acquiring authority in its letter of 12 March was marked “subject to contract”. As everybody, including Mr Christos himself, knows, that expression, when used in relation to the sale of land, means that, although the parties have reached an agreement, no legally binding contract comes into existence until the exchange of formal written contracts takes place. As Lord Denning MR said in Tiverton Estates Ltd v Wearwell Ltd [1975] Ch 146*, at 159H:
for over a hundred years, the courts have held that the effect of the words “subject to contract” is that the matter remains in negotiation until a formal contract is executed…
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* Editor’s note: Also reported at (1973) 228 EG 2123
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[35] In this case, no formal contracts were ever exchanged between the parties. The acquiring authority was not, and never became, contractually bound by the figure of £500,000 proposed as an “offer to settle” in its letter of 12 March. The letter of acceptance of 10 June by Mr and Mrs Christos was an acceptance of the “subject to contract” offer. It could not therefore create a binding contract. The correspondence between the solicitors for the parties continued on a “subject to contract” basis.
[36] Mr Gaunt QC attempted to argue that the suspensive effect of the expression “subject to contract” had ceased as a result of the statement in the letter of 26 October that the acquiring authority was not seeking to renege on and renegotiate the figure of £500,000. He argued that the effect of that statement was that the figure of £500,000 was no longer provisional and open to further negotiation. At that point, he said, a final and binding contract had been reached.
[37] I do not agree. The effect of the expression “subject to contract” is that, unless and until that condition is waived, there is no binding agreement in the absence of the execution of formal contracts. In my judgment, the letter of 26 October was simply referring back to the agreement that had been made as a result of the offer of 12 March and the acceptance of 10 June, both of which were made in the “subject to contract” setting. The 26 October letter was simply a reference to not renegotiating the figure proposed as a “subject to contract” offer to settle. There was no waiver of the suspensive “subject to contract” condition.
[38] I would also reject the contention that the expression “subject to contract” was meaningless in this case and could be ignored, since the parties were in a compulsory purchase situation, which did not envisage any further formal contract, rather than in the conventional vendor/purchaser relationship: see Michael Richards Properties Ltd v Corporation of Wardens of St Saviour’s Parish, Southwark [1975] |page:9| 3 All ER 416*. It is true, as observed by Lord Denning MR in Munton v Greater London Council [1976] 1WLR 649†, at 652F, that compulsory purchase differs from an ordinary contract sale and purchase in a number of respects:
First, when a notice to treat is given, it binds the acquiring authority to purchase and the owner to sell at a price to be ascertained… Second, when there is an unconditional agreement fixing the price whether in writing or by word of mouth it is the equivalent of a binding contract between the parties…
Once, therefore a notice to treat has been served and there is an agreement on the price, a binding obligation is created which is equivalent to a contract between the parties.
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* Editor’s note: Also reported at [1976] 1 EGLR 163
† Editor’s note: Also reported at [1976] 2 EGLR 5
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[39] That means that, after the notice to treat has been given in respect of a particular property, neither party is free to back out of the legal obligation to buy and sell thereby created. That is not, however, the situation in this case. First, the notices to treat served before the letter of 12 March related only to part of the property. The whole of the property became included in the notice to treat only by reason of the statutory deeming process, which occurred on the service of the counternotice on 27 March. The position as at 12 March was that the acquiring authority had been making an “offer to settle” for the purchase of the whole of the property at the figure of £500,000. Second, the sum of £500,000 had been “subject to contract”, which, as was held in Munton, prevented the agreement on price from being contractually binding.
[40] Because, in my judgment, there had never been any binding contract for the sale and purchase of the property at the price of £500,000, it is unnecessary to consider whether the contract had been subject to a condition precedent relating to title, and, if so, whether the condition had been satisfied or waived.
B. Estoppel point
[41] In my judgment, the tribunal had been wrong to hold that the acquiring authority was estopped from adducing evidence that the value of the property had been other than £500,000. On this part of the case, the tribunal appears to have overlooked the pervasive significance of the fact that the offer to settle for £500,000 was, and remained throughout, “subject to contract”. The sum to be paid for the property was still “subject to contract” at the date upon which the tribunal had found that representations had been made on behalf of the acquiring authority in the letter of 26 October, and at the meeting on 2 November.
[42] The difficulty in establishing equitable estoppel in the context of an offer or agreement made “subject to contract” was explained by Lord Templeman when delivering the judgment of the Judicial Committee of the Privy Council in Attorney-General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] 1 AC 114, at pp127G-128A. He said:
In the present case the government acted in the hope that a voluntary agreement in principle expressly made “subject to contract” and therefore not binding would eventually be followed by the achievement of legal relationships in the form of grants and transfers of property. It is possible but unlikely that in circumstances at present unforeseeable a party to negotiations set out in a document expressed to be “subject to contract” would be able to satisfy the court that the parties had subsequently agreed to convert the document into a contract or that some form of estoppel had arisen to prevent both parties from refusing to proceed with the transactions envisaged by the document. But in the present case the government chose to begin and elected to continue on terms that either party might suffer a change of mind and withdraw.
[43] In my judgment, that was the position in this case. The offer to settle for £500,000 had been “subject to contract”. So had been the acceptance of that offer and the subsequent conduct of the parties with respect to compensation for the property. It is true that, following the notice to treat given by the acquiring authority and the counternotice given by Mr and Mrs Christos, it had not been open to either party to withdraw from the compulsory acquisition of the property. It had, however, been open for either party to withdraw on the amount to be paid, since the offer to settle for £500,000 “subject to contract” signified that was not intended to be legally binding until the exchange of formal contracts.
[44] In view of the continuing “subject to contract” status of the communications between the parties, it was not open to the tribunal to conclude that statements made on behalf of the acquiring authority in the letter of 26 October and at the meeting of 2 November were representations or promises capable of creating an estoppel binding the acquiring authority to pay £500,000 for the property.
[45] The tribunal’s reliance upon the passage quoted from the first instance decision in Salvation Army Trustee Co Ltd v West Yorkshire Metropolitan County Council (1980) 41 P&CR 179 had been misplaced. The governing principle enunciated by Lord Templeman in Hong Kong was cited to, but was not referred to in the decision of, the tribunal. Lord Templeman discussed Salvation Army at pp126G-127G and distinguished it. It had been cited to the Judicial Committee as an instance of specific performance of an agreement “subject to contract”. Lord Templeman disagreed. He explained that, in the particular circumstances of that case, the “subject to contract” nature of the arrangement was irrelevant to the amount of compensation on the basis of equivalent reinstatement, which a local authority had proposed to pay for the acquisition of the site of the Salvation Army’s meeting hall for road-widening purposes. The “subject to contract” arrangement was that the Salvation Army should acquire from the local authority an alternative site upon which to build a new hall in place of the old meeting hall. After the Salvation Army had entered onto the new site, and had built the hall upon it, and had paid for it in the expectation of receiving payment of compensation for the old site on the equivalent reinstatement basis, the successor local authority abandoned the road-widening scheme and refused to acquire the site of the old meeting hall or to pay equivalent reinstatement compensation for it. An estoppel binding the local authority to acquire the old site and to pay statutory compensation for it arose from the representations of the local authority to the Salvation Army as to their intentions to acquire the site and to pay compensation on the basis of equivalent reinstatement. The Salvation Army had, to its detriment, relied upon those representations, which had not been made “subject to contract”, when, to the knowledge of the local authority, it had entered onto, and had built upon, the new site. As Sedley LJ observed in the course of argument, if those facts were to occur today, it is likely that the same outcome would result from the application of the public law doctrine of legitimate expectation on a judicial review of the lawfulness of the actions of the acquiring authority.
[46] I should add that, in his careful and clear submissions, Mr Gaunt rightly accepted that the acquiring authority had not made any representations as to the value of the property that could give rise to an estoppel. All that the acquiring authority had done was to make a “subject to contract” offer to settle for the acquisition of the property at the figure of £500,000. The offer to settle for that sum indicated a willingness to negotiate on that figure. It did not constitute a representation or statement by the acquiring authority as to what in fact was the value of the property.
C. Post-valuation-date damage point
[47] In my judgment, the tribunal had correctly held that the property was to be valued in its physical condition at the agreed date of valuation, and that the deterioration in the condition of the property occurring after the agreed valuation date had had no effect upon the compensation payable to Mr and Mrs Christos. The tribunal referred to a number of authorities on this point. On the hearing of the appeal, Birmingham Corporation v West Midland Baptist (Trust) Association Inc [1970] AC 874, at pp903E-908C, and Chilton v Telford Development Corporation [1987] 1 EGLR 12 were cited on the question of the relevant date for the assessment of compensation for compulsory purchase when, following the service of a notice to treat, physical possession or control of the land is taken by the acquiring authority over a period, and whether the risk of damage to, or deterioration of, the property should pass before |page:10| the physical possession or control by the acquiring authority of the part affected has been taken.
[48] It is, however, unnecessary to examine the authorities on those points, since the legal position in this case is settled beyond doubt by the fact that, as recorded by the tribunal, the acquiring authority agreed to take a single date for the valuation of the property (that is, 17 May 1999), even though it did not enter into the whole of the property until a later date, after the damage had been suffered by the property. The inevitable consequence of the agreement on a single date was that the property had to be valued in the condition in which it was upon that date, and not in the condition in which it was upon any other date. What happened to the property after the agreed valuation date may give rise to other claims, which the tribunal has no power to determine. Its function in this case was confined to determining, so far as the value of the property was concerned, its value at the agreed valuation date in the condition in which it was upon that date.
Result
[49] I would allow the acquiring authority’s appeal on the estoppel point. I would dismiss the cross-appeal by Mr and Mrs Christos on the contract point. I would remit the matter to the tribunal to redetermine the amount of compensation payable for the acquisition of the property on the basis that the acquiring authority is not estopped from adducing valuation evidence. In the absence of agreement, no deduction from the amount of compensation should be made in respect of the deterioration in the condition of the property after the agreed valuation date of 17 May 1999.
Sedley LJ said:
[50] I agree.
Sir Andrew Morritt V-C said:
[51] I also agree.
Appeal allowed in part; cross-appeal dismissed.
