Compulsory purchase — Compensation — Whether parties concluding binding contract on amount of compensation — Whether appellant acquiring authority estopped from disputing agreed valuation — Whether compensation to be reduced for damage occurring after agreed valuation date — Appeal allowed
The appellant acquiring authority served a notice to treat and a notice of entry in relation to part of the respondents’ property, in the exercise of its compulsory purchase powers under the Channel Tunnel Rail Link Act 1996. In a letter of March 1999, headed “subject to contract”, the authority offered to purchase the entire property for £500,000. In the same month, the respondents served a valid counternotice requiring the authority to take the whole property, the effect of which was, by virtue of para 11(4) of Schedule 4 to the 1996 Act, that the authority’s notice to treat was deemed to relate to the whole property. On 17 May 1999, the authority entered into possession of part of the property, with the respondents continuing to occupy the remainder.
In June 1999, the respondents wrote to the authority accepting the offer in the March letter. Negotiations ensued but later collapsed, and no formal contract was concluded. The respondents later vacated the property, which subsequently suffered water damage.
In May 2001, the respondents gave a notice of reference to the Lands Tribunal to determine the amount of compensation payable for the acquisition of their property. It was agreed that the appropriate valuation date was 17 May 1999. The tribunal held that no binding contract had been concluded for the payment of £500,000. However, it took that figure as the basis for valuation, holding that the authority was estopped from relying on valuation evidence showing that the value of the property was less than that figure. The tribunal then deducted £15,000 in respect of a defect in the respondents’ title to part of the land. It rejected the authority’s contention that a deduction should be made for the water damage. The authority appealed, and the respondents cross-appealed against the finding that no binding contract had been made.
Held: The appeal was allowed in part and the cross-appeal was dismissed.
1. The tribunal had correctly held that no binding contract had been made between the parties for the payment of £500,000. The offer in the letter was marked “subject to contract”, which clearly meant, in the context of a sale of land, that although the parties had reached an agreement, no binding contract came into existence until the exchange of formal written contracts: Tiverton Estates Ltd v Wearwell Ltd (1973) 228 EG 2123 applied. Since no formal contracts had been exchanged, the authority had not been contractually bound by the figure of £500,000. The respondents’ letter of acceptance in June 1999 was an acceptance of the “subject to contract” offer only, and could not create a binding contract. The fact that the parties were in a compulsory purchase situation did not affect that conclusion: Munton v Greater London Council (1976) 239 EG 43 considered. This was not a case where, after the notice to treat had been given, neither party was free to back out of the legal obligation to buy and sell thereby created. The notice to treat in the instant case had related to part of the property only, and it was not until after the date of the offer letter that the whole of the property was included in the notice to treat by the service of the counternotice. Although, after that date, it was not possible for the parties to withdraw from the compulsory acquisition, either one could still withdraw on the amount to be paid. In view of the continuing “subject to contract” status of the communications between the parties, it had not been open to the tribunal to conclude that statements made by the authority were representations or promises capable of creating an estoppel binding the authority to pay £500,000: Attorney-General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] 1 AC 114 considered; Salvation Army Trustee Co Ltd v West Yorkshire Metropolitan County Council (1980) 41 P&CR 179 distinguished.
2. The tribunal had been correct to hold that the property should be valued in its physical condition as at the agreed date of valuation, and that any deterioration occurring after the agreed date had no effect upon the compensation payable to the respondents. That was the effect of the authority agreeing to take a single date for valuation of the whole property, even though it did not enter into possession of the whole until after the damage had been suffered.
Guy Roots QC and Michael Humphreys (instructed by Cripps Harries Hall, of Tunbridge Wells) appeared for the appellant; Jonathan Gaunt QC and Barry Denyer-Green (instructed by Houghtons Solicitors Ltd) appeared for the respondents.
Sally Dobson, barrister
