Acquisition of purpose-built club premises at Manchester–Question of entitlement to compensation on equivalent reinstatement basis–Premises let by company to club on tenancy from year to year–Company’s shares held by club trustees and members–Held that grant of the tenancy and use to which premises put by club were intra vires the company–Rule (5) applies
Mr A B Dawson
(instructed by Clinton Geddes & Co, of Manchester) appeared for the
claimants; Mr James Fitzhugh QC (on the first hearing day) and Mr P B Keenan
(instructed by the Solicitor to the City of Manchester) for the acquiring
authority.
Giving his
decision, THE PRESIDENT said: This is a decision on a preliminary point of law,
namely, whether the claimants, or one of them, are entitled to compensation
under rule (5) of section 5 of the Land Compensation Act 1961 for part of the
premises acquired, the part being the whole of 744-746 Rochdale Road,
Harpurhey, Manchester 9, other than the ground floor of No 746.
The whole
premises were purpose-built as a club in 1877, apparently by the Harpurhey
District Conservative Club Company Ltd, but in 1922 they were acquired by the
second-named claimants [‘the company’] who, it appears from their memorandum of
association, were established for that purpose among others. The new company
had an issued capital of 3,416 £1 shares of which 3,219 are held by trustees of
the first-named claimants [‘the club’] and the remainder by 23 members of the
club. The company have paid no dividends since 1968.
At December 22
1971, the date of the notice to treat, the ground floor of 746 Rochdale Road
was let to Co-operative Retail Services Ltd, but they subsequently surrendered
the residue of their term of 14 years; this part of the premises does not form
part of any claim under rule (5). The remainder was let to the first claimants
on an annual tenancy at a rent of £186 per annum. The company have never had
any other business than the letting of these premises, which have always been used
as a Conservative Club.
The acquiring
authority informally have offered to allocate a suitable alternative site for
the club and it is beyond doubt that the two claimants have a bona fide
intention of reinstating the club in some other place and have prepared sketch
plans for that purpose. Further, it was not disputed that there is no general
demand or market for land for the purpose of a members’ club.
Application of
Rule (5) to Yearly Tenant’s Use
In opposing
the claim under rule (5) Mr Fitzhugh and Mr Keenan argued that there is no
precedent for an application of that rule for premises let on a tenancy for
year to year and where the tenant’s occupation is devoted to a rule (5)
purpose. They said that two questions must be asked, namely:
(1) For what purpose were the premises
devoted? and
(2) Who is going to reinstate them for that
purpose?
As to the
first question, they said that the purpose for which the premises are devoted
by the company are those of a property company, namely, for letting at a profit.
As to the
second question, it was argued that the intention to reinstate must be by the
payee of the compensation, which in this case must be the second-named
claimants, but they could not have any such intention because they have no
money, and because, notwithstanding section 47 of the Land Compensation Act
1973, by reason of section 20 of the Compulsory Purchase Act 1965, rule (5)
does not apply to a tenant from year to year at all. The speech of Lord Reid in
Birmingham Corporation v West Midland Baptist (Trust) Association
(Inc) [1970] AC 874 at 897, was cited for the proposition that a claimant
must show that the entirety of rule (5) must operate so far as he is concerned,
and he can only claim the benefit of it where he is carrying on the purpose.
Further, the company has no power under its memorandum of association to build
premises and let on a non-profit-making basis and that the application of the ultra
vires rule prevents the company leasing to the club, so that the club
carries on business as a club and the company does not. Even if the company had
power to grant a lease to the club, their actual proposals for doing so on a
non-profit-making basis were ultra vires: Parke v Daily News Ltd
[1961] 1 All ER 695 at 699 and [1962] Ch 927. Thus, it followed the company
could not bona fide intend reinstatement, as to do so would be ultra
vires.
Fifty Years’
Use by Club
Mr Dawson, for
the claimants, said that if the corporation’s argument that the company had no
power to lease the premises for a members’ club were right, then,
notwithstanding the club’s occupation for 50 years, in law there had been no
lease or licence and therefore the club had acquired a possessory title.
However, he did not accept the corporation’s construction of the memorandum of association.
The first object stated that the acquisition was with a view to adopt and carry
into effect an agreement, dated July 28 1922, made between the vendors and one
William Gilgryst. That agreement has not been found, but, said Mr Dawson, in
regard to the club’s use for 50 years, and applying the maxim omnia
praesumuntur rite acta est, it must be presumed that the lease to the club
and its use of the premises were in furtherance of that agreement. Counsel for
the corporation had merely picked on the first two objects and relied on an
argument that the other 20 or more objects were merely ancillary, but there was
no warrant for that assumption, because, for example, one object was to
establish, promote, or assist in establishing or promoting, and to subscribe to
any other association, union or club whose objects are similar to the objects
of the club, and another object gave express power to let on lease. It was
remarked in passing that in any event the company would not be at risk on the ultra
vires question, having regard to section 9 of the European Community Act
1972. So far as rule (5) is concerned the question is whether the land is
devoted to a particular purpose and not whether any particular interest in the
land is so devoted. The question as to who will reinstate is also irrelevant
because rule (5) is in the passive voice. Moreover, one should look at the
realities, thus in considering whether there is a bona fide intention it
is to be observed that over 90 per cent of the shares in the company are held
by the club’s trustees.
Mr Dawson
remarked that it was not surprising that there is no precedent for the
application of rule (5) in a case where the purpose was being carried on by a
tenant from year to year, because section 47 of the Land Compensation Act 1973
has only been in operation for about a year. However, he claimed support for
the application of the principle by reference to Cripps on Compensation,
11th ed, p 909, A & B Taxis Ltd v Secretary of State for Air
[1922] 2 KB 328, Aston Charities Trust Ltd v Stepney Metropolitan
Borough [1952] 2 QB 642, Zoar Independent Church Trustees v Rochester
Corporation [1974] 3 All ER 5, Trustees of the Nonentities Society v
Kidderminster Borough Council (1970) 215 EG 385, 455 and Trustees of
the Manchester Homoeopathic Clinic v Manchester Corporation (1970)
215 EG 1033.
I am satisfied
as follows:
1. That the relevant part of the premises has
been occupied by the club for many years as tenant from year to year.
2. That the grant of the tenancy and the use
to which the premises were put by the club were intra vires the company.
3. That the use to which the premises were put
by the club was of such a nature that there is no general demand or market for
it.
4. That both the company and the club bona
fide intend to reinstate elsewhere.
5. That the club and the company jointly and
severally intend that upon reinstatement elsewhere the new premises will be
devoted to the same purpose as the existing premises.
Under the circumstances
I find that the claimants, or one of them, would be entitled to compensation
under rule (5) of section 5 of the Land Compensation Act 1961 for the part of
the premises previously described. However, I draw attention to the fact that I
was specifically not asked to say at this stage which of them are so entitled
and I refrain from doing so. I also record that Mr Dawson at this stage
required no more than a ruling whether the parties or one of them could be so
entitled and that he was not yet asking for the exercise of the Lands
Tribunal’s discretion in favour of either of them; that would be dealt with at
the substantive hearing.
The authority
will pay the claimants’ costs of this interim hearing, such costs if not agreed
to be taxed by the Registrar of the Lands Tribunal on the High Court Scale.
