Compulsory purchase – Compensation – Reference – Acquiring authority giving notice to claimant to exercise option to purchase land needed for new bus station – Expert determining purchase price pursuant to option agreement – Claimant dissatisfied with price and sale not proceeding – Authority instead acquiring same land by compulsory purchase – Authority applying to strike out reference for determination of compensation payable to claimant – Whether Upper Tribunal having jurisdiction — Whether “disputed question of compensation” existing within section 1 of Land Compensation Act 1961 –Application dismissed
The claimant owned an area of disused land in Accrington, Lancashire, for which the acquiring authority had refused planning permission for a mixed-use development. The grounds for refusal were that the grant of permission would prejudice the town centre master plan, under which the site was earmarked for a new bus station.
In 2010, the claimant gave a purchase notice to the authority under section 137 of the Town and Country Planning Act 1971, requiring them to purchase the land on the ground that the refusal of planning permission had rendered it incapable of beneficial use. Lengthy negotiations resulted in the making of an option agreement between the parties in 2011, under which the authority was entitled to acquire the land at a price to be determined by an expert, representing the aggregate of the market value of the land and all other sums to which the claimant would have been entitled had the land been acquired compulsorily.
In August 2012, the authority gave notice to the claimant to exercise the option. The purchase price was subsequently determined by an expert at £197,327.25, but the claimant was dissatisfied with that figure and, in the event, the sale did not proceed. Instead, in 2013 the authority exercised compulsory purchase powers in respect of the claimant’s land and the other land required for the new bus station. That land vested in the authority in January 2015.
The claimant made a reference to the Upper Tribunal (UT) to determine the compensation payable to it for the taking of its land. It claimed £300,000 as the market value of the land and a further £107,156 in costs and professional fees, plus more than £1.5m in respect of lost profit from the development which had been frustrated by the authority’s scheme.
The authority disputed the UT’s jurisdiction to determine the matter. They argued that the expert’s determination of the contractual purchase price under the option agreement meant that there was no “question of disputed compensation” capable of being referred to the UT under section 1 of the Land Compensation Act 1961. The UT treated the authority’s case as an application to strike out the reference.
Held: The application was dismissed.
The claimant’s land was acquired by the exercise of compulsory powers in January 2015 and there had been no agreement between the parties as to the compensation payable in respect of that acquisition. It followed that the claimant was entitled to refer the determination of that compensation to the UT under the 1961 Act.
The expert’s determination under the option agreement was irrelevant to the question of whether the UT had jurisdiction to entertain the reference. That determination had been made a different purpose and, even if the price which the expert determined included the sum to which he considered that the claimant would have been entitled as statutory compensation on a compulsory acquisition in in August 2012, there was no agreement to treat that determination as conclusive of the value of the entitlement which accrued to the claimant in January 2015.
Further, even if the statutory vesting date had been much closer to, or the same as, the contractual date, the power that the parties had given to the expert was solely a power to resolve disputes under the option agreement and did not extend to making binding determinations of the claimant’s statutory entitlement to compensation: BP Oil UK Ltd v Kent County Council [2003] EWCA Civ 798; [2003] 3 EGLR 1 distinguished.
Nor was it impossible to imply a term into the option agreement to the effect that any determination by an expert under the agreement would remain binding between the parties in the event that the acquisition of the land was completed by the exercise of the acquiring authority’s powers of compulsory purchase rather than by a contract arising from the exercise of the option. Such a term was not necessary, nor was it obvious that reasonable people in the position of the parties would have intended the expert’s determination of the contractual purchase price to be determinative also of the claimant’s statutory entitlement in the event of the land being acquired at an indeterminate future time by the exercise of compulsory purchase powers.
Nonetheless, once the acquiring authority gave notice to exercise the option in August 2012, a relationship of buyer and seller had come into existence between the parties under an open contract for the sale of the land at a price to be determined in accordance with the agreement. The price payable under that contract was the sum of £197,327.25 determined by the expert. Although the authority had not yet enforced that contract, the parties remained bound it and, accordingly, the authority’s rights under it would need to be taken into account in determination the compensation due to the claimant. The price determined by the expert did not bind the UT when determining the value of the land by reference to hypothetical parties negotiating a sale. However, the authority’s rights under the contract might discourage potential purchasers from bidding for the land; that issue remained for consideration at a later date.
Vincent Blake (instructed by Mohammed Ayub Sadiq) appeared for the claimant; Ala Evans (instructed by the legal department of Lancashire County Council) appeared for the acquiring authority.
Sally Dobson, barrister
