Honisett and another v Rother District Council

Compensation for compulsory acquisition of leasehold interest in a small area of land with development value–Town and Country Planning Act 1968, section 30–Appeal by acquiring authority against Lands Tribunal’s decision in favour of claimants–Valuations of freehold and leasehold interests interdependent–Agreed value of freehold in possession but disputes as to deductions to be made in arriving at value of leasehold–Criticisms of Lands Tribunal’s valuation rejected–Freeholder with a defective title assumed to be in the market–No error of law by tribunal This was an appeal by case stated from a decision of the Lands Tribunal (J D Russell-Davis FRICS) (1977) 243 EG 10, [1977] 2 EGLR 12307 relating to the compensation payable for the compulsory acquisition of land, just under half an acre in size, at Church Road, Catsfield, East Sussex. The appellants were the acquiring authority, Rother District Council, and the respondents R L O Honisett and H Kennedy, leaseholders under a lease expiring in 1998. J Sullivan (instructed by Sharpe, Pritchard & Co, agents for J G Millward, Town Hall, Bexhill-on-Sea) appeared on behalf of the appellant council; M Horton (instructed by Sheppard & Son, of Battle) represented the respondents. Giving judgment STEPHENSON LJ said: The decision of the Lands Tribunal was given on April 5 last year. The appellant authority is dissatisfied with the amount of compensation awarded to the leaseholders of some land, just under half an acre in extent, at Church Road, Catsfield, East Sussex. There is no dispute that some compensation has to be paid for the compulsory acquisition of that land by the appellant authority under section 30 of the Town and Country Planning Act of 1968. The leaseholders claimed £11,750; the authority put forward evidence that they were only entitled to £2,850; and the member of the Lands Tribunal awarded them £10,900. It is submitted by Mr Sullivan on behalf of the appellant authority (and he did not appear for them below) that although he cannot seek to justify as low a figure as that which was put forward on behalf of the authority before the Lands Tribunal, or to justify at least one of the items that went to make up that figure, nevertheless, this court should allow an appeal against the tribunal’s award, and, not substituting its own valuation, remit the matter to the Lands Tribunal for rehearing. The grounds on which he puts forward that submission are, first of all, that the Lands Tribunal failed to make a material finding of fact; alternatively, if they did make that finding of fact by implication, that there was no evidence to support it; and thirdly, that in giving its reasons, the tribunal failed to have regard to one fact and to deal with one of the substantial issues in the case. The trouble in this case really arose, as it seems to me, from the fact that the freeholder–or possible freeholder (the Earl of Chichester)–was not certain whether he was able to make a good title to the freehold. This parcel of land (I suppose with others) was originally let as long ago as the 40th year of the reign of Queen Elizabeth I for a term of 200 years from Michaelmas Day 1598. An option was exercised to continue it for a further 200 years, and that long period of 400 years expires 27 1/4 years after the valuation date, namely on September 29 1998. And the rent which the Earl (or whoever is the correct freeholder) derives from the lease is the sum of five pence per annum. The land has a value because of its development possibilities. An outline planning permission was obtained by the respondent leaseholders (the claimants) in 1965 for five detached bungalows. That planning permission had not been acted upon, but the land has now been developed by the authority with eight units and a lay-by, which was a condition of the later detailed planning permission. There was correspondence in 1965 with Lord Chichester’s land agents, and in a letter of April 29 1965 they said that they understood that outline permission had been given for five units, and indicated that they would not be able to recommend a sale of the reversion for less than £1,750, subject to various other matters being cleared up. However, on the next day, Lord Chichester’s solicitors wrote that it had been decided not to sell the freehold reversion at the present time. Later Lord Chichester, on a reference initiated by the authority for the determination of the value of the freehold interest, indicated by his solicitors that, as it had not been possible to establish title, he would not be represented. It became clear during the course of the hearing of the reference in respect of the valuation of the leasehold interest that the values of the two interests were largely interdependent. In the absence of the freeholder the tribunal determined to decide the case for the leaseholders, and adjourned that for the freeholder until the former decision had been published One can understand the authority’s anxiety not to have to pay twice over, and not to find themselves in the position of, having given full compensation to the leaseholders, thereafter being compelled to pay the freeholder, and losing a sum greater than that which they would have had to pay had the value of both interests been determined at one and the same time. Nevertheless, in challenging in this court the award in fact made in respect of the valuation of the leasehold, they have to show an error of law on the part of the tribunal. A fact which was purported to have been agreed, and from which both valuations put before the tribunal started, was that the value of the freehold in possession of the subject land at the material date–and that was the date when the authority entered into possession, on June 30 1971–was26 £15,000. The rival valuations were put before the Lands Tribunal, both based on that agreed value of £15,000. Mr G J Walker, a Fellow of the Royal Institution of Chartered Surveyors, deducted from that figure the cost of acquisition of the freehold reversion, which he worked out at £3,000, considering it a reasonable uplifting from the figure of £1,750 which had been quoted in the letter from Lord Chichester’s land agents of April 1965. He deducted also legal fees on the £3,000 scale, and an agency commission on it, totalling £140, and he also deducted a single premium for indemnity against a third party claimant to the freehold, quoted at from £50 to £70, but he put that up to £110. And there was a letter from an insurance broker informally quoting a premium of £50-£70 from Sun Alliance, a London insurance group, for an indemnity insuring the leaseholder against a third party claim, claiming the freehold. Those deductions together came to £3,250, and left a net value of the land, for the claimants’ development, of £11,750. On the other side Mr Nightingale, the deputy district valuer and valuation officer for the Eastbourne District, put forward a much lower valuation on behalf of the acquiring authority. He considered that a deduction of £750 from the agreed figure of £15,000 ought to be made for the lay-by, and that the Lands Tribunal accepted: the construction of the lay-by was properly deducted from the value of the unencumbered freehold in possession, and a value put upon it, with the benefit (it should have been said) of the planning permission that had been granted. So, starting from £14,250, instead of £15,000, Mr Nightingale went on to assume the freeholder being in the market as the most likely purchaser, and he deducted, first (a) for a profit on venture, then (b) for costs of merging interests, and third (c) for resale of freehold in possession 20 per cent, the sum of £2,850–a deduction which Mr Sullivan found difficulty, I do not say in understanding, but in supporting. That gave a figure of £11,400 and he then went on to assume that the parties would agree that their interests were of equal value, so he deducted the freeholders’ share of one-half, £5,700, leaving the value of the leaseholders’ interest as £5,700, but went on: ‘As the freeholder was not available, he assumed that only a speculator would be in the market,’ and he deducted another half of £2,850 from that £5,700, leaving a net value realisable for the leasehold interest of £2,850. Now, though the member of the Lands Tribunal preferred (reluctantly) Mr Nightingale’s contention that the £750 for the lay-by should be deducted, he did not follow Mr Nightingale’s reasoning in making a deduction of 20 per cent for profit. He did not follow it in either sense; I do not think he understood it, and he certainly was not going to accept it. The reason he gave was that he regarded the starting point at £15,000–or £14,250–the market value which would have been paid by a purchaser who had already allowed for profit and expenses, or who would reckon it to come out of the development itself. In reaching his conclusion, he said this–in a passage in his decision which has been criticised by Mr Sullivan: A freeholder without a good title would have been negotiating from a position of weakness, and I agree with Mr Walker that in the real world he would have been glad to take a sure £3,000 or thereabouts for his interest rather than to chance holding out for a half share. Mr Nightingale’s argument of equal shares would have had more force had the freeholder a good title. Furthermore, by halving the leaseholders’ residue, I think he is making a double deduction for the same thing; he has already disposed of the ‘known’ freeholder, and until the hearing when he agreed that insurance was practicable I do not think he had applied his mind to its possibility. For these reasons I have to reject his approach and turn to that of Mr Walker. He then referred to Mr Nightingale having conceded that a known freeholder is the most likely purchaser, and said that that followed from the Mountview Estates case and the judgment of this court in Lambe v Secretary of State for War [1955] 2 QB 612. We have looked at Mountview Estates Ltd v London Borough of Enfield (1968) 20 P & CR 729. The member concluded: I think it is plain that the freeholder’s particular position of weakness would have benefited the leaseholder, and I am persuaded by Mr Walker that in those circumstances he could reasonably have been expected to accept £3,000 so that the two interests could be married. By his further deduction of £140 Mr Walker has gone some way to satisfying the point (b) –that is the cost of merging interests– in Mr Nightingale’s valuation. Nevertheless, the evidence of the cost of indemnity insurance is not conclusive. The brokers’ letter seems to have been written following a telephone conversation with Mr Walker, not a letter setting out the full facts, and the quotation seems to be in respect of a price of £15,000 up to beyond the end of the lease. I think that the insurers would, however, have had to envisage more than that, in that the benefit would be assignable to the five ultimate purchasers after development had taken place, when something like a capital sum of £60,000 for the cost of five bungalows would have been at risk. I prefer to raise the deduction in this respect to £200. So he came to his criticised valuation of the leasehold interest: £14,250 as the starting point, net value of the freehold in possession after allowing for the lay-by and from that he deducted the cost of the acquisition of the freehold reversion, £2,950; for fees and costs, he accepted Mr Walker’s figure of £140, and the single premium indemnity he uplifted from £110 to £200, for the reasons I have just read from his decision. So that the total deductions from the £14,250 were £3,290, leaving a value of £10,910, which he grossed down to £10,900 and awarded. For my part I cannot see anything wrong in the decision, either in law or in fact; and were it not for the fact that Mr Sullivan has argued that the member has not found whether or not the reputed freeholder–that is, Lord Chichester, with his weak title–would have been in the market as a purchaser, I would not have thought it arguable from the passages at p 12 of the decision which I have read, because those passages seem to me quite beyond doubt to indicate–not to imply, but to express the view of the member–that the freeholder without a good title (namely Lord Chichester) was in the market. That seems to me to be the basis of his decision. I cannot agree, secondly, that there was no evidence to support that finding; nor could I draw any such inference or hold against that finding the fact that no steps were taken, either by the claimants or the freeholder, to implement the 1965 planning permission after May 1965. Although the agreement as to the £15,000 in 1975 was an agreement between the leaseholders and the authority, I see no reason to suppose from inactivity that this reputed freeholder abandoned all interest in the development of this property and what might be gained for it. Indeed, his position seems to have been kept open by the way in which the action was taken on his behalf by his solicitors in the communication they made to the Lands Tribunal, and in the adjournment of the valuation of the freehold until the leasehold had been valued by the Lands Tribunal. Obviously, the uncertainty or weakness in the reputed freeholder’s title made his position difficult, but I am quite unable to conclude that there was no evidence that he was in the market–or to have any doubt that the tribunal found that he was in the market. In those circumstances, such possible points of law as are raised in the notice of appeal by Mr Sullivan seem to me to be without substance. I certainly cannot find that the reasons given by the member for his decision are inadequate, or fail to deal with the substantial issues in the case–or that27 there is anything substantially wrong or inadequate in the reasons that he gives. So we are not entitled in this court, following the decision of Megaw J, as he then was, in Re Poyser & Mills Arbitration [1964] 2 QB 467 to quash his decision and remit the matter to the tribunal for another valuation. For these reasons I would dismiss the appeal. Agreeing, ROSKILL LJ said: The reasons of the member of the tribunal have been assailed as lacking in clarity and not dealing adequately with the points raised before him. With all respect to Mr Sullivan, it seems to me that both submissions are unfounded. Reading the reasons as a whole, it seems to me absolutely clear that the member intended to find that Lord Chichester was in the market, and there was ample evidence, to my mind, upon which that finding was justified. I think the reasons given are both clear and adequate, and I do not think that this case raises any point of law. I would only add that I feel bound to express my regret that a public authority should have spent public money pursuing this matter to this court, for it seems to me that this was essentially a matter of fact for the tribunal and that the facts found are quite adequate in justifying the conclusions reached. The tribunal rejected the argument put forward on behalf of the district valuer, and I do not find that in the least surprising when one sees the argument in the form in which it appears in the case. That being so, it seems to me very difficult to justify this matter having been brought further. Like my Lord, I would dismiss this appeal. GEOFFREY LANE LJ also agreed. The appeal was dismissed with costs.