Aquilina and another v Havering London Borough Council

Compulsory purchase compensation — Appeal from the Lands Tribunal — Whether decision of tribunal perverse as being made upon a basis of valuation not specifically relied upon by the claimants, alternatively upon a basis of valuation not put to the acquiring authority’s expert valuer — Whether tribunal acted in breach of natural justice Following a reference to the Lands Tribunal by the claimants, PJ Aquilina and LJ Carberry, to have determined the proper compensation payable for the compulsory acquisition of a two-storey house used for a dental surgery at 71 Western Road, Romford, the tribunal awarded the sum of £717,000. Before the tribunal the claimants’ valuer advanced three valuations of which one, valuation A, in the sum of £720,000, assumed office use of the existing building and the construction of new offices. The acquiring authority’s valuer spoke to a primary valuation on the same basis as valuation A in the sum of £365,000. The tribunal in rejecting the claimants’ valuer’s alternative valuations B and C adopted a further valuation, referred to in the appeal as valuation D, based upon a free-standing scheme of development on the subject land and rates per sq ft of site area derived from the sale of a site for such redevelopment in the same road. The tribunal decided that it would have been reasonable to expect planning permission on a similar basis to be forthcoming for the subject site. On appeal by way of a case stated, the acquiring authority contended that the tribunal acted in breach of natural justice by making the award upon a basis of valuation not relied upon by the claimants and failing to put the basis of valuation to the acquiring authority’s expert valuer. They were not given an opportunity to deal with valuation D as a separate and distinct way of putting the case. Held: Valuation D was not distinctly or separately put forward by the claimants; there was no direct reference to it in any part of the claimants’ valuer’s evidence at any stage as a separate basis of valuation, and nothing with reference to it was put to the acquiring authority’s expert witness. The tribunal, in its expert judgment, was free to prefer valuation D as a better approach for the doing of justice between the parties but, if the tribunal thought it right to apply valuation D, it was necessary to ensure that the parties had a proper opportunity to deal with it. The acquiring authority was entitled, until given reason to do otherwise, to limit their questioning, evidence and submissions to the case put forward by the claimants based as it was upon elaborate expert evidence and legal submissions by counsel. If the tribunal had wished to proceed on valuation D the member should have raised the matter at the hearing or called the parties back for further consideration. The appeal was allowed and the matter remitted to the tribunal for rehearing before another member. The following cases are referred to in this report. Fairmount Investments Ltd v Secretary of State for the Environment [1976] 1 WLR 1255; [1976] 2 All ER 865; (1976) 75 LGR 33, HL R v Paddington and St Marylebone Rent Tribunal, ex parte Bell London & Provincial Properties Ltd [1949] 1 KB 666; [1949] 1 All ER 720; 65 TLR 200; 47 LGR 306 Sabey (H) & Co v Secretary of State for the Environment [1978] 1 All ER 586; (1977) 245 EG 397, [1978] 1 EGLR 64 Westminster Renslade Ltd v Secretary of State for the Environment (1983) 48 P&CR 255; [1983] JPL 454 This was an appeal by case stated from the decision made by Mr T Hoyes FRICS in the Lands Tribunal on June 7 1991 ([1991] 2 EGLR 209; [1991] 41 EG 143 and 42 EG 139) upon a reference to determine the compensation payable on the compulsory acquisition by the acquiring authority, Havering London Borough Council, of a building owned by the claimants, PJ Aquilina and LJ Carberry. Philip Walter (instructed by Clifford Chance, for the solicitor to Havering London Borough Council) appeared for the appellants; Timothy Straker (instructed by Hunt & Hunt & Houghtons, of Romford) represented the respondents. Giving the first judgment at the invitation of Lloyd LJ, RALPH GIBSON LJ said: This is an appeal by case stated from the decision made by Mr T Hoyes FRICS, a member of the Lands Tribunal, on June 7 1991 upon a reference to determine the compensation payable on the compulsory acquisition by Havering London Borough Council of a building used for dental surgeries, at 71 Western Road, Romford. The award was the sum of £717,000 together with an appropriate surveyor’s fee and costs. The case stated, under section 3(4) of the Lands Tribunal Act 1949, is dated June 15 1992, and the facts proved or admitted in the contentions put forward by the parties are set out in the written decision. The question of law for the decision of this court turns upon one point, namely that in the submission of the council, the tribunal acted in breach of natural justice by making the award upon a basis of valuation not relied upon by the claimants and to deal with which the council had no proper opportunity. The land had upon it a two-storey house. The gross-internal floor area was 1,999 sq ft. To the rear was a single-storey annex with a gross-internal area of 401 sq ft. Planning permission was likely to be granted for a change of use from surgeries to offices and for a new single-storey office building of 2,490 sq ft gross-internal area, with associated car parking upon the rear part of the site. The valuation date was November 21 1988. Certain matters were agreed. Those which need to be mentioned were (this can be seen at pp 8-9 of the decision): There existed in November 1988 in Romford a market both for occupational leases of offices and for the freehold purchase of modest areas of office space. Both markets were at their highest, or peak, in late 1988. The 2,400 square feet of existing space on the subject site [which was] 12,565 square feet [in all] left latent potential for the construction of a new single-storey office building to the rear of 2,493 square feet; in effect 50 per cent of the site was available for new development for which planning permission could have been reasonably expected. Matters upon which the valuers differed were noted by the tribunal as follows: first, the capital value per sq ft to attribute to the existing buildings at the material date so as to reflect physical, locational and34 other attributes; next, the capital value to attribute to any new offices assumed for valuation purposes to be constructed on the rear of the site as part of the process of arriving at site value; and, last, whether it was appropriate, in all the circumstances prevailing in Romford in November 1988, to consider the value of the subject premises for office redevelopment in conjunction with adjoining sites and attribute a proportionate part of the value of a larger site to the site of 71 Western Road. Mr Parish, FRICS, who had advised and prepared the case for the claimants, had submitted a proof of evidence in which he advanced three valuations. They were briefly described by the tribunal as follows at pp 9-10 [[1991] 2 EGLR 209 at p211G]: Mr Parish spoke to three valuations of the subject premises. Valuation A . . . in the sum of £720,000, assumed office use of the existing buildings (about £520,000) and the construction of new offices on the rear half of the site (about £200,000 being £31.83 per sq ft of site area); Valuation B, in the sum of £840,000 . . . assumed redevelopment for offices of the total site in conjunction with other sites . . . Valuation C, in the sum of £1m . . . assumed redevelopment likewise but in conjunction with a local-authority-owned car park to the south-west. It is to be noted that valuation A was claimed in addition to the sum claimed for disturbance, the largest sum claimed being £161,336, as to part of which there was agreement. Mr Burton FRICS, who was called on behalf of the council, did not accept valuations B or C as valid bases of valuation. The tribunal agreed with Mr Burton and neither need be considered in further detail. Mr Burton agreed with the approach of Mr Parish under valuation A, but reached a smaller sum for compensation. The tribunal said of that as follows: Mr Burton spoke to a primary valuation . . . on the same basis as valuation A by Mr Parish, in the sum of £365,000; £300,000 . . . in respect of the existing building and 50% of the site and £65,000 . . . for the rear half of the site. After a passage in which the tribunal considered the evidence relating to 87 Western Road, which had appeared in the papers as a comparable, and then concluded that evidence set the upper limit of value for the freehold interest and possibly total compensation (and to that passage I shall return shortly), the tribunal next considered the two valuations based upon the method applied by Mr Parish for valuation A. The tribunal said: . . . these valuations proceeded upon a common approach and embraced two elements: (a) the value of the existing buildings and the front part of the site (for all practical purposes 50% of the total) and (b) the value of the residue for the construction of 2,493 sq ft of new single-storey offices. I take the latter element first, for which the valuations were: Mr Parish £200,000 . . . and Mr Burton £65,000 . . . both promulgated on the residual basis but involving considerable diversity in the data employed and the detailed mode of calculation adopted. The tribunal then reviewed the differences between the two experts and concluded with reference to (b) (at pp 12-13) [[1991] 2 EGLR 209 at p 212L]: Valuation A by Mr Parish falls to be reduced by £56,092 . . . £199,692 minus £56,092 = £143,600 . . . This figure, which I round up to £145,000 I regard as realistic when broadly tested against the two transactions at 89 Western Road. The member then turned to (a), the first part of valuation A, the value of the existing surgery building as offices. He rejected Mr Parish’s valuation of £520,800. He accepted Mr Burton’s valuation of £300,000, but increased it by 10% because of his view of the progress of the market. He concluded (this is at pp 14-15) [1991] 2 EGLR 209 at p 213C]: The value of the land taken is therefore determined in the alternative at: (a) The existing buildings and their site £330,000 (b) The backland (50% of the site area) £145,000 £475,000 Less the agrees payment for title insurance £1,000 Total £474,000 Although the tribunal had thus fixed the proper amount of the valuation A claim at £474,000, and had rejected valuations B and C, the sum awarded was different. The sum of £474,000, with the full amount of £161,336 claimed for disturbance (of which £54,628 was in dispute) amounted to £635,336. The tribunal did not consider the outstanding issue with reference to compensation because in its view it did not arise: the alternative award for the land taken in the sum of £717,000 exceeded the valuation A claim together with the compensation. I return now to the passage in the decision in which the tribunal determined the ‘alternative award’. It was in effect in a passage which was a continuation of the reasons for rejecting valuations B and C. It reads (at pp 10-11 of the decision) [[1991] 2 EGLR 209 at p 212E] as follows: It was accepted by Mr Burton that in terms of a location for offices there was no difference material to value between 71 and 87 Western Road. The evidence of Mr Heady was clear that no 87 had been sold for redevelopment by offices and that planning permission had been granted for 6,000 sq ft on the site in isolation, namely as a free-standing scheme. In my judgment, it would also have been reasonable to expect . . . planning permission on a similar basis to be forthcoming for the site of 71 Western Road. Mr Parish included in his submitted documents two such schemes and in answer to my question he indicated that were the site to be redeveloped for offices the expected density would be equal to that approved at no 87. It is agreed that 87 Western Road realised, in late 1988, £57.14 per sq ft of site area for a free-standing development by offices. I prefer this direct evidence of site value in the locality close to the valuation date to any figure derived from residual valuations promulgated upon the assumption of implementing a scheme of redevelopment jointly with neighbouring owners. A purchaser of 71 Western Road would not put a joint project entirely out of mind, but would take comfort from the ability to undertake a free-standing scheme and would accordingly prefer to base any offer on the less risky and more immediate proposition. In re-examination, Mr Parish adopted the value for a free-standing office development, using the same unit price as 87 Western Road, as a check upon his valuation A, namely 12,565 sq ft at £57.14 = £717,964, say £718,000. I consider Mr Parish was misguided in seeking to substantiate his valuation A at £720,000 by adopting the achieved development value. In my judgment £718,000, less £1,000 agreed in respect of title insurance, sets the upper limit of value for the freehold interest and possibly total compensation, subject to what follows in relation to valuation A (Mr Parish) and . . . the claim for disturbance. That basis of claim has been called, in argument, ‘Valuation D’. The point of law raised in the case is at p 20 of the bundle, and set out at some extent, but I now need read only para 3, which is as follows: The questions upon which the decision of the . . . court is desired are: (3)  Whether the decision was perverse as being made upon: (a)  the general evidence of value before the tribunal; (b)  a basis of valuation not specifically relied upon by the claimants; (c)  a basis of valuation not put to the expert valuer called to give evidence by the acquiring authority. In opening the matter, it was said on behalf of the council that reliance was placed only upon (b) and (c). Reference has been made to the decision of the House of Lords in Fairmount Investments Ltd v Secretary of State for the Environment [1976] 1 WLR 1255. In that case it was held that it was contrary to natural justice for the Secretary of State to confirm the order on a basis of facts as to the inadequacy of the foundations, which the owners had no opportunity of showing was erroneous, and of an opinion, with which they had no opportunity to deal, that the state of the foundations made rehabilitation impractical. I quote from the speech of Lord Russell of Killowen at p 1265 at E: For the Secretary of State it was in substance submitted that the question of stability and settlement had been raised, and therefore Fairmount should reasonably have anticipated all possible causes by leading evidence directly as to the state of the foundations: consequently it was not right to say that Fairmount had been deprived of the opportunity, as would have been the case had the inspector at the hearing cast doubt on the foundations but refused to hear evidence designed to correct his doubt. This submission for the appellant appears to me to be at the core of this appeal, and, my Lords, I do not, in the circumstances of the case that I have rehearsed, accept it. I entirely accept that such an inspector, in a case such as this, is not merely trying an issue or issues between the local authority and the objector owner, and may from his professional experience supply deficiencies in the case as presented by the local authority. I equally accept that he is not bound to accept as established a contention in evidence for the objector owner simply because it is not, or is not adequately, challenged or contested on the part of the acquiring authority at the hearing. Part of his function lies in his own knowledge of the subject. Nor would I wish to introduce into procedures such as this — which include, prior to report, his inspection of the site — a rigidity more appropriate to a private issue to be decided by a judge; and in that connection I do not believe that a ‘view’ by a judge is to be equated in anyway with such a site inspection by such an inspector, a possibility which (it was said) might have been in the mind of the Court of Appeal in the instant case. But in this case I am unable, consonant with the essential principles of fairness in a dispute, to uphold this compulsory purchase order. All cases in which principles of natural justice are invoked must depend on the particular circumstances of the case. I am unable, my Lords, in the instant case, to generalise. I can only say that in my opinion, in the circumstances I have outlined, Fairmount has not had — in a phrase whose derivation neither I nor your Lordships could trace — a fair crack of the whip. A passage at p 682 of Rex v Paddington and St Marylebone Rent Tribunal, ex parte Bell London & Provincial Properties Ltd [1949] 1 KB 666 on being taken by surprise is of relevance here. I would only add two points. The first is the suggestion that the inspector should perhaps have kept silent about his views or inference as to the foundations. With this I wholly disagree: it was not suggested by Fairmount. What he should have done was either to reconvene the hearing, or to invite the department to do so: or, in a relatively straightforward case such as this, have in writing invited views on his provisional conclusions as to the foundations and financial feasibility. There is nothing either in the statute or in any rules to prevent this. It should be noted that at the commencement of the hearing there was reference to an application to call fresh evidence before the court, directed, as I understand it, to the question of prejudice to the council. In the event, the argument proceeded in a way which rendered it unnecessary for that application to be pursued, and I say nothing further about it. Reference was also made to R v Paddington and St Marylebone Rent Tribunal, ex parte Bell London & Provincial Properties Ltd [1949] 1 KB 666 and H Sabey & Co Ltd v Secretary of State for the Environment [1978] 1 All ER 586. The case for the appellant council was that they were not given an opportunity to deal with valuation D as a separate and distinct way of putting the case. They acknowledge that it was open to the tribunal to proceed on the basis of valuation D, if, in the member’s expert view, it had been necessary so to do, but in that case they contend that they should have been given an opportunity by the member to call any evidence with reference to it and to make submissions upon it. Mr Straker, for the claimants, in responding to the appeal, has acknowledged the applicability of the principles stated by Lord Russell in Fairmount Ltd, referred to above, to these proceedings before the Lands Tribunal, but has submitted that there had been no breach of natural justice in what occurred. The member made the following points, among others. First, that there was clear reference before the hearing to development of the site as a whole by itself, not, as in valuations B or C, with the property of others. In the proof of Mr Parish, the member pointed out, there had been reference to two schemes, and there was mention of that in the passage in the decision to which I have referred, at pp 10-11, as there having been two such schemes included in the submitted documents. Mr Straker pointed out that those were not variants of valuations B or C. They were part of the contention, apparent at p 28 of the bundle, in the proof of Mr Parish, that valuation A was not only a sound basis for valuation but should be accepted in the figure put forward by him. In particular that contention included reference to pp 61 and 62 of the bundle, on which can be seen drawings, the two on the right-hand side of p 62 showing a proposed development of the entire site by itself including the demolition of the existing buildings, that being, of course, the basis of valuation D. Mr Straker contended that the member of the tribunal, as an expert, was entitled to act upon a basis of valuation put forward by neither side at the hearing, and that there was before him sufficient evidence to justify the decision which he reached. There was reference to Westminster Renslade Ltd v Secretary of State for the Environment, a decision of Forbes J of May 9 1983. Next Mr Straker argued that the council in fact had sufficient opportunity to deal with valuation D, particularly since, in re-examination, Mr Parish had referred to it as a check valuation for affirming the validity of his approach to valuation A. In proceedings of this nature, it was said, it is very commonly the case that the decision of the tribunal is on ground not contended for by either side. Lastly it was said that the onus of proof, with reference to an alleged breach of natural justice, lies upon the party asserting that it has occurred. For my part, I have no doubt that the main contention for the council has been made out. Mr Straker acknowledged that the case put forward for the claimants based on valuations A, B and C was that advanced at the hearing. Valuation D was not distinctly or separately put forward. There was no direct reference to it in any part of Mr Parish’s evidence at any stage as a separate basis of valuation, and nothing with reference to it was put to Mr Burton, the council’s expert witness. It is clear that the tribunal, in its expert judgment, was free to prefer valuation D as a better approach for the doing of justice between the parties, but, if the tribunal thought it right to apply valuation D, it was necessary to ensure that the parties had proper opportunity to deal with it. The council did not have such opportunity merely because they could have asked questions about the references at pp 60 and 61, and could have directed evidence to destroy or modify any conclusions which might otherwise be based upon that material. The council was, I think, entitled, until given reason to do otherwise, to limit their questioning, evidence and submissions to the case put forward by the claimants based as it was upon elaborate expert evidence and legal submissions by counsel. As was pointed out in argument by my lords, the passage at p 28 in the proof of Mr Parish was introduced and controlled by the sentence, ‘The value of the existing building coupled with the development potential of the extensive backland’, which was, of course, as has been made clear, the basis of valuation A. If the tribunal had wished to proceed on valuation D, the member should have raised the matter at the hearing or called the parties back for further consideration. Further, the reference by Mr Parish to valuation D as a check valuation in re-examination did not, in my judgment, provide any proper opportunity to the council to deal with it as a separate basis of claim. They were dealing with valuation A and on that they largely succeeded. For my part, I would therefore allow the appeal and remit the matter to the tribunal for rehearing. It clearly should be heard by another member. That is no reflection whatever upon Mr Hoyes. I am sure he would prefer not to be required to deal further with the matter. If the claimants wish to put forward valuation D on the rehearing, it is common ground that on the facts of this case they should be free to do so, subject to complying with the requirements of the rules, and any directions of the tribunal. The undecided issue as to the sum due for disturbance, if relevant, will also require to be considered. LLOYD LJ and SIR DAVID CROOM-JOHNSON agreed and did not add anything. Appeal allowed with costs; matter remitted to the Lands Tribunal for expedited rehearing by a different member; application for leave to appeal to the House of Lords refused.