Duttons Brewery Ltd v Leeds City Council

Compulsory acquisition of public house–Dispute as to date at which compensation should be assessed having regard to the negotiations between the parties and the events which happened–Agreement reached in 1968 for a sum of £15,000 ‘subject to a contract to be approved by me’ (ie the town clerk of acquiring authority)–Entry and payment of compensation expected to be in 1971 or shortly after–Lengthy delay resulting in entry on June 30 1976–Claim by owners that compensation should be assessed as at that date, the revised figure being of the order of £78,000–Challenge to court’s jurisdiction rejected by judge on the ground that the question here was one of contractual rights analogous to a question of title, not a matter merely incidental to the assessment of compensation–Spheres of the Lands Tribunal and the courts discussed and Harrison v Croydon London Borough Council distinguished–Held, distinguishing also Munton v Greater London Council, that there was an agreement as to price in 1968, the expression ‘subject to a contract to be approved by me’ not having in the context the ordinary meaning of ‘subject to contract’ in the sense understood by conveyancers (and estate agents)–The agreement as to price in 1968 was, however, made on the assumption that entry and payment would take place within a reasonable period, which expired at the end of 1971 or shortly afterwards–The agreement as to price had ceased to stand at the very latest by 1976–Compensation accordingly fell to be assessed as at the date of entry, June 30 1976–The assessment was a matter, failing agreement, for the Lands Tribunal In these proceedings, the plaintiffs, Duttons Brewery Ltd, sought by originating summons in the Chancery Division a declaration relating to the basis of their right to compensation for the acquisition by Leeds City Council of the New Inn, Bramley Town Street, Leeds, in the light of the history of the negotiations between the parties. P J Millett QC and M Kershaw QC (instructed by Farley, Parker & Pickles, of Blackburn) appeared on behalf of the plaintiffs; R P Ground (instructed by the solicitor to Leeds City Council) represented the defendants. Giving judgment, NOURSE J said: This is a dispute between Duttons Brewery Ltd and Leeds City Council as to the basis on which compensation should be paid to Duttons on the compulsory acquisition by the council of land on which there formerly stood one of Duttons’ public houses, known as the New Inn, Bramley Town Street, Leeds. The dispute depends on the contractual rights of the parties in the light of the compulsory purchase legislation. The facts can be quite shortly stated. The relevant compulsory purchase order was confirmed by the minister on March 19 1965. On April 3 1967 the council served notice to treat on Duttons in respect of the New Inn. At that time and for some seven years previously the premises were subject to a tenancy in favour of a Mr Johnson. This tenancy was subject to determination by either party on three months’ notice and was in a form familiar in the case of a tenancy of a tied house. In 1967 and 1968 correspondence took place between Duttons and the council as to the terms on which the acquisition should take place, and in particular with regard to the amount of the compensation payable. By April 1968 the basic terms had been agreed between Duttons’ surveyors on the one hand and the regional licensed property valuer on the other. Those terms were set out in a letter from Duttons’ surveyors to their solicitors of April 26 1968 of which a copy was, as I shall recount, shortly afterwards sent to the council. In that letter Duttons’ surveyors told the solicitors that they had negotiated the compensation and that the details of the agreement reached with the licensed property valuer were as then set out. The premises were identified. It was said that the sale was to be with vacant possession. The beer, wine and spirit licence was to be retained by Duttons. It was said that there were no fixed charges affecting the property. Paragraph 5 was in these terms: ‘Subject to the above conditions compensation in settlement of all heads of claim to be the sum of £15,000.’  Then there were a number of subsidiary provisions to which I need not refer. On April 29 Duttons’ solicitors wrote to the town clerk referring to the agreement in principle and then saying this: ‘If your Corporation are to accept these terms we shall be glad if you will let us know when you will require vacant possession, and in this respect perhaps you will bear in mind that under the terms of our clients’ tenancy agreement with the present tenant the tenant would normally require three months’ notice.’ On May 6 Duttons’ solicitors again wrote to the Town Clerk, referring to their previous letter, enclosing a copy of the letter of April 26 to which I have referred, and then saying this: ‘We propose to dispose of contracts and enclose therefore full abstract of title to enable you to proceed.’  On May 29 the town clerk wrote to Duttons’ solicitors referring to that last letter and saying this: I have to inform you that the City Council have now approved the purchase of the above property from your clients at the price of £15,000, subject to a contract to be approved by me. Then there was a sentence dealing with payment of costs. Then the letter went on as follows: In view of the fact that notice to treat has been served in respect of the property I agree that contracts may be dispensed with and will let you have a draft conveyance for approval in due course. I have requested the City Architect to let me know when vacant possession will be required, and I will write to you again on this point as soon as possible. I shall return to this letter in greater detail later. It is to be noted at this stage that by May 29 there had been no agreement between the parties as to the date on which the council should enter. That would be the date on which the purchase would be completed and the £15,000 paid. Accordingly, if this had been a concluded private contract there would at that stage have been an implied term that completion should take place within a reasonable time, and it would have followed that the £15,000 would have been payable at the expiration of that period. On June 7 1968 the town clerk wrote again to Duttons’ solicitors referring to his letter of May 29 and saying this: ‘I am now informed by the City Architect that it is unlikely that this property will be required for redevelopment before 1971.’  Duttons did not go back to the town clerk after the receipt of this letter in such a way as to query the date of 1971 or anything like that. Therefore, I think that the correct view is that the parties in June 1968 must be taken to have intended that the date when the council would make entry and the compensation would be paid would be within a reasonable period thereafter; that it was unlikely to be before 1971, but, on the other hand, that it was likely to be in 1971 or shortly thereafter. In fact the council did not make entry either in 1971 or in 1972. On February 28 1973 Duttons’ surveyors wrote to the regional licensed property valuer requesting that negotiations be reopened for revised compensation. In support of that request they said that the trading had increased considerably over the last four years, and they clearly intended to call that in aid in support of a claim for increased compensation. However, in spite of a further plea made by Duttons’ solicitors to the effect that compensation had been settled on a basis of fairly early completion but that some five years had passed in the meantime, the council were not prepared to allow negotiations to take place. 22 The council did not in the end seek to enter the land until 1976. On May 4 of that year they served the normal 14 days’ notice of entry. At the same time they requested that possession should be given if at all possible by May 31. Naturally Duttons protested at the short notice on behalf both of themselves and of their tenant, Mr Johnson, but they were only able to obtain an extension until June 30, on which date the council did in fact enter. It is not relevant to the decision of this case, but I am bound to say that I have some sympathy with Duttons in the grievances which they then expressed to the council, both in relation to the New Inn and in relation to another neighbouring house of theirs known as the Cardigan Arms. The council subsequently negotiated with Mr Johnson as to the amount of compensation payable to him. In due course he received an agreed sum of £10,000 which did, I think, include an element in respect of disturbance. Those being the material facts, the council maintain that notwithstanding the fact that entry was not made until June 30 1976 Duttons are still only entitled to receive the £15,000 compensation which was agreed in 1968. Duttons, on the other hand, maintain that compensation should be assessed as at the date of entry on June 30 1976. They say that the figure appropriate to the latter date would be of the order of some £78,000; that is to say, about £63,000 more than the 1968 figure. The council do not accept Duttons’ figure, but they agree that the figure as at the date of entry would greatly exceed the £15,000. If Duttons succeed on this application, it is quite clear that the amount of the compensation cannot be determined by the court. If it is not agreed, it will have to be assessed by the Lands Tribunal. Before dealing with the substantive arguments on each side, I must deal with a preliminary point raised by the council. This is to the effect that the court has no jurisdiction to determine the issue raised by the originating summons in these proceedings. For this purpose the council rely on section 6 of the Compulsory Purchase Act 1965, which provides that if the parties do not agree as to the amount of compensation, then the question of disputed compensation must be referred to the Lands Tribunal, and, more particularly, on section 1 of the Land Compensation Act 1961, which provides that any question of disputed compensation shall be referred to and determined by that tribunal. Mr Ground, who appears for the council, has argued that the question at issue in these proceedings is a question of disputed compensation for the purposes of these statutory provisions and that the effect of section 1 of the 1961 Act is to oust the jurisdiction of the court to determine it. If it is indeed a disputed question of compensation for the purposes of that section, I have no doubt that Mr Ground would be right. But is it such a question?  In a broad sense it may, I suppose, be said that it is. There is in dispute a question whose resolution will result in compensation being paid on one basis or on another. It will either be the £15,000 agreed in 1968 or another, and no doubt a larger, sum agreed or assessed as at June 30 1976. It is now established that the Lands Tribunal, like its predecessors, has no jurisdiction to decide questions of title. No doubt the reason for that was that questions of that sort were regarded as being matters which could only be determined by the court and not by persons who did not have a legal training: of Brandon v Brandon (1864) Dr & Sm 305; at p 310. But a question of title is, nevertheless, one whose resolution will often result in compensation being paid on one basis instead of another and in a greater or a lesser amount being received by the claimant. In the broad sense to which I have referred it is, therefore, a question of disputed compensation, but it is one which the court is not only entitled but bound to decide itself. In my judgment, it is clear from this that the phrase ‘any question of disputed compensation’ in section 1 of the 1961 Act cannot be used in the broad sense for which Mr Ground contends. Similarly, in the present case the dispute between the parties is purely one of law and its resolution depends on a correct analysis of the contractual relationship between the parties. It is a disputed question of contractual rights. If it is decided in favour of the council, then the compensation payable will be the existing £15,000, and that amount will not be in dispute. Equally, if it is decided in favour of Duttons, it is clear that the amount of compensation will have to be agreed or assessed by the Lands Tribunal and that it cannot be assessed in these proceedings. It may well be that the point could have been decided by the Lands Tribunal had Duttons sought to take it there. A similar point was so decided and then went to the Court of Appeal in Munton v Greater London Council [1976] 1 WLR 649, which is a case to which I shall have cause to return later. But that does not mean that the jurisdiction of the court is necessarily ousted. On general principles I would want to see a very much clearer provision than that contained in section 1 of the Land Compensation Act 1961 before I was prepared to hold that the jurisdiction of the court in deciding purely legal questions of a type which it considers every day of the week had been ousted. In support of his argument on the jurisdiction point Mr Ground referred me to Harrison v Croydon London Borough Council [1968] Ch 479, where the plaintiff had issued an originating summons asking whether on the true construction of section 1 of the 1961 Act and certain words used in the then current development plan for the area in question it was to be assumed for the purpose of assessing compensation that planning permission would be granted in respect of the plaintiff’s properties for office development. Pennycuick J held that the court had no jurisdiction to determine that question, and one of his reasons for taking that view was that the significance of the answer to that question lay wholly in its effect as a factor in the assessment of the compensation. In other words, as he himself said later on at p 489, the learned judge took the view, and if I may respectfully say so he was obviously right to do so, that the court was being asked to adjudicate in isolation on only one of the matters which would have to be taken into account by the Lands Tribunal in the computation of the compensation. In my judgment, that case is clearly distinguishable from the present on that ground. It is also to be noted that counsel for the plaintiff had contended that the question raised by the summons was analogous to a question of title. But the learned judge said that it did not seem to him that that was a true analogy. Then he said this (at p 490): ‘The present question concerns the amount of the compensation. A question of title concerns the person to whom the compensation is to be paid and does not, except perhaps indirectly, concern the amount of the compensation.’  In my judgment, the question in the present case is analogous to a question of title and it is also one which concerns the amount of compensation only indirectly. In the circumstances, I have no hesitation in rejecting the council’s preliminary point on jurisdiction. In order to understand the substantive arguments, I must refer briefly to those principles of the law of compulsory acquisition which are material to this case. They are conveniently summarised in Halsbury’s Laws of England, 4th ed, vol 8, para 136, under the heading ‘Relation of parties as vendor and purchaser after notice to treat,’ as follows: The effect of serving a notice to treat is to establish a relation analogous in some respects to that of vendor and purchaser, a relation which binds the owner of the land to give up the land subject to his being paid compensation, and which binds the undertakers or acquiring authority to take the land, but there is no contract of sale until the price is ascertained and the land remains the property of the landowner. Then it goes on to say that both parties have the right to have the price ascertained under the statutory procedure, and so forth. And then a little further down the learned authors say this: When the price has been ascertained the relationship of vendor and purchaser exists between the parties as if there had been an ordinary agreement for sale, and . . . the parties’ rights and23 duties are the same as those arising out of an ordinary contract for the sale of land including the right to have the contract enforced by specific performance, and the owner’s interest then, but not before, becomes an interest in personalty. Mr Millett, who appears for Duttons, submits that there never was a binding agreement as to price. He says, and I do not think this has been in dispute during the hearing before me, that the parties arrived at no agreement independently of the statutory procedure. Then he says that the price never was ascertained so as to create the relationship of vendor and purchaser within the principles summarised in the passage from Halsbury which I have just read. And he says, in my view quite correctly, that in order to determine whether the price has been ascertained or not, you have to ask, as in any normal case of vendor and purchaser, whether the parties have agreed a price in circumstances which makes that agreement binding in law. He puts his argument that the parties in this case never did so agree the price in two ways. First, he says that the parties were not negotiating the amount of compensation which would be payable by the council for the acquisition of the interest to which the notice to treat applied, that is to say Duttons’ freehold interest subject to Mr Johnson’s tenancy, but that they were negotiating for the acquisition of the whole freehold interest with vacant possession. Mr Millett says that the agreement by Duttons was to give vacant possession, and accordingly that was the interest in respect of which compensation was being or must be taken to have been negotiated. I must say that I find this argument a little unrealistic. It seems to me that the parties were in practice negotiating the amount of the compensation which would be payable in respect of the freehold subject to the tenancy. That is borne out both by the fact that the council knew about the tenancy before the price was finally agreed and by the fact that the council later paid Mr Johnson a substantial amount of money for his own interest. And even if Mr Millett’s view of the negotiations was correct, it does not, in my judgment, follow that the agreement as to the £15,000 was not binding so far as Duttons’ actual interest was concerned. In the circumstances, I reject Mr Millett’s argument on that point. The second argument on this part of the case is based on the terms of the town clerk’s letter of May 29 1968 to which I have already referred. Mr Millett says that that letter makes it clear that the council only entered into the agreement as to the price subject to a contract to be approved by the town clerk, that is to say, subject to contract in the sense in which that term is understood by conveyancers. He has referred me for this purpose to the Munton case, from which it is clear that if that were a correct view of the relationship between the parties, then there certainly was not a binding agreement as to price. However, that is not, in my view, a correct reading of the town clerk’s letter of May 29. That letter, like many which come to be scrutinised in the course of proceedings in this court, is not perhaps with hindsight as happily worded as it might have been. But, in my judgment, it would be putting altogether too strained an interpretation upon it to say that the words ‘subject to a contract to be approved by me’ meant that the council’s approval of the purchase price of £15,000 had only been on terms that there would actually be a contract in a form approved by the town clerk and that that contract would be signed and exchanged on both sides in accordance with normal conveyancing practice. Clearly the town clerk did not understand it in that way, because he went on to say that he agreed that contracts might be dispensed with. It seems to me that the natural and normal meaning of the words ‘subject to a contract to be approved by me’ is that the council were leaving it to the town clerk to deal with the contract, and if he decided that this was a case where it was not necessary to have contracts, that would be all right by them. So I reject Mr Millett’s argument on that point as well. On that footing, there was an agreement as to price in 1968. It then becomes necessary to see exactly what that agreement was and what later befell it. Before I do that it is important that I should say something about the background circumstances against which that agreement was entered into. It is clear from the correspondence that when the amount of the compensation was being negotiated in 1968 both Duttons’ surveyors and the regional licensed property valuer paid close attention to the trading figures, in particular to those in the immediately preceding three years. It is not, I think, in dispute that barrellage, as it is called, is one of the more important factors, perhaps the most important, in assessing compensation for the compulsory acquisition of a public house. At the same time it appears clear that, subject to the minimum statutory notice of 14 days and the practicalities of any particular case, the date when entry is to be made is very much at the dictation of the acquiring authority. It would therefore seem to me to be very strange if an acquiring authority could serve a notice to treat, could then agree the amount of compensation on the basis of the most recent barrellage figures, but could then, albeit for very good and proper reasons, postpone the date of entry almost indefinitely while asserting a right to stand by the previously agreed figure for compensation, even in the face of later trading figures which would produce an entirely different result. That is what the council are claiming to do in this case. It would seem to me to be very strange if the council, having put off entry until 1976, were still able to assert a right to pay compensation on figures which were agreed as long ago as 1968. However, legislation and statutory procedures do sometimes produce strange results, and I must not jump to a conclusion which may not on closer examination be justified. Mr Millett’s arguments on this part of the case are founded on the fact that, as I have already held, the parties must be taken to have intended in June 1968 that entry would be made and the compensation paid within a reasonable period thereafter; that it was unlikely to be before 1971, but, on the other hand, that it was likely to be in 1971 or shortly thereafter. Mr Millett again has two strings to his bow. First, he says that by June 30 1976, when entry was made, the council had either abandoned the contract altogether, or at least had lost their right to have it specifically performed. He says that in either case they then had no right to or interest in the land, and accordingly that, whatever may have been agreed before, compensation must be assessed as at the date of entry. Secondly, and in the alternative, he says that so far as the agreement as to price is concerned, it was conditional on completion taking place by 1971 or shortly thereafter, and in any event long before June 30 1976. It seems to me that logically I should deal with the second of Mr Millett’s two arguments first. I note that in the Munton case, the ‘subject to contract’ case, Lord Denning MR said this (at p 655): ‘The one question is was there a firm agreement on the price before the Borough entered into possession?’  In the same way I would say that the first question here is: Was there an agreement that the compensation should still be £15,000, even if completion did not take place during the period which was within the contemplation of the parties in June 1968?  It seems to me that if you take into account the method of assessing compensation in this case and the fact that the date of entry was very much at the dictation of the council, the answer to that question must be ‘No.’  I find it impossible in the circumstances to construe the agreement between the parties as being that the price should be £15,000, irrespective of the date on which entry was actually made. Entry might not have been made until 1980, 1985 or even later. In my judgment, Duttons’ agreement to accept the £15,000 necessarily assumed that entry would be made and the sum paid within a reasonable period after June 1968. That reasonable period expired in 1971 or shortly thereafter. It is not necessary for me to be more precise than this, because it is on any footing clear that June 30 1976, or even (so that there should be no doubt about it) January 1 1976, was well outside any period which was reasonable, or which could24 have been within the contemplation of the parties in June 1968. On that ground, therefore, I hold that the agreement as to price no longer stands and that it had ceased to stand by January 1 1976 at the latest. In the circumstances, it must follow that compensation falls to be assessed as at the date of entry on June 30 1976 in accordance with the decision of the House of Lords in Birmingham City Corporation v West Midland Baptist (Trust) Association Inc [1970] AC 874. On this view of the matter it becomes unnecessary for me to consider Mr Millett’s alternative arguments based on the abandonment of the contract, alternatively on the loss of the council’s right to have it specifically performed, and I propose to say nothing about those arguments. I will make a declaration in the form requested in the originating summons in these proceedings. The declaration was granted with costs.