Fairmount Investments Ltd v Secretary of State for the Environment and another

Owners of Southwark houses object to CPO–Inquiry followed by inspection of the properties–Financial viability of owners’ proposals for rehabilitation commented on by inspector in report–Held not to have been in issue at the inquiry–Inspector’s reasons included extent of settlement of foundations, attributed by him to expansion and contraction of clay base–This matter also held not to have been in issue at the inquiry–Inspector’s reliance on ‘tell-tale’ observed during his inspection held improper–CPO quashed on ground of breach of rules of natural justice This was an appeal by Fairmount Investments Ltd, from a judgment of Cusack J in the Queen’s Bench Division on February 25 1975 dismissing their application for an order to quash the London Borough of Southwark (Aldbridge Street) (No 1) Compulsory Purchase Order 1973, made by the second respondents, the London Borough of Southwark, on January 9 1973 and confirmed by the first respondent, the Secretary of State for the Environment, on April 9 1974. Mr M Mann QC and Mr D G Robins (instructed by Laytons & Charles Ingham, Clegg & Crowther, agents for John Gorna & Co, of Manchester) appeared for the appellants, and Mr W J Glover QC and Mr H K Woolf (instructed by the Treasury Solicitor) represented the first respondent. The second respondents took no part in the proceedings. Giving judgment, CAIRNS LJ said: This is an appeal from a decision of Cusack J given on February 25 of this year on an application under the Housing Act 1957 to quash a compulsory purchase order made under that Act by the second respondents, the London Borough of Southwark, and confirmed by the first respondent, the Secretary of State for the Environment. The order was made on January 9 1973 under section 43 of the Act. It is called the London Borough of Southwark (Aldbridge Street) (No 1) Compulsory Purchase Order 1973. It covered 68 houses. The appellant company, Fairmount Investments Ltd, is the owner of 64 of them. The area in which these houses were situated had been declared under section 42 of the Act to be a clearance area, it being the wish of the local authority to clear it for the purpose of providing a public open space. The compulsory purchase order required the houses to be demolished as being unfit for human habitation. The owners objected to the order on the ground that the houses were not unfit for human habitation, alternatively that if they were, they were suitable for rehabilitation rather than for demolition. The Secretary of State ordered a public local inquiry under the third schedule to the Act, paragraph 3 (3) of which provides as follows: If any objection duly made is not withdrawn, the Minister shall, before confirming the order, either cause a public local inquiry to be held or afford to any person by whom an objection has been duly made as aforesaid and not withdrawn an opportunity of appearing before and being heard by the person appointed by the Minister for the purpose, and, after considering any objection not withdrawn and the report of the person who held the inquiry or of the person appointed as aforesaid, may, subject to the provisions of this part of this schedule, confirm the order with or without modification. The Secretary of State, of course, fulfils the functions which were conferred upon the Minister by that subparagraph. The inquiry was held on September 18 and 19 1973, and after hearing the evidence for the local authority and for the owners, after hearing the submissions of advocates on both sides, and after inspecting the premises, the inspector made a report recommending that the order be confirmed. The Secretary of State accepted this recommendation and confirmed the order. The owners applied to the High Court, as they were entitled to do under paragraph 2 of the fourth schedule to the Act, for the order to be quashed. The application came before Cusack J, who dismissed it, and the owners appeal. It is provided in paragraph 2 (2) of the fourth schedule to the Act that such an order may be quashed ‘if it is not within the powers of the Act or if the interests of the applicant have been substantially prejudiced by any requirement of the Act not being complied with.’  The owners made an application under each of those heads, contending that the order was not within the powers of the Act, because the rules of natural justice had not been observed, in that the inspector and the Secretary of State took into account matters not raised at the inquiry and paid attention to something which the inspector observed in the course of his inspection which the owners had no opportunity to deal with; and they contended, for the same reasons, that the Secretary of State failed to comply with the requirements of the Act and that they were thereby substantially prejudiced. Section 4 (1) of the Act provides: ‘In determining for any of the purposes of this Act whether a house is unfit for human habitation, regard shall be had to its condition in respect of the following matters, that is to say (a) repair; (b) stability; (c) freedom from damp; (cc) internal arrangement; (d) natural lighting; (e) ventilation; (f) water supply; (g) drainage and sanitary conveniences; (h) facilities for storage, preparation and cooking of food and for the disposal of water; and the house shall be deemed to be unfit for human habitation if and only if it is so far defective in one or more of the said matters that it is not reasonably suitable for occupation in that condition.’  The case presented by the council was that the houses were defective in a number of respects, and the inspector reported in paragraph 78 of his report that there were defects under (a), (b), (c), (g) and (h) in varying degrees which rendered the properties unfit for human habitation by reason of the sum of those defects. The finding of unfitness is not under attack by the owners. But a finding in paragraph 78 of the report which is attacked by them is that under (b), which is headed ‘Stability’ and is in these terms: There is evidence of settlement in all of these properties which is evidenced in many humped and sloping ground floors, sloping first floors, the majority of door heads are out of alignment varying from about 1/4 in to 1 1/2 in in the worst cases. Many side back-addition walls are bulged; some of these walls have been rebuilt owing to war damage, but some others appear to have been rebuilt pre-war; this is apparent by materials and workmanship. These rebuilt walls are generally sound. Most back walls to the back additions appear to be somewhat bulged outwards.8 This is evidenced by excessive mortar filling between the sash window and the wall in the external window reveal. The back walls of the three-storeyed blocks appear to be bulged outwards at second-floor level and this is evidenced by long vertical cracks in the staircase partition walls at or near their junctions with the back walls. These cracks extend through the partition walls from staircase to bedrooms. I would underline the next sentence: A ‘tell-tale’ has been secured across a typical crack in reference P62, and this has sheared through. A number of the lean-to scullery blocks are pulling away from the main building at the roof intersection level with the main back addition wall and fractured brickwork is frequently evidenced at this point. Then in paragraph 81 (c) of the report the inspector expresses this opinion: The settlement which is evident in all the houses in clearance area no I would appear to be due to the foundations not having been taken deeply enough into the clay so as to avoid that area which is subject to seasonal expansion and contraction. Because of this and other previously stated defects I am of the opinion that satisfactory rehabilitation would not be a financially viable proposition and that the award of discretionary grants would be unlikely. In paragraph 102 he said: I am satisfied that [with an exception to which it is not necessary to refer] the best method of dealing with the conditions is the demolition of all the buildings in the clearance areas. The buildings are old and of an out-moded type, but they are of a character and general location which might warrant consideration for rehabilitation, were they of satisfactory general structural condition. The properties in the order are largely held by one owner who wishes to rehabilitate and improve his holding. Since for reasons already stated, I do not consider this to be a financially viable proposition, the council are justified in seeking to acquire the properties in order to consolidate the total of three ownerships into one controlling interest so that the clearance area can be redeveloped for approved purposes. Then in paragraph 104 he formally recommended that ‘the London Borough of Southwark (Aldbridge Street) (No 1) Compulsory Purchase Order 1973 be confirmed,’ with certain minor qualifications. It is contended by the owners that the financial viability of rehabilitation was not an issue raised at the inquiry; nor was it suggested in evidence that the foundations had not been taken deep enough into the clay; and in connection with settlement, it is complained that the owners had no opportunity of dealing with the ‘tell-tale,’ this being something which the inspector observed after the close of the inquiry when he went to inspect the premises. In these respects it is contended that the inspector in reaching his conclusions, and the Secretary of State in acting upon the inspector’s recommendation, did not comply with the rules of natural justice, and therefore that the inquiry was a nullity, so that the confirmation of the order was not within the powers of the Act, or alternatively a requirement of the Act was not complied with and the owners have been substantially prejudiced thereby. There is no reported case in which the issues correspond exactly with those raised on this appeal, but very valuable guidance is to be found in the decision of Browne J (as he then was) in Hibernian Property Co Ltd v Secretary of State for the Environment (1973) 27 P & CR 197. That was a case relating to an inquiry under the Housing Act 1957 where the inspector after the inquiry had visited the premises and had conversations with the occupiers which were taken into account in the report to the Secretary of State, and Browne J held that this was not in accordance with natural justice. The judgment contains ample citation of authorities in this court and in the House of Lords, and contains, among other things, these propositions: at p 207, that the functions of the inspector and the Secretary of State are quasi-judicial and that each is bound to observe the rules of natural justice; at p 210, citing from the judgments of Denning and Parker LJJ in Steele v Minister of Housing and Local Government and Another (1956) 6 P & CR 386, that the inspector must not take into consideration information coming to him in the absence of one party, and must not pay attention to material unless the parties have had the opportunity of commenting upon it; and at p 212, that the test as to prejudice is not whether the party is proved to have been prejudiced, but whether there was a risk of prejudice. I respectfully agree with all of those propositions. So far as the actual decision is concerned, it is contended on behalf of the Secretary of State in this appeal that the observation of the ‘tell-tale’ is something very different from obtaining oral information from people seen at the time of the inspection. For my part, I can see no relevant difference between the two. It is conceded that what the inspector sees in the course of his inspection is by way of evidence in the course of the inquiry. Whatever may be the position in relation to seeing, for instance, cracks and other physical features of the houses of that kind, it appears to me that a ‘tell-tale’ is, as its name very aptly shows, something which is informing a person who looks at it of something just as would a piece of information given orally or a notice placed in the premises. The ‘tell-tale’ by having sheared is saying, ‘At some stage there was some settlement which caused this crack to widen.’  Another decision from which I derive assistance is that of the Divisional Court in R v Paddington & St Marylebone Rent Tribunal [1949] 1 KB 666, where the decision of a rent tribunal was based in part on their having found on inspection of the premises that the height of some rooms in some flats was low. This matter was not referred to at the hearing, and this was one of the grounds upon which the court granted an order of certiorari and quashed the decision. It was contended on behalf of the Secretary of State that the issue of stability was clearly raised at the hearing of this inquiry; that settlement was referred to in that connection, and that settlement would only be relevant to stability if it was settlement which was continuing or was liable to continue; that the inspector was therefore entitled to take into account anything he observed in the course of his inspection which tended to show that the settlement had not ceased; and further, that he was entitled to form a view based on his professional experience (the inspector is a Fellow of the Royal Institute of British Architects) as to the cause of the settlement. With regard to financial viability, it is said that the owners had put before the inspector a valuation directed to showing that the cost of carrying out conversion and improvement on the premises in a way that they were willing to do was such that the value of the houses after repair would be £1,450 more than their original value, plus the cost of such conversion and improvement, minus an improvement grant of £2,400 which they expected to receive, and it was contended that the inspector was entitled to conclude from his professional knowledge that rehabilitation in the sense in which it was found to be required here by the inspector, that is to say, rehabilitation involving major structural work, would cost much more and would not be financially viable. I cannot accept these contentions. It appears to me from the report that the matter of stability or instability was dealt with at the hearing only as part of the defects constituting unfitness. In this connection I quote from paragraph 14 of the report, under the heading ‘The case of the council’: ‘On unfitness. The houses in the clearance areas suffered from external and internal disrepair, there was evidence of settlement, rising and penetrating dampness, there were poorly defined changes of level inside the houses, the external was were not readily accessible, facilities for the preparation and cooking of food and for the disposal of waste water were inadequate.’  Then paragraph 15: ‘The council were satisfied that the dwellings were unfit for human habitation and that the most satisfactory method of dealing with the conditions in the clearance areas was by the demolition of all the9 buildings in the clearance areas.’  Then paragraph 37 (b): ‘The properties were unfit for the reasons already stated. The objectors’ proposed unit of rehabilitation was not favoured by the council; in the council’s opinion a maisonnette over a ground-floor flat was unsuitable on social grounds. It created a fire risk, and a pram belonging to the upper floor tenant would have to be kept in the common entrance passage which was about 3 ft wide (3 ft 3 in where measured by the inspector).’  It will be observed that the council were there saying that the properties were unfit ‘for reasons already stated,’ and the objection to rehabilitation was put forward on the basis that ‘a maisonnette over a ground-floor flat was unsuitable on social grounds.’  In paragraph 52, in the case for the objectors, the matter of unfitness was put as follows: ‘The grounds of unfitness of each of these properties were examined in great detail. In general terms it was submitted that all the alleged defects listed in the principal grounds, under items (a) to (h) of section 4 of the Housing Act 1957, were, upon examination, trivial or exaggerated. Any disrepair that existed in the particular house or its curtilage did not constitute a threat to the health of or cause any serious inconvenience to the occupants. There was no evidence of instability which would constitute a threat to the occupants of any house. Indeed, the local authority had, under the heading of stability, mentioned only external settlement or internal settlement. The existence of settlement did not indicate the probability, nor indeed the slightest possibility, of further movement, and this was no ground for unfitness.’  Again it is ‘unfitness’ that is being referred to. The grounds on which the local authority were contending that rehabilitation was unsuitable were, therefore, that the owners’ proposals for conversion and improvement would not create satisfactory units; and further, it appears from other parts of their contentions that they were saying that in any case they wanted to turn the area into a public open space, a matter which is not relevant on this appeal. Whether the inspector’s opinion that settlement was due to the foundations not having been taken deeply enough was an inference from any evidence given at the inquiry or was inferred from what he observed on the inspection is not apparent, but there is nothing to indicate that the owners’ counsel or witnesses ever had the opportunity of dealing with it. If it had been raised they might have been able to counter it, which would have a major bearing on the practicability of rehabilitation. With regard to financial viability, if it is indeed correct (and there is nothing in the report to show whether it is so or not) that the inspector drew some inference about the cost of rehabilitation from the valuation put forward for conversion, this was not an inference that should have been drawn without the owners having the opportunity of challenging it. Finally, the ‘tell-tale,’ though it may seem a small matter, was so far as appears the one piece of evidence which pointed towards progressive settlement. It was not very cogent evidence without something to show how long it had been there and when it had sheared, but it seems that the inspector placed some reliance upon it, and in my view it was as wrong for him to do so as it was for the rent tribunal in the Paddington case to place reliance on the height of the rooms observed in the absence of the parties. I regard anything observed by an inspector on an examination of property as evidence just as much as anything that is put before him in writing or told to him by witnesses, and indeed, that is accepted on behalf of the respondents to this appeal. In so far as a view does no more than help him to a clearer understanding of evidence given at the hearing, it can properly be taken into account without the need for any further opportunity of comment. Nor would such an opportunity be necessary if witnesses on one side said that a certain defect was present, and witnesses on the other side denied it, and observation indicated directly which side was speaking the truth. But if some feature is observed which nobody has so far mentioned, it is not in accordance with natural justice for it to be used in support of a conclusion unless the parties are told of it and are enabled to present argument, and it may be evidence, upon it. Nothing inconsistent with the views that I have expressed is, in my judgment, to be found in the case to which we were referred by Mr Glover, Salsbury v Woodland [1970] 1 QB 324. There the judge who had tried a road accident case went after the court hearing to have a view of the road where the accident had occurred. The grounds of appeal were that he should not have had a view, and that on the whole of the evidence, including what he had seen on the view, the decision was against the weight of evidence. Both of these arguments were rejected. In the present case there is no suggestion that the inspector should not have had a view. Everybody agrees that it was a proper thing for him to do. But the question is what he should observe, and what use should he make of what he does observe. In the Salsbury case, at p 343, Widgery LJ (as he then was) in the course of his judgment said: ‘The expression ‘view’ is used indifferently to describe two very different things. Sometimes it refers to what Denning LJ spoke of as a judge going to see some public place, where all that is involved is the presence of the judge using his eyes to see in three dimensions and true colour something which had previously been represented to him in plan and photograph.’  That was the type of view which the Court of Appeal found that the judge had had in that case and which they held not to be objectionable. Similarly Sachs LJ, at p 350 of the report, said: ‘Knowing how plans and photographs may give an incomplete impression of a place, it may, indeed, often be wise to go and have a look in order to get a first hand impression of the locality as a whole–to obtain a clearer and three-dimensional picture, so that, in effect, the evidence falls into place. It must be remembered that all he is doing is to appreciate the evidence already given in the light of a static background.’  It was a different use, it appears to me, which was made by the inspector in this case of the view which he had. Another case that was mentioned was a very recent one of Weatherall v Harrison, reported in The Times on November 1. There it was decided that a professionally-qualified magistrate can give effect as part of the background of a case to his expert knowledge. Well, of course, so can an inspector at an inquiry of this kind. But that is very different from basing his decision on matters which are not raised at the inquiry or on a piece of evidence obtained in the absence of the parties. Mr Woolf drew our attention to the Town and Country Planning (Inquiry Procedure) Rules 1974. In rule 11 of those rules provision is made for a site inspection, and in rule 12 (2) there is provision for the Secretary of State to notify the parties if new evidence or a new issue has come to light after the close of an inquiry, and to give an opportunity for representations to be made or an opportunity to ask for the reopening of the inquiry. It was pointed out that no reference appears in those rules to the reopening of an inquiry by an inspector. Admittedly the rules do not apply to this particular inquiry with which we are concerned, but it is said that if in any circumstances reopening by an inspector were considered appropriate, that would be something which would be dealt with in these rules, which were made after consultation with the Council on Tribunals. I cannot accept that because there is no reference in the rules to an inquiry ever being reopened by an inspector there could be no circumstances in which it would be proper and necessary for him to reopen an inquiry. It is self-evident that in some cases reopening would be needed: if, for instance, an important change of circumstance took place between the time when he concluded the hearing and the time when he made his report, or if a vital and completely new fact came to light during that period.10 The only question, to my mind, is in what circumstances such as reopening is necessary. Next Mr Woolf says that under the third schedule, paragraph 3 (3) (which I have read), there need not be a public inquiry at all. What would be natural justice if there were no inquiry, but the alternative procedure provided by that sub-paragraph were adopted, it is unnecessary for us on this appeal to go into. But Mr Woolf goes on to say that in the case of Local Government Board v Arlidge [1915] AC 120 the House of Lords held that it was a mistake to suppose that an inquiry made in circumstances parallel to these is subject to all the rules applicable to a trial in a court of justice. The actual decision in the case was that there is no need for a party to be shown a copy of the report made by the inspector to the Minister, and there is no right to obtain a copy of such a report. But it will be noted that in the course of the speeches in the House of Lords it was made abundantly clear that there are certain rules of natural justice which are required to be observed in connection with such an inquiry as well as in a court case. Lord Haldane LC, at p 133, referred to the well-known case of Board of Education v Rice [1911] AC 179 in that connection, and referring to some of the observations of Lord Loreburn in a speech in that case, said: ‘But he went on to say that he did not think it was bound to treat such a question as though it were a trial. The board had no power to administer an oath, and need not examine witnesses. It could, he thought, obtain information in any way it thought best, always giving a fair opportunity to those who were parties to the controversy to correct or contradict any relevant statement prejudicial to their view.’  At p 141, in the speech of Lord Parmoor near the foot of the page, is an actual citation from Board of Education v Rice on the same point. One question of importance here is whether there was some new issue of fact raised after the inquiry. Mr Woolf contends that there was not; that the issues at the inquiry were unfitness and whether rehabilitation was appropriate, and that both of these were fully gone into. But if the broad issues are dealt with, as they were here, by considering certain sub-issues at the hearing, and then in the report some quite different sub-issue is considered and a conclusion upon it is reached by the inspector, that is indeed, to my mind, a new issue. Financial feasibility of such rehabilitation as might be needed to remedy defects in the foundation was never considered at the inquiry. It is said that it is inconsistent for the owners to attack the decision on rehabilitation while accepting the decision on unfitness. I do not for a moment accede to that. Acceptance of the decision on unfitness does not involve acceptance of all the grounds upon which that decision was based. It was put to us that it was for the owners to present their case of financial feasibility on the basis of structural rehabilitation. Again, I cannot accept that. Until it was raised that that form of rehabilitation was not financially feasible it was not something that the objectors could be expected to deal with. Finally, there is the contention that the reopening of an inquiry of this kind would be a matter of considerable expense to a great many people, and delay, both of which are matters to be avoided. They could be avoided if the inspector found it possible to put out of his mind something which he had observed and on which he ought not to base his report. That, of course, relates only to the matter of the ‘tell-tale.’  So far as the other matters are concerned, the issues which were not dealt with at the hearing, but which were dealt with as part of the inspector’s opinion and on the basis of which he made his recommendations, I can only say that it seems to me unfortunate that if he were going to deal with it in that way he should not himself have raised it before the hearing came to an end, which might have avoided any calling together again of the parties for the purpose of continuing the inquiry. For the reasons that I have given, I am of the opinion that in this case the rules of natural justice were not adhered to, that in consequence the confirmation of the order was not within the powers of the Act, and also that the owners were substantially prejudiced by the requirement of the Act for an inquiry, which must obviously be a proper inquiry, not being complied with. Accordingly, I would allow the appeal and quash the order. Agreeing, JAMES LJ said that as the court was differing from the learned judge below, and out of courtesy to the careful arguments of Mr Glover and his learned junior Mr Woolf, he ought perhaps to deliver a separate judgment, but he did not propose to review all the factors or all the points which had been covered in the judgment of Cairns LJ. The inspector had based his conclusion that rehabilitation was not a financially viable proposition on unfitness generally and (in particular) on the houses not having been taken deeply enough into the clay to avoid the area subject to seasonal expansion and contraction. That opinion appeared to be based expressly upon that which was evident in all the houses, and referred to what the inspector saw on his inspection; and it was because of the feature that he found, that it was apparent that the foundations had not been taken deeply enough into the clay, that the inspector concluded that the rehabilitation was not financially viable. The Secretary of State for the Environment by letter dated April 9 1974 reported to the borough and the objectors his decision to confirm the compulsory purchase order. The letter stated that the inspector’s findings, conclusions and recommendations had been generally accepted, and it made specific reference as a matter of recital to the matters of the foundations and the apparent cause for the evident settlement. Paragraph 8 of the letter read: ‘Careful consideration has been given to the objectors’ arguments that the dwellings were not unfit and that they were capable of being converted and rehabilitated at a reasonable cost. While recognising that it is government policy to secure the rehabilitation of older houses where this is practicable, it is noted that the inspector found that the dwellings had serious defects, including evidence of settlement, and that their general structural condition was not satisfactory.’  It appeared to him (his Lordship) that the finding of the inspector on his inspection of the premises as to the probable cause of the evident settlement played some part in his ultimate conclusion, and also, naturally enough, was a feature taken into account by the Secretary of State. The argument for the respondents was that neither the Secretary of State nor the inspector had failed to exercise their functions in accordance with the rules of natural justice. The inspector was entitled to make an inspection; indeed he was invited to make an inspection, and was invited to arrive at conclusions based on what he saw at the inspection. The issue ‘rehabilitation or demolition’ only arose for determination, said the respondents, if the inspector reached, as in fact he did reach, the conclusion that the properties were unfit, and therefore was an issue to be determined by him on the basis, already decided, that the properties were unfit by reason of instability, or, using the words of the Act, ‘a condition in respect of stability.’  Upon that basis, the condition of the premises in respect of stability had already, said the respondents, been fully canvassed, and it was a factor which the inspector would have to consider when he went on to the next issue, namely, that of possible rehabilitation. The respondents said that upon that issue the appellants decided to rest their case upon the evidence that they put before the inspector as to their feasibility project and the figures they advanced as to the value of the houses then as they were, the cost of immediate repairs, the cost of renovation and alteration to provide for a ground-floor flat and a maisonnette on the upper floor, in which calculations they did not include any element at all for the cost of the work of putting right any structural defects due to settlement. The respondents said that the appellants in this regard were in11 that difficulty which confronts every man who tries to ride two horses at once. If they had included calculations of the cost of work based on work being necessary to rectify defects of instability, it would go to undermine their case that the houses were not unfit, and if they chose to rest their case without incorporating such material, then, said the respondents, the inspector was fully entitled to consider the evidence that was before him, and if he rejected that evidence put forward by the appellants, then he was entitled to reach the conclusion that the case for rehabilitation had not been made out. So the respondents contended that Cusack J was right in the way he approached that aspect of the matter and dealt with at page 9 of his judgment. He (his Lordship) heeded the warning to be found in the case of Local Government Board v Arlidge and did not seek to apply principles applicable to the trial of a suit between parties in a court of law to the conduct of an inspector conducting an inquiry which he had been appointed by the Secretary of State to conduct. But he did find, having warned himself in that way, that although the inspector was entitled to go about the inspection in the way he did, was entitled to take note of what he had found, was entitled to reach conclusions based upon what his senses told him, still, whatever senses he used and applied, he did do something which he ought not to have done, and that was to take into account certainly his opinion that the condition as to stability was affected by the foundations not having been taken deeply enough into the clay, and possibly the ‘tell-tale,’ without giving the opportunity to the objectors at the inquiry of dealing with these matters in respect of the financial feasibility of rehabilitation. He (James LJ), for his part, was not very much impressed with the argument based upon the finding of the ‘tell-tale.’  It was an argument put forward by Mr Mann in a very restricted way, and one could see why; indeed, the respondents saw why. The reference to the ‘tell-tale’ in paragraph 78 of the report was a plain statement of fact: ‘A ‘tell-tale’ has been secured across a typical crack in reference P62 and this has sheared through.’  The inspector who made that report was a professional gentleman, an architect with high qualifications, and one had to assume that he would not be misled into drawing conclusions from that bare fact. Nevertheless, it was a possible argument of which the appellants could avail themselves that there was something there in the report which might possibly have reference to the later opinion as to the cause of the settlement. But as it stood by itself, he (his Lordship) would not regard the reference to the ‘tell-tale’ as being any indication that the inspector took something into account that he ought not to have done without giving the appellants notice of the fact or giving them the opportunity to deal with it either by evidence or argument. But on the other aspect, the causation of the cracks evidencing settlement, he was quite satisfied that that was a matter which the inspector gleaned from his inspection and which did go towards his conclusions. This was not a new major issue, but was a new sub-issue on rehabilitation affecting the heart of the appellants’ case. It introduced a matter with which they would have to deal specifically if they were going to meet it by evidence or by argument, because it was a matter which, on the face of it, falsified their feasibility project, being inconsistent with it. They were not given the necessary opportunity, and they were not given the information that they should have been given. He (his Lordship) thought that that was a breach of the rules of natural justice, and for that reason the position was that the appellants had not had a fair inquiry. In saying that, he did not for one moment wish to imply that the inspector thought he was behaving unfairly or thought otherwise than that he was behaving fairly. It was not a case of attributing any moral blame at all, but there was here a breach of the rules of natural justice applicable to the conduct of the inquiry. For those reasons, he thought the appeal should be allowed and the order quashed. SHAW LJ: As I agree fully with both the judgments which have been delivered, I content myself by adding only a few sentences. This court is not called upon to apply any other than familiar and well-established principles to the particular facts. The only difficulty has been in seeing what were the facts upon which the inspector ultimately rested his conclusion as to the financial feasibility of the project of rehabilitation. The difficulty arose because he took account of a material factor which came to his notice on an inspection after the hearing was concluded and which had not been canvassed before him. It was urged on behalf of the respondents that the general question of stability was raised and investigated at the hearing. So it was; but the impact on the decision of that question of evidence not led or tested at the inquiry was never considered during the hearing. There was neither discussion nor argument as to a state of things which in the end appears to have been regarded by the inspector as weighty, even if not of itself decisive. This was simply that the foundations were defective. There can be no doubt that that was a matter which affected his mind (and the objectors could not have known it) in deciding whether the rehabilitation contended for by the appellants was financially practicable or not. The ‘tell-tale’ is perhaps of little consequence, except that it is clear from the way in which the inspector put the matter that it was something that reinforced his view as to the non-feasibility of rehabilitation. That being so, it seems to me that there was a failure to recognise what natural justice required, namely, that a proper opportunity should have been afforded to the objectors of dealing with this new aspect of the problem. I would allow this appeal. The appeal was allowed, with costs in the Court of Appeal and below. Leave to appeal to the House of Lords was given on an undertaking that the Secretary of State would not seek to alter the order for costs made by the Court of Appeal and would not apply for costs of the appeal to the House of Lords.