Hillman v Beverley Borough Council

Compulsory purchase — Compensation — Site value — House subject to demolition order — Appeal by house-owner from decision of Lands Tribunal — Rule (2) in section 5 of Land Compensation Act 1961 — Right of appeal against demolition order never exercised — Sympathy expressed by members of Court of Appeal but no error of law in tribunal’s decision The house owned by the appellant was a small, late-19th-century terraced house near Beverley Minster, purchased by appellant in 1971 — It became subject to a closing order in 1972, which was altered to a demolition order in 1979 — The house was purchased under compulsory powers by the borough council in 1983 and demolished by the council before the end of that year — Compensation was disputed and, on a reference to the Lands Tribunal, it was assessed by the member (Mr W H Rees FRICS) at site value, £200 — The valuation date was September 5 1983, the date when the council took possession of the house — The appellant claimed to have done a good deal of work to restore the property and believed that he had rendered it fit for human habitation — Nevertheless, he had not appealed against the closing or demolition order The appellant, who appeared in person before the Court of Appeal, submitted in his notice of appeal that the Lands37 Tribunal had erred in two respects: (1) by disregarding the provisions of section 5 of the Land Compensation Act 1961 and (2) by disregarding the provisions of section 9 of that Act — As the court pointed out, section 9, which dealt with the disregard of depreciation due to the prospect of acquisition, had no relevance to the present case — Rule (2) in section 5 was, of course, applicable — The question was: if the property had been put on the open market on September 5 1983, subject to the demolition order, what would a purchaser have given for it? — Before the Lands Tribunal, the appellant’s surveyor, who had never seen the house before demolition and did not know of the demolition order, put a value of £7,000 on it and considered that, if fully improved, it would have been worth £19,000 to £20,000 — The council’s surveyor, applying the normal basis for houses unfit for human habitation, concluded that the value was that of the cleared site only, namely £200 — This submission was accepted by the tribunal — Unfortunately, the appellant did not qualify for the alleviation of an owner-occupier’s supplement It was argued by the appellant before the Court of Appeal that the tribunal had reached a result which was wrong in law — The existence of a demolition order was not necessarily conclusive as a matter of law that only site value could be paid — There might be a higher value for a house subject to a demolition order depending on the prospect of the order’s being revoked — A potential purchaser might pay substantially more than the site value in the light of such a prospect — However, in the opinion of the court this argument failed, because of the finding by the member of the tribunal that ‘the possibility of the demolition order being removed seems to me to be very remote’ — This finding of fact was conclusive against the appellant’s submission — The decision of the tribunal was fully justified — Appeal dismissed — It was disclosed that at one point the appellant had rejected an offer from developers owning the adjoining land of a sum of £6,000 for his property; he took the view that the compensation he would receive would be more The following case is referred to in this report. West Midland Baptist (Trust) Association (Inc) v Birmingham Corporation [1970] AC 874; [1969] 3 WLR 389; [1969] 3 All ER 172, HL This was an appeal by John Frederick Hillman from a decision of the Lands Tribunal relating to the compensation payable to the appellant for the compulsory acquisition by the respondent East Yorkshire Borough of Beverley of the appellant’s house at 58 St Andrew Street, Beverley. The appellant appeared in person; Charles Cross (instructed by the solicitor to East Yorkshire Borough of Beverley Council) represented the respondent authority. Giving the first judgment at the invitation of Lloyd LJ, GLIDEWELL LJ said: The appellant, Mr Hillman, was the owner of a house at 58 St Andrew Street, Beverley, in what anybody who lives there still thinks of as the East Riding of Yorkshire. It was purchased by the Beverley Borough Council (the respondent) following the making of the Beverley Borough Council (St Andrew Street, Beverley) Compulsory Purchase Order 1981. That order was confirmed by the Secretary of State for the Environment on March 7 1983. The borough council obtained possession of the property on September 5 1983 and demolished it in November 1983. There was a dispute between Mr Hillman and the council as to the amount of compensation he should receive for the property. That dispute was referred to the Lands Tribunal. On April 25 1985 the member of the Lands Tribunal charged with dealing with this reference [Mr W H Rees FRICS] issued a decision awarding only the sum of £200 by way of compensation, that being what it was suggested was the value of the site on which the house stood. Mr Hillman now seeks to appeal against this decision by way of case stated. The appeal itself has had an unfortunate history. From the rudimentary documentation, so far as this matter is concerned, included in our bundle it seems that solicitors acting on his behalf as the member is concerned, the point of law can only be: was he correct in coming to the conclusion to which he did come as a matter of law? The facts of this matter are largely agreed. 58 St Andrew Street was a small terraced house built in the later part of the 19th century. St Andrew Street itself was a street of terraced houses lying to the south-east of and very close to Beverley Minster. Mr Hillman purchased the house in 1971. The former Beverley Borough Council had at that time a policy of seeking to acquire properties in St Andrew Street as they became available with a view to eventual redevelopment. Moreover, where houses were considered unfit for human habitation the council had a policy of making closing orders under the Housing Act 1957. Such an order was made in relation to 58 St Andrew Street on October 3 1972 and, according to an agreed statement of facts which was submitted to the Lands Tribunal, ‘Mr Hillman accepted at that time that the property was in a dilapidated state of repair and quite unfit to be inhabited’. On January 11 1979 the new borough council (the present respondent) substituted a demolition order for the closing order. Mr Hillman did not appeal against the making of that order. The closing order and the demolition order were both made under the powers contained in section 17 of the Housing Act 1957. That Act has now been replaced by the Housing Act 1985, but it was the 1957 Act which was in force at all relevant times. That section is part of a group of sections which, among other things, permit an authority, if they are satisfied that a house is unfit for human habitation and is not capable at reasonable expense of being rendered so fit, to make a closing order which has the effect that the building may not be occupied as a human habitation. A demolition order, which is the alternative of or which may under the statutory provisions be substituted for a closing order, is, as its name suggests, a requirement that the house be demolished. By section 21 of the Act a demolition order shall require ‘that the premises shall be demolished within six weeks after the expiration of that period’, that is to say, the date on which the order is to come into force; and section 17 contains another provision under which, if the local authority might make a demolition or closing order, but if it appears to them that the house can be rendered capable of providing accommodation which is adequate for the time being, they may purchase the property. The policy of the present borough council as set out in the case stated and in an affidavit we have from their solicitor, Mr Gregory, is that they had from 1979 onwards a policy for the redevelopment of the whole area to the south of the Minster, including the area in which St Andrew Street lay. The intention was, and as we understand it this has now happened, that the northern part of the area was going to be developed by a housing association partly by retaining some of the existing houses and reinstating them and partly by building new houses. Then the southern part of St Andrew Street was intended to be acquired by the council and sold to a firm of building developers who already owned some vacant land in the vicinity to enable them to construct new houses on the site so created. As I have said, it is recorded as a fact that Mr Hillman did not appeal against the demolition order. The right to appeal against such an order, and indeed the right to appeal against a closing order, is contained in section 20 of the Housing Act 1957. Mr Hillman tells us, and he sought to give evidence before the Lands Tribunal to this effect, that in the early part of his ownership of the property he had done a good deal of work to restore it, and had put it in a condition where, in his view at any rate, it was fit for human habitation. He says that the borough council never accepted that he lived in it himself, and he produced some photographs before the Lands Tribunal and before us which show the interior of what was obviously on the interior an attractive small cottage property with an attractive view from the rear garden. Nevertheless, as I have said, he did not appeal against the demolition order. If indeed at that stage, that is to say in 1979, it was not a property unfit for human habitation then he could have appealed and no doubt the appeal in those circumstances would have succeeded, but he did not. The property was not then demolished, the compulsory purchase order was made and confirmed, and so the matter came before the Lands Tribunal. In the meantime something like four years had elapsed. The task of the Lands Tribunal was to assess in accordance with the relevant legal provisions the value of this property on the date on which the council took possession of it, that is to say on September 5 1983. That was38 established by the West Midland Baptist (Trust) decision* in the House of Lords and is not in dispute. The Lands Tribunal was thus seeking to value a property which, at the date of its decision, had been demolished, and which, at the relevant date (September 5 1983), was the subject of a demolition order against which there had been no appeal but in respect of which the owner maintained that his house was in fact in a fit state to be inhabited. *Editor’s note: West Midland Baptist (Trust) Association (Inc) v Birmingham Corporation [1970] AC 874, HL. Mr Hillman did not make the point that, owing to the lapse of time between the making of the demolition order and the making of the compulsory purchase order, the demolition order had in some way lapsed, although I believe he thinks that that ought to be the case. If he was submitting that, then I can only say that tempting though the proposition is, there is no authority for that. Certainly the statute does not contain any provision under which a demolition order not complied with lapses after some passage of time. Mr Hillman, as I have said, in his notice of appeal submitted that the member of the Lands Tribunal was wrong in law in two ways: first, that he disregarded the provisions of section 5 of the Land Compensation Act 1961 and, second, that he disregarded the provisions of section 9 of that Act. It is of course agreed that a right to appeal to this court from a decision of the Lands Tribunal is on a point of law only; otherwise the decision of the Lands Tribunal is final. I say something first about Mr Hillman’s submissions in relation to section 9 of the 1961 Act, which provides: No account shall be taken of any depreciation of the value of the relevant interest which is attributable to the fact that (whether by way of designation, allocation or other particulars contained in the current development plan, or by any other means) an indication has been given that the relevant land is, or is likely, to be acquired by an authority possessing compulsory purchase powers. That is a statutory enunciation of a part of what is known in the jargon as the Pointe Gourde principle from the well-known decision of the Privy Council by that name. What it stems from is the undoubted fact that if a development plan indicates in some way or another that a property or an area is likely to be subject to compulsory purchase, then that of itself has a depressing effect upon the value of that property or properties in that area, and the section provides that such a depreciation in value is to be disregarded in assessing the true value of the property. That is, of course, only fair. It has been a part of compensation law for a considerable period of time now. But with the greatest respect to Mr Hillman, it has got nothing whatsoever to do with this present case. This present case is one in which the compensation falls to be assessed purely under section 5. So I turn to that section. That sets out six rules under which compensation for compulsory acquisition is to be assessed, and it is the second in particular which is all important. That is the well-known market value rule, that is to say: The value of land shall, subject as hereinafter provided, be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise. Rule (4) reads: Where the value of the land is increased by reason of the use thereof or of any premises thereon in a manner which could be restrained by any court, or is contrary to law, or is detrimental to the health of the occupants of the premises or to the public health, the amount of that increase shall not be taken into account. Reference was made to that because if it were the case that the property was being occupied as a habitation at the time of the compulsory purchase order, then as a result of the demolition order, and indeed the closing order which preceded it, that could have been restrained. But the principal provision is rule (2) and it is that which Mr Hillman maintains Mr Rees in the Lands Tribunal has disregarded. The task of the Lands Tribunal was to ask itself: if this property had been put on the open market on September 5 1983 subject to the demolition order which was then in force, what value would a purchaser bidding in the open market have given for it?  Before the Lands Tribunal Mr Hillman gave evidence himself about the amount of work he had done to the property. He produced some photographs, to which I have already referred, and then the solicitor then acting for him called on his behalf a chartered surveyor, a Mr R E Ward [ARICS]. Mr Ward had not himself seen the property, and, of course, he could not inspect it at the time of the hearing in the Lands Tribunal because, by that time, as I have said, the house had already been demolished some two years previously. So his evidence was necessarily secondhand, but he said that his housing manager had seen it and they had had a discussion about the valuation, and apparently nobody took any objection to this secondhand evidence being given, and he expressed the opinion that the freehold interest was worth £7,000. Moreover, if an extension had been built and the house had been fully improved, in his view it would be worth between £19,000 and £20,000. When he was cross-examined Mr Ward said that when he made this valuation he did not know of the demolition order. Moreover, he knew of no property subject to a demolition order in Beverley being sold in the open market. He valued the property as it stood, not on a site value basis. So it follows that on behalf of the then claimant, Mr Hillman, the member of the Lands Tribunal did not receive any evidence as to the value of the property subject to the demolition order. The contrary evidence was that of Mr A R Beasley [ARICS], the surveyor giving evidence on behalf of the borough council, and he concluded that the open market value of this property subject to the demolition order on September 5 1983 was no more than the value of the site, which he assessed at £200. There was no dispute that if site value was the proper measure, then £200 was the right figure. This compulsory purchase order was made under the Town and Country Planning Act 1971. There are routes by which if a house was unfit for human habitation it could have been purchased under the provisions of the Housing Act 1957. One was contained in the provisions to which I have already referred (section 17 and the subsequent sections). The other is by a compulsory purchase order made under Part III of that Act (section 42 and a group of sections in Part III). Compulsory purchase orders made under either set of provisions are subject to a specific statutory requirement that prima facie the compensation to be paid for the property compulsorily acquired is site value only. That is a rule which dates back many years in relation to compulsory acquisition of houses unfit for human habitation. There are, however, two statutory exceptions to it. One is to the effect that if a house has been well maintained the owner may apply for what is called a well maintained supplement, and the second is that if a house is owner-occupied then the owner may claim what is frequently called the owner-occupier supplement, which increases the value of his compensation very considerably over site value. It seems that it was argued before the Lands Tribunal that Mr Hillman was entitled to something equivalent to an owner-occupier supplement. The learned member pointed out, correctly in my view, that he could not get that directly because such a supplement is applicable only to a compulsory purchase order made under the provisions of the Housing Act. But Mr Rees did say: The provisions as to an owner-occupier’s supplement contained in the 1957 Act might have been invoked through paragraph 2 of Schedule 2 to the Land Compensation Act 1961 which could have been brought into play by an order made under para 2(2) of that Schedule but no such order has been made. That, if I may say so, is impeccable logic. There could in the circumstances of this compulsory acquisition only be a payment of an amount equivalent to an owner-occupier supplement if those conditions had been brought into play, but they were not. So that argument really disappeared or was met and disposed of by the member of the Lands Tribunal in that way. However, another argument was then advanced on behalf of Mr Hillman by his solicitors which Mr Rees recorded in the following words: ‘The claimant’s solicitor submitted that the demolition order might be removed if the premises were renovated.’  For what it is worth that is common ground. ‘The claimant would be treated harshly if only site value were payable.’  Then the member records: I have come to the conclusion that the submission made by the authority’s solicitor is correct and I accept Mr Beasley’s opinion that no more than site value would be paid for the freehold interest in the subject premises at the relevant date because of the existence of the demolition order. The possibility of the demolition order being removed seems to me to be very remote. — then he goes on to say — But even if its removal were certain, I had no evidence as to the cost of doing the works necessary for that to be done nor of the cost of bringing the house up to a standard in which it would fetch something between £15,500 and £20,000. I should have said that £15,500 was Mr Beasley’s view as to what the39 wrote very shortly after the decision was received from the Lands Tribunal requesting Mr Rees to state a case for the opinion of this court, but no point of law was submitted with that request. We do not know but it can be assumed that the Lands Tribunal replied asking that the point of law should be elucidated, but none ever was. The matter then lay dormant until February 26 1988, when Mr Hillman himself wrote to both the Lands Tribunal and the Beverley Borough Council enclosing a copy of a notice of appeal to this court. That notice says that one of the grounds on which the decision of the Lands Tribunal is alleged to be erroneous in law is: ‘1. The Lands Tribunal failed to adhere to the 1961 Land Compensation Act, Sections 5 and 9.’  I will come back to that ground. The fact that the point of law with which we are supposed to be concerned is not clearly expressed has caused some difficulties for us. The member of the Lands Tribunal has done as he is entitled to do — that is to say, his case stated merely appends his decision and says that his decision sufficiently sets out the point of law — but with the greatest respect to him it does not really set out the point of law. So far house would be worth if it had been completely renovated and enlarged. The conclusion therefore was that ‘the compensation will therefore be in the sum of £200, the agreed site value’. Before us it was argued that in the conclusion to which he has come in that last paragraph of his decision, or the penultimate paragraph which I have read, the member of the tribunal came to a wrong decision on a point of law. What he was considering was a situation where, the house being put on the market by a willing seller on September 5 1983, subject to the demolition order, the vendor might nevertheless say to potential purchasers: ‘if you are willing to do work of restoration to this property, then in my view you will be able to put it into a condition in which you will be entitled to have the demolition order revoked.’  Now, as a matter of law, there are provisions in the Housing Act under which a demolition order which has not been complied with may be revoked if the owner satisfies the authority or on appeal to the county court that the house has been put in a condition where it is no longer unfit for human habitation. What was being submitted on Mr Hillman’s behalf was that if that had been suggested to a potential purchaser then a potential purchaser might well pay substantially more than £200 site value. In the first part of the paragraph which I have read, having set out that submission, the member of the Lands Tribunal says in terms: ‘The possibility of the demolition order being removed seems to me to be very remote.’  Now this, of course, is a matter to be decided on probabilities. He having made the finding of fact that the possibility of the demolition order being removed is very remote, in my view that really concludes the matter. That is a finding of fact and if the prospect of its being removed was very remote then there is no evidence that a potential purchaser would pay any more than site value for the property. In other words, he would buy the property subject to the demolition order as the member suggested. However, he did go on, as I have already said, to consider the alternative with the words ‘but even if its removal were certain’, and in answer to that he indicated that he had no evidence as to the cost of doing the work necessary to put the house in a fit condition where the demolition order would be revoked. It was suggested in argument that he was wrong to come to that conclusion because in the evidence given by Mr Ward that the value of the property without the demolition order was some £7,000 and the value of the property fully restored was some £19,000 to £20,000 or £15,500 if Mr Beasley were correct, there was material upon which an argument could be constructed that the proper cost of renovating the property was something like the difference between those two sets of sums. For myself I am far from confident that I agree with that argument, but even if it be correct I do not think that that particular passage in the member’s decision can really be considered to be a necessary part of his decision. The decision itself is contained in the passage to which I have already referred in which he finds as a fact that the possibility of the demolition order being removed seemed to him to be very remote. Accordingly, in my view it cannot be said that the Lands Tribunal has erred in law in applying rule (2) or indeed rule (4) of section 5 of the 1961 Act, and I can find no other error of law in its decision. I have not referred to one fact which was before the Lands Tribunal, which is that during the course of the lengthy proceedings which finally led to the making of this compulsory purchase order Mr Hillman was offered by the developers who owned the adjoining land a sum of £6,000 for his property. He refused the offer because he took the view that the compensation would be more. If they were willing, even taking into account their desire presumably to acquire the property as soon as possible, to pay him £6,000 for it, it does in ordinary terms seem harsh in the extreme that in the end he should receive no more than £200. No doubt in many ways this is a decision which will appear to him to be unjust. If he, or those advising him, had taken the steps which were open to them back in the early 1970s and the later 1970s of appealing against the closing order or appealing against the demolition order, or if the surveyor who appeared for him at the Lands Tribunal had known there was a demolition order when he made his valuation and had put forward evidence which supported a figure greater than £200, it may be that the eventual result would have been different. But the member of the Lands Tribunal could do no more than work with the material which was put before him. Upon that material, in my view, he was entirely justified in coming to the conclusion to which he did come, harsh or not. For these reasons I would dismiss this appeal. Agreeing, STUART-SMITH LJ said: I, too, reach the same conclusion with very considerable regret because I think it is a harsh result for Mr Hillman. The valuation which the Lands Tribunal had to assess was based and had to be based upon section 5(2) of the Land Compensation Act 1961 to which my lord has referred, which I need not repeat. A demolition order was obviously a relevant factor in arriving at such a valuation, but it is not necessarily conclusive as a matter of law that only site value should be paid. There may be a market value for a house subject to a demolition order over and above the site value. That depends at the end of the day upon the prospect of the demolition order being revoked under the provisions of what is now section 274 of the Housing Act 1985. Unfortunately, as it seems to me, from Mr Hillman’s point of view the member of the Lands Tribunal did address himself to this problem and found as a fact that the possibility of the demolition order being removed was very remote. It is that finding of fact which seems to me to be difficult to disturb. I have wondered whether or not the fact that the local authority did not enforce the demolition order for more than four years can be said to be something which precluded them from enforcing the order through lapse of time, or was itself a ground for saying that the order might be revoked. But I cannot see that a local authority can be precluded from doing their statutory duty, namely enforcing the order, simply because they have been tardy in so doing. Moreover, in the absence of evidence that substantial work had been done to make the house fit for habitation after the demolition order was served, I do not see that the member’s finding of fact that the possibility of its being revoked was remote can be disturbed. Therefore, for the reasons given by Glidewell LJ, I agree that this appeal should be dismissed. Also agreeing, LLOYD LJ said: Mr Hillman feels that he has suffered a grave injustice in this case and I can understand why. In 1981, subsequent to the demolition order, he refused an offer of £6,000 from a firm of developers, Stepney Contractors Ltd. His expert witness at the hearing, Mr Ward, valued the house as it stood at £7,000 albeit in ignorance of the demolition order. With money spent on it, Mr Ward said, it would fetch up to £20,000. Nevertheless, the Lands Tribunal has arrived at a valuation figure of £200. I have been at pains, therefore, to find an error of law in the Lands Tribunal’s decision. The second half of the penultimate paragraph of the decision starting with the words ‘But even if its removal were certain’ does, I think, display an erroneous approach. The member points out that there was no evidence before him of the cost of works to bring the house up to a standard at which it would fetch £20,000. This is true. But there was evidence, in particular the evidence of Mr Ward, which would have enabled him to find that the value of the property in its existing state was of the order of £6,000. If removal of the demolition order was therefore certain, which is the hypothesis on which this part of the paragraph was based, that is presumably the price which it would have fetched in the open market, which is the relevant test under section 5(2) of the Land Compensation Act 1961. But the second half of the penultimate paragraph does not stand on its own. There is the first half of the paragraph beginning with the words ‘I have come to the conclusion that the submission made by the authority’s solicitor is correct’. That half of the paragraph is, I regret to say, conclusive against Mr Hillman. Mr Hillman’s argument was that the demolition order might be removed. If so, then that was a chance which should have been reflected in the valuation, instead of which the member simply took40 the site value as conclusive. Bearing in mind that the demolition order was very stale and had not been enforced for a period of over four and a half years by the local authority, there was a good deal of force in Mr Hillman’s argument. But the difficulty so far as we are concerned lies in the second sentence of the paragraph. That sentence reads: ‘The possibility of the demolition order being removed seems to me to be very remote.’  That is a finding of fact which is binding on us. If there was no chance of the demolition order being removed I do not see how a willing buyer would have given more than the site value for the property. Why the developers, Stepney Contractors Ltd, were prepared to pay £6,000 we do not know. It may be that they took the view, contrary to the member’s finding, that the demolition order was very likely to be removed. But it is the finding of the member on that point which is binding on us. I can see no way around it, so I, too, would dismiss the appeal. The appeal was dismissed with costs not exceeding the amount which was in court.