Obichukwu v London Enfield Borough Council

Compulsory purchase – Compensation – Acquiring authority making compulsory purchase order to facilitate acquisition of premises for purpose of redevelopment project – Negotiations taking place over payment of compensation – Claimant surrendering lease of shop to authority by returning keys in expectation of receiving compensation – Authority taking view that no compensation payable where lease surrendered – Whether terms of surrender preserving right to claim compensation – Whether legitimate expectation arising that compensation payable – Claim dismissed Until 2011, the claimant ran a small grocery business, specialising in the sale of African foodstuffs, from a shop which she held on a lease from the acquiring authority for a term of 20 years from 2003. The shop was located in a retail parade adjoining the base of a residential tower block which the acquiring authority proposed to demolish and redevelop. In 2005, the authority began removing its residential tenants from the block and in 2009 they began negotiations for the acquisition of their commercial tenants’ leasehold interests. In August 2011, the authority made a compulsory purchase order (CPO) and submitted it to the secretary of state for confirmation. The claimant objected to the confirmation of the CPO, erroneously believing that this was necessary in order to protect her entitlement to compensation. A public inquiry was scheduled at which the objections of the claimant and others were to be considered. On the day of the inquiry, following discussions with representatives of the authority, the claimant agreed to withdraw her objection. Thereafter, she wrote to the authority indicating that she intended to hand back the keys to the shop. After receiving the keys, the authority wrote to the claimant asking her to remove her remaining goods from the premises. The authority subsequently took the view that the claimant had surrendered her lease and that, accordingly, no entitlement to compensation arose. In August 2012, the claimant referred a claim for compensation to the Upper Tribunal. issues arose as to whether: (i) the terms on which the claimant had surrendered her lease, including any implied terms, preserved her right to claim compensation; or (ii) the authority’s conduct had created a legitimate expectation, from which they could not resile, that the claimant would remain entitled to compensation as if her lease had been compulsorily acquired. Held: The claim was dismissed. (1) At the time when the claimant withdrew her objection to the CPO, the expectation of both sides was that compensation would eventually be paid to the claimant for her lease. The claimant had believed that her abandonment of her opposition to the CPO would result in the authority getting the premises back and compensating her accordingly. She had thought that there was no voluntary element, save as to timing, in her handing back of the premises and she had believed that her entitlement was to compensation for the taking of her lease by compulsion. She had not appreciated that an unconditional surrender of her lease would put her right to compensation at risk. It must have been clear to the authority, shortly after the claimant handed back the keys, that she had made a mistake in doing so. However, there was no suggestion that the withdrawal of the claimant’s objection to the confirmation of the CPO had been made conditional on the continuation of negotiations over compensation. Although the parties had shared an expectation that the claimant’s lease would be terminated, they had agreed nothing about timing or the mechanism by which that would be achieved. There had been no express agreement between the parties for the surrender of the claimant’s lease in return for a commitment to negotiate compensation or submit the issue to the tribunal. Even if there had been an express or implied agreement, it could not have had contractual effect, since all previous negotiations had been subject to contract, which prevented the parties from becoming bound by what they might say in informal settings, and no written agreement for a surrender satisfying the formality requirements of section 2 of the Law of Property (Miscellaneous Provisions Act) 1989 had come into existence. Nor had there been any prior approval by the court of the kind that was required by section 38 of the Landlord and Tenant Act 1954 for the surrender of a business tenancy to which Part II of that Act applied. Moreover, there could have been no enforceable “agreement to negotiate” since a bare agreement to negotiate lacked the certainty required for it to be enforced as a contract: Walford v Miles [1992] 2 AC 128; [1992] 1 EGLR 207; [1992] 11 EG 115 applied. It followed that the claimant’s lease had not come to an end pursuant to any contract. (2) The claimant’s lease had been terminated by an implied surrender, or surrender by operation of law. Such a surrender occurred where the absence of the required formalities for a surrender prevented the parties’ actions from having contractual effect, but there was an unqualified delivery and acceptance of possession which was so inconsistent with the continuation of the tenancy that the law would treat it as a surrender and bar either party from asserting the continued existence of the tenancy. The acts of both the claimant and the authority had the necessary unequivocal quality to give rise to an implied surrender, in that their conduct was so inconsistent with the continuation of the lease or tenancy that it could only be justified as being lawful if the tenancy had come to an end. In her letter to the authority, the claimant had made it clear that, whatever she might have thought about compensation, she wanted to bring her lease to an end by returning the keys. The authority, for their part, had not only accepted the keys but had used them to secure the premises and had sought the removal of the claimant’s goods from the premises. It made no difference in that regard whether it was unfair or inequitable for the authority to rely on the handing back of the keys without making good the claimant’s expectation of further negotiations and an opportunity to have her entitlement to compensation determined by the tribunal. The impact of the doctrine of surrender by operation of law was confined to the relationship of landlord and tenant. The termination of a lease by such a surrender did not provide an opportunity for the tribunal to investigate the behaviour of the parties generally or to require that they act in a manner which the tribunal considered would be fair. No additional consideration of how the surrender ought to operate on the consciences of the parties was required or permissible: Artworld Financial Corp v Safaryan [2009] EWCA Civ 303; [2009] L&TR 20; [2009] 2 EGLR 27; [2009] 23 EG 94 and Sable v QFS Scaffolding Ltd [2010] EWCA Civ 682; [2010] L&TR 30; [2010] PLSCS 166 applied. (3) The authority’s conduct was not such as to create a legitimate expectation on the part of the claimant that negotiations over compensation would continue, and would be resolved if necessary by the tribunal, such as to make it an abuse of power for the authority now to frustrate the expectation. While the tribunal had considerable sympathy for the claimant, the approach taken by the authority did not amount to an abuse of power. The only representation that they had made was of their willingness to negotiate a price for the purchase or surrender of the lease. There was no enforceable promise to pay compensation and no bargain had been struck which could bind them to make a payment in any event. Because of the claimant’s own decision to hand back the keys, there had ceased to be any lease for the authority to purchase. Thereafter, there was nothing abusive in their refusal to acquiesce in an assumption, contrary to the true facts, that the lease had come to an end as a result of the exercise of their powers of compulsory purchase. The compensation code was intended to be self-contained and to operate according to its own defined procedures. There was no authority for the proposition that the public law doctrine of legitimate expectation, or the private law of estoppel, could be used to create an entitlement to pursue a claim for compensation where the statutory procedures had not been implemented. Accordingly, the claimant was not entitled to compensation.   Adolf Emeka, of Graceland Solicitors, appeared for the claimant; Rory Clarke (instructed by the legal department of Enfield London Borough Council) appeared for the acquiring authority. Sally Dobson, barrister Click here to read transcript: Obichukwu v London Enfield Borough Council