R v Northumbrian Water Ltd, ex parte Able UK Ltd

Compulsory acquisition — Whether acquiring authority can withdraw notice to treat after taking possession — Advance payment — Determination of parties’ rights after withdrawal of notice to treat On August 14 1992 the respondent water company served a notice to treat on the applicant company in respect of land required for a sewage treatment works; on January 4 1993 the respondent took possession, but no works were commenced. The applicants obtained a certificate of appropriate alternative development for land tipping, including the disposal of hazardous waste. On September 26 1994 the applicants submitted a claim for over £22m. Within six weeks of the claim the respondent purported to withdraw the notice to treat under section 31(1) of the Land Compensation Act 1961. It did so on the ground that there was a risk of having to pay the amount claimed. The applicants challenged the right of the respondent to withdraw the notice to treat and to demand the return of an advanced payment. Held: Entry by an acquiring authority under section 11 of the Compulsory Purchase Act 1965 does not affect the legal or equitable ownership of the land. The right to withdraw a notice to treat under subsection (1), unlike under subsection (2), of section 31 of the 1961 Act, is not limited in a case where possession has been taken. The respondent was entitled to withdraw the notice to treat. The reference to compensation in subsections (1) and (5) of section 52 of the Land Compensation Act 1973 is to compensation for the acquisition of land and not to compensation under section 31 of the 1961 Act in the case of a non-acquisition. However, under section 52(5) or under the principles of restitution an acquiring authority ought to recover any overpayment. The following cases are referred to in this report. Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111; [1995] 2 WLR 404; [1995] 1 EGLR 19; [1995] 19 EG 147, PC Farrell v Alexander [1977] AC 59; [1976] 3 WLR 145; [1976] 2 All ER 721; (1976) 32 P&CR 292; [1976] 2 EGLR 69; [1976] EGD 343; 240 EG 707, HL Morgan v Metropolitan Railway Co (1868) LR 4 CP 97 Tiverton and North Devon Railway Co v Loosemore (1884) 9 App Cas 480 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 application by way of judicial review of a decision of Northumbrian Water Ltd to withdraw a notice to treat which had been served on the applicants, Able UK Ltd. Anthony Anderson QC and Nicholas Burton (instructed by Ward Hadaway, of Newcastle upon Tyne) appeared for the applicants; Robert McCracken (instructed by Wheldon Houlsby & Scott, of Newcastle upon Tyne) represented the respondent. Giving judgment, Carnwath J said: This case raises two novel questions relating to the law of compulsory acquisition. The first is whether the acquiring authority is entitled to withdraw its notice to treat, under section 31 of the Land Compensation Act 1961, even after it has entered into possession of the land. The second arises if the first is answered in the affirmative. Where the authority have made an advance payment of compensation under section 52 of the Land Compensation Act 1973, what are the respective rights of the parties following withdrawal of the notice to treat? Facts The factual background against which these questions arise is somewhat unusual. The water company is a company appointed under the Water Act 1989 as the sewerage undertaker for an area which includes Hartlepool and Seaton Carew in the county of Cleveland. In 1991 it made a compulsory purchase order for an area of approximately nine hectares to the south of Seaton Carew, for the purpose of constructing a sewage treatment works. The applicants (‘Able’) owned almost the whole of the site. According to the water company’s statement justifying the order, the works were needed to comply with a ‘consent to discharge’ issued by the National Rivers Authority in respect of three sea outfalls at Seaton Carew, they having been constructed as part of a programme to comply with European directives on the quality of bathing water. It was said that the works needed to be operational by December 31 1995, and that there was therefore some urgency involved. The proposed site was the most suitable of seven sites which had been investigated. Able initially objected but their objection was resolved by agreement, and the order was confirmed by the Secretary of State on July 22 1992. On August 14 1992 the water company served a notice to treat and this was followed on August 18 1992 by a notice of entry. They initially sought to take possession in September, but there was a disagreement about the location of the boundary and the actual taking of possession was delayed until January 4 1993. By this time the programme for construction of the works had become less urgent, but the water company took possession with a view to safeguarding the land from the effects of excavations which Able were undertaking on adjoining land. After they had taken possession, part of the land continued to be used by Able as a means of access to its retained land which was used for waste disposal. No work was undertaken by the water company in relation to the construction of the sewage works. Prior to the making of the compulsory purchase order, there had been discussions with a view to sale by agreement, but there was a disagreement as to the value of the site. The land had been accepted as suitable for the tipping of inert waste, but an application to extend the permission to include disposal of hazardous waste had been refused in 1990. However, in April 1991 there were indications of more favourable prospects for obtaining consent for disposal of hazardous wastes, which would have increased the value substantially. In July 1992 Able made an application for a certificate of appropriate alternative development under section 17 of the Land Compensation Act 1961. The proposed use was for disposal of hazardous and difficult wastes. In due course, following an appeal to the Secretary of State, a certificate including disposal of hazardous waste was granted on June 14 1994. On September 26 1994 Able submitted a claim ‘in answer to notice to treat dated 14th August 1992’. The amount claimed was over £22m. On November 9 1994 (within six weeks of the receipt of the claim on October 3) solicitors for the water company gave notice purporting to withdraw the notice to treat pursuant to section 31(1) of the Land Compensation Act 1991. They stated that the water company had withdrawn from the land. They asked Able to arrange for the advance payment to be returned. The land was said to be in the same state and condition as at the date of the notice to treat and to be available for the uses proposed in the claim for compensation. A claim for compensation for any loss or expense occasioned by the giving and withdrawal of the notice to treat was invited. Able’s solicitors responded immediately, challenging the right of the water company to withdraw its notice to treat. The only reason given by the water company for wishing to withdraw (in the affidavit of its solicitors) is that: it is not in the interest of Northumbrian Water Limited or its customers to take on the risk of having to pay the amount claimed by Able UK Limited to achieve the purposes for which the sewage treatment works would be constructed. The sewage treatment works project will still go ahead but on another site which has now been obtained much more cheaply (at a cost of £240,000). It is considered suitable though a less good site than Able’s land. Law The procedure for the implementation of compulsory purchase and the assessment of compensation is contained, so far as relevant, in the Compulsory Purchase Act 1965, the Land Compensation Act 1961 and the Land Compensation Act 1973. Following the confirmation of the compulsory purchase order, the authority may initiate the acquisition by service of a notice to treat under section 5 of the 1965 Act. The notice to treat gives particulars of the land to which it relates, requires the recipient to give particulars of his interests and his claim and indicates that the authority is willing to treat for the purchase of the land and as to the compensation to be made. Following service of notice to treat, the authority may take possession under section 11 of the 1965 Act. That provides: If the acquiring authority have served notice to treat in respect of any of the land and have served on the owner, lessee and occupier of that land not less than fourteen days notice, the acquiring authority may enter on and take possession of that land, or of such part of that land as is specified in the notice; and then any compensation agreed or awarded for the land of which possession is taken shall carry interest … from the time of entry until the compensation is paid, or is paid into court in accordance with this Act. Section 11(4) provides that, except as provided by the foregoing provisions of the section, the acquiring authority shall not, other than by consent, enter on the land subject to compulsory purchase until the compensation has been settled and paid. Following service of the notice to treat, either party has the right, failing agreement as to compensation, to have the matter referred to the Lands Tribunal for determination. The service of a notice to treat does not create a contract, nor does it give the authority any interest in the land. However, once the compensation has been agreed or determined, there comes into being what is sometimes called a ‘statutory contract’. Subject to any specific rights of withdrawal given by the statute, the parties are in the same position as the parties to a contract for the sale of land, and their rights may be enforced by a specific performance: see Cripps, Compulsory Acquisition of Land para 2-056. The statute does not define in terms the nature of the acquiring authority’s interest following entry under section 11. In relation to the former power under section 85 of the Land Clauses Act 1845 (see below) to enter after deposit of a bond for the compensation, Cripps says at para 2-107: The effect of section 85 is not, however, to vest any lands in the promoters, and the owner’s title is not divested. The power of entry is given as ancillary to, and for the purposes of, the other statutory powers; and after entry a company has nothing more than a possessory right, enabling it to utilise the lands entered upon for the purposes of their undertaking. This analysis appears equally valid in relation to section 11. The right of entry given by that section is separate and distinct from the provisions of the Acts relating to the transfer of title. There seems to be no reason to treat entry under that section as affecting the legal or equitable ownership. This analysis is also consistent with West Midland Baptist (Trust) Association (Inc) v Birmingham Corporation [1970] AC 874. That case established that the relevant date for assessment of compensation was the date when the value is agreed or assessed, or if earlier the date when possession is taken. That does not appear to have rested on any implication that there is an interest transferred when possession is taken. Lord Reid (p899C) identified ‘the date of expropriation’, as the date when actual possession was taken if that precedes assessment of compensation; if not, the date when compensation is assessed should be taken — because then either party can sue for specific performance and the promoters obtain a right to the land, as if there had been a contract of sale at that date. Lord Donovan (p911G) adopts — 16 the date when the promoter becomes the owner of the property, whether in law or in equity, in place of the expropriated owner, or enters into possession of it. Thus entry into possession, although amounting to ‘expropriation’, is seen as something distinct from the acquisition of a legal or equitable title. The provisions for withdrawal of notices to treat are contained in section 31 of the Land Compensation Act 1961, as follows: (1) Where a claimant has delivered such a notice as is mentioned in paragraph (b) of subsection (1) of section four of this Act, the acquiring authority may, at any time within six weeks after the delivery thereof, withdraw any notice to treat which has been served on him or on any other person interested in the land authorised to be acquired. (2) Where a claimant has failed to deliver a notice as required by the said paragraph (b), the acquiring authority may, at any time after the decision of the Lands Tribunal on his claim but not later than six weeks after the claim has been finally determined, withdraw any notice to treat which has been served on him or any other person interested in the land authorised to be acquired, unless the authority have entered into possession of the land by virtue of the notice. (3) Where the acquiring authority withdraw a notice to treat under this section, the authority shall be liable to pay compensation to the person to whom it was given for any loss or expenses occasioned to him by the giving and withdrawal of the notice, but if the notice is withdrawn under subsection 2 of this section, not for any loss or expenses incurred by the claimant mentioned therein after the time when, in the opinion of the Lands Tribunal, a proper notice of claim should have been delivered by him. (4) The amount of any compensation payable under subsection (3) of this section shall, in default of agreement, be determined by the Lands Tribunal. (5) So long as the acquiring authority are entitled to withdraw a notice to treat under subsection (2) of this section, the authority shall not be compellable to take the land to which the notice relates or to pay any compensation awarded in respect of the taking. The reference to a notice under section 4(1)(b) of the 1961 Act needs to be explained. Section 4 is headed ‘Costs’. It provides: (1) Where either — … (b)   the Lands Tribunal is satisfied that a claimant has failed to deliver to the acquiring authority, in time to enable them to make a proper offer, a notice in writing of the amount claimed by him, containing the particulars mentioned in subsection (2) of this section; the Lands Tribunal shall, unless for special reasons it thinks proper not to do so, order the claimant to bear his own costs and to pay the costs of the acquiring authority so far as they were incurred after the offer was made or, as the case may be, after the time when in the opinion of the Lands Tribunal the notice should have been delivered. (2) The notice mentioned in subsection (1) of this section must state the exact nature of the interest in respect of which compensation is claimed, and give details of the compensation claimed, distinguishing the amounts under separate heads and showing how the amount claimed under each head is calculated. Thus, if a properly particularised notice of claim is submitted, section 31(1) gives the authority a right to withdraw within six weeks. If not, they can wait till six weeks from the Lands Tribunal’s decision. Provision for advanced payment of compensation is made by section 52 of the Land Compensation Act 1973. By subsection (1): Where an acquiring authority have taken possession of any land the authority shall, if a request in that behalf is made in accordance with subsection (2) below, make an advance payment on account of any compensation by them for the compulsory acquisition of any interest in that land. The advance payment is equal to 90% of the authority’s estimate of compensation, if no amount has been agreed. Provision is made for adjustment following final determination of compensation as follows: (5) Where the amount, or aggregate amount, of any payment under this section made on the basis of the acquiring authority’s estimate of the compensation exceeds the compensation as finally determined or agreed, the excess shall be repaid; and if after any payment under this section has been made to any person it is discovered that he was not entitled to it, the amount of the payment shall be recoverable by the acquiring authority. Section 52 contains no express provision for what is to happen if a notice to treat is withdrawn following the making of an advance payment. Issue 1 — Right to withdraw notice to treat In the water company’s submission, the position under section 31 is clear. It is not disputed that the notice of withdrawal was served within six weeks of the notice of claim (as provided for by section 4(1)(b)). In those circumstances section 31(1) gives an unqualified right to withdraw the notice to treat. It is to be contrasted with section 31(2) which specifically provides that the right to withdraw a notice to treat following determination by the Lands Tribunal applies ‘unless the authority have entered into possession of the land by virtue of the notice’. There is no such qualification under subsection (1). No hardship would result from this approach, since, by subsection (3), Able are entitled to claim compensation for any loss or expenses occasioned by the giving and withdrawal of the notice. The water company accept that, in a case where possession has been taken following notice to treat, any loss resulting from that abortive period of possession would properly fall within the loss caused by the giving of the notice to treat and would therefore be compensatable. Able contest this view by inviting me to consider the historical development of the relevant compulsory purchase law. The genesis of the law in this field is to be found in the Land Clauses (Consolidation) Act 1845. Under the 1845 Act there was no power to withdraw a notice to treat, once served, and thereafter the authority was bound to proceed with the purchase: see Morgan v Metropolitan Railway Co (1868) LR 4 CP 97. The authority’s right to enter was governed by sections 84 and 85. Section 84 prohibited entry, except for the purpose of survey, until all relevant claims to compensation had been paid. However, this was subject to section 85, (to which reference has already been made). This enabled the promoters to enter in advance of payment of compensation, having first deposited by way of security, supported by a bond, either the amount claimed by the parties interested in the land or a sum determined by a surveyor appointed by two justices to be the value of the land. The Acquisition of Land (Assessment of Compensation) Act 1919 section 5(2), changed the position by setting out specific requirements for the notice of claim and providing: when such a notice of claim has been delivered the acquiring authority may, at any time within six weeks after the delivery thereof, withdraw any notice to treat which has been served on the claimant or on any other person interested in the land authorised to be acquired, but shall be liable to pay compensation to any such claimant or other person for any loss or expenses occasioned by the notice to treat having been given to him and withdrawn, and the amount of such compensation shall, in default of agreement, be determined by an official arbitrator. This was the genesis of subsections (1) and (3) of section 31. The simplified ‘notice of entry’ procedure, now embodied in section 11 of the 1961 Act, was introduced by the Acquisition of Land (Authorisation Procedure) Act, 1946, Schedule 2, para 3. Although the 1845 Act procedures were preserved, the notice of entry procedure now became the normal procedure by which authorities acquired possession of land subject to compulsory purchase. (Subsequently, there has been introduced a ‘general vesting declaration’ procedure, which provides an alternative method of securing possession and title in advance of assessment of compensation. However, nothing turns on that for the purpose of this case.) The last link in the chain is provided by section 5 of the Lands Tribunal Act 1949. That Act established the Lands Tribunal as the normal forum for determination of compensation. Section 5 provided: (1) Where a claimant is required by subsection (2) of section five of the Acquisition of Land Act to deliver a notice of claim and fails to comply with the provisions of that sub-section with respect to that notice, the provisions thereof with respect to the withdrawal of notices to treat shall apply subject to the modifications hereafter provided for by this section. (2) Where this section applies — (a) the power to withdraw notices to treat, instead of being exercisable 17 within six weeks after the delivery by the claimant of a notice of claim, shall be exercisable at any time after the decision of the Lands Tribunal on the claim not exceeding six weeks from the final determination thereof; (b) the claimant shall not be entitled to any compensation under the said subsection (2) in respect of any loss or expenses incurred after the time when, in the opinion of the Lands Tribunal, a proper notice of claim should have been delivered. (3) Notwithstanding anything in the last foregoing subsection, the acquiring authority shall not be entitled under this section to withdraw a notice to treat after the authority has entered into possession of the land by virtue of the notice. This was the genesis of section 31(2) of the 1961 Act. The 1961 Act was a consolidation Act. Under the Consolidation of Enactments (Procedure) Act 1949 there is power, as part of the process of consolidation, to make ‘corrections and minor improvements’. That expression is defined (at section 2) to mean: amendments of which the effect is confined to resolving ambiguities, removing doubts, bringing obsolete provisions into conformity with modern practice, or removing unnecessary provisions or anomalies which are not of substantial importance, and amendments designed to facilitate improvement in the form or manner in which the law is stated … Piecing together this legislative patchwork, Mr Anthony Anderson QC, for Able, submits that I should read the 1961 Act in the light of the earlier statutes, having regard to the principle that any changes would have been limited to those permitted under the Consolidation of Enactments Act. Under the 1919 Act, it is said, there was no practical possibility of entry being made before a claim, since lawful entry was only possible when compensation had either been determined or at least certified. Thus, there was no need to provide for the possibility of withdrawal of the claim after the taking of possession. This explains the lack of any specific reference in section 31(1) to that possibility. Subsection (2) derives from a different, later source that is (the 1949 Act), which was enacted after the 1946 Act had introduced the notice of entry procedure. This explains the specific reference in section 5 of the 1949 Act to the position after possession had been taken. However, this should not be read as implying a difference of substance, but as something inserted ex abundanti cautela. I was referred to Tiverton and North Devon Railway Co v Loosemore (1884) 9 App Cas 480, to show that, under the 1845 Act, it was clear that once notice to treat had been served and entry made, there was no going back. Similarly under the modern law, as exemplified by the West Midland Baptist case, the taking of possession is regarded as a crucial step which fixes the basis for assessment of compensation. It would not be appropriate to hold that that step could be reversed, other than by express words of the statute. Able also rely on the suggested anomalies which might arise if the water company’s interpretation is correct. In the first place, it is argued, there is no logical reason for a different approach under subsection (1) as compared to subsection (2). Thus, if in the present case, they had never submitted a proper claim for compensation, but the authority had simply referred the matter for determination to the Lands Tribunal, then their right to withdraw would have been governed by subsection (2); and there would have been no question of withdrawing following the determination of compensation, even if the Lands Tribunal had determined it at a sum much higher than that originally envisaged. There is no reason why Able should be worse off because they happened to have submitted a claim, than if they had not. Second, it is said that in some cases the approach could cause injustice. For example, if the authority had not merely entered but had actually carried out building work, it would not be fair to require the owner to take back land which had changed in nature, even if he was entitled to compensation. It would not be fair to foist on the owner, for example, a half-complete sewage works. Alternatively, the authority might have built houses and let tenants into possession. It would hardly be open to it to force the previous owner to take the land back, and force the tenants to accept a private land-owner instead of a public authority as their landlord. In my view, the answer is to be found in the words of section 31. Even though it is a consolidation statute, the ordinary approach to construction applies. It is only permissible to look outside the statute if there is some substantial difficulty or ambiguity: see Farrell v Alexander [1977] AC 59. I agree with the water company’s submission that section 31 is clear in its terms. The right to withdraw under subsection (1), unlike that under subsection (2), is not limited in a case where possession has been taken. Of course, mere withdrawal of the notice to treat does not result in possession being recovered by the owner. But it removes his entitlement to compensation in respect of acquisition. That step having been taken by the authority, they clearly can have no right to retain the land. Whether in different circumstances the owner could refuse to take it back is not a question which arises in this case. This result produces no anomaly or absurdity in this case. It leaves the owners with the land, unaffected by any works of the authority, and with a claim to compensation for any loss which they have suffered. It accords with the ‘principle of equivalence’ which underlies the statutory code: see Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 WLR 404*. It also gives effect to the parliamentary intention, implicit in section 31, that authorities should be able to make an informed decision as to the likely cost of the acquisition before they are finally committed. *Editor’s note: Also reported at [1995] 1 EGLR 19 I accept that potential anomalies could arise in hypothetical sets of circumstances. However, I do not think it helpful to try to envisage how the scheme would work in such cases. It does not appear that problems have arisen in practice, since as far as I am aware this is the first case in which the point has needed to be considered. The authority is under its ordinary duty to exercise its powers reasonably, particularly where compulsory acquisition of land is involved, and is subject to the constraints of judicial review. If circumstances arose such as those hypothesised by the applicants, possible remedies would need to be considered in the light of their particular facts. I accept also that it is not wholly clear why a distinction is drawn between subsection (1) and subsection (2). Mr Robert McCracken, for the water company, sought to explain the limitation in subsection (2), as the corollary of the tribunal’s power to limit the compensation to that which occurred before the time when a proper notice of claim should have been served. It would be unreasonable to allow the authority to withdraw after a period of possession, if the land owner was not going to be fully compensated. I can see that there may be a link between these two provisions, but that does not explain why a different approach was adopted under subsection (1). It would have been equally appropriate there to have provided for a limitation on the authority’s obligations where the notice of claim had been substantially delayed, with a corresponding restriction on its right to withdraw after entry. An alternative explanation may be found in the nature of the rights of the respective parties at the different stages. As I have already noted, the notice of entry and possession under it do not affect the title to the land. Following determination of compensation however, the parties are in the position of parties to a contract of the sale of land, and entitled to specific performance. The authority becomes the owner in equity. It may have been thought inappropriate to allow withdrawal where both title and possession had been transferred. In any event, I see no answer to the water company’s submission that it is entitled to withdraw under the clear words of section 31(1); and I so hold. Issue 2 — Repayment of compensation under section 52 In correspondence, each party was taking an extreme view of the position under section 52. The authority was claiming to be entitled to immediate repayment, without waiting for the assessment of any compensation due under section 31. Able were claiming to be entitled to retain the advance payment, regardless of any entitlement under section 31. In the course of the submissions, the practical difference between the parties on this aspect narrowed considerably. Mr 18 McCracken, for the water company, did not seek to argue that the money should be repaid in advance of any claim to compensation under section 31. Conversely, Mr Anderson, for Able, accepted that the advance payment would be set against the compensation payable under section 31, which he contended would be substantially higher. He did not, as I understood it, go so far as to accept that, if the compensation under section 31 were found to be less than the advanced payment, there would necessarily be an obligation to repay it. Of course, those positions presuppose that a claim is to be made under section 31. Hitherto such a claim has not been lodged, consistently with the applicant’s position that the withdrawal was not valid. In these circumstances it seems to me inappropriate to make any formal declaration of a position which may be purely academic. However, since the matter has been argued I will make certain observations. Mr McCracken submitted that he was entitled to recover the excess of the advance payment, if any, over the compensation as finally determined, either under the specific provisions of subsection (5), or failing that, under the general law of restitution. The first submission depended on taking a broad view of subsection (5), so that ‘compensation’ there referred to can include compensation under section 31(3). Mr Anderson on the other hand, says that ‘compensation’ in subsection (5) must mean the same as ‘compensation’ in subsection (1), that is: ‘compensation … for the compulsory acquisition of any interest in that land’. Compensation under section 31 is not compensation for the acquisition of land, but compensation for non-acquisition of land. Furthermore, the authority’s right to repayment under the second part of subsection (5) only arises where it is found that the applicant ‘was’ not entitled to compensation, ie at the time of the advance payment. Since in the present case the advance payment was properly made at a time when the authority had taken, and still retained, possession, the conditions of subsection (5) are not satisfied. I think Mr Anderson is probably right that compensation in both subsection (1) and subsection (5) of section 52 is directed to ordinary compensation for the acquisition of the land. I doubt if the draftsman had in mind the possibility of compensation for an abortive notice to treat under section 31. However, I think his reading of the second part of subsection (5) is too narrow. Looking at the subsection as a whole, the obvious purpose is to contrast the position at the time of the advance payment with the position when compensation is finally determined or agreed. If at that time it is found that there is either an excess or no entitlement, then I think the right to payment arises. If this were wrong, then I would agree with Mr McCracken that the principles of restitution are broad enough to provide an appropriate remedy. Given the owner’s rights to specific compensation under section 31, I can see no reason why the law should allow him to retain a sum which was paid on an assumption which has been falsified by events, and which does not represent his true loss. However, for the reasons I have given I do not think it necessary to express a concluded view on this point. Conclusion For the above reasons, I reject the application for judicial review. If so requested, I will make a declaration to the effect that the water company’s letter dated November 9 1994 was effective to withdraw the notice to treat dated August 14 1992.