Washington Development Corporation v Bamlings (Washington) Ltd

Compensation for the acquisition of an interest in land under a contract with an authority which had compulsory purchase powers in respect of the land, the contract not being a ‘parliamentary contract’ but a common form of contract to which the Law Society’s Conditions of Sale applied so far as not varied by the contract — Case stated by Lands Tribunal — The contract provided that the price should be settled, failing agreement, by the Lands Tribunal ‘as if the necessary steps for acquiring such interest compulsorily had been taken under the New Towns Act 1965 and a notice to treat had been served on date hereof’ — The contract was made on May 13 1975 — It entitled the authority to take possession of the land piecemeal, which they did on different dates between 1975 and 1980 — The issue before the Lands Tribunal and now before the Court of Appeal was what was or were the relevant date or dates as at which the price payable for the land should be assessed — It was claimed by the purchasing authority that the relevant date for the entirety of the land was the date of the contract — Claimants contended that the proper date for each parcel was the date when the authority took possession of it — The Lands Tribunal member decided in favour of the claimants, holding that the price should be assessed as if there were no contract, as if the acquisition were compulsory, and as if the equitable interest did not pass on the making of the contract — The Court of Appeal, while not necessarily persuaded that in the circumstances of this case the equitable interest did pass on the making of the contract, were prepared to proceed on the assumption, which the claimants had not challenged, that this was the position — Even so, it did not follow that the price fell to be assessed on the date when the authority became the owner in equity — Such a proposition was inconsistent with the principle of the House of Lords decision in Birmingham Corporation v West Midland Baptist (Trust) Association that the relevant date for assessment was the earlier of the two following dates, namely, (a) the date when the value is agreed or assessed by the appropriate tribunal, or (b) the date when possession is taken by the acquiring authority — The contract in the present case required the price to be settled as if the necessary steps for compulsory acquisition had been taken and a notice to treat had been served at the date of the contract — Applying this provision in the light of the Birmingham Corporation rulings, the correct dates in the present case for the assessment of compensation, in the events which happened, were the dates when possession was taken of the several parcels of land — The Lands Tribunal member had reached the right conclusion — Appeal dismissed This was an appeal by case stated under section 3(4) of the Lands Tribunal Act 1949 by Washington Development Corporation in respect of a decision of the Lands Tribunal (V G Wellings QC) in favour of the contention of the claimants (the present respondents) concerning the price payable for the acquisition, under an agreement, by the corporation of the claimants’ freehold interest in land at Glebe House Farm, Washington, Tyne and Wear. The claimants, Bamlings (Washington) Ltd, were market gardeners, nurserymen and greengrocers. G E Moriarty QC and J H Fryer-Spedding (instructed by J B Baker, chief legal officer, Washington Development Corporation) appeared on behalf of the appellants; P Boydell QC and J Milner (instructed by Ingledew Botterell Roche Pybus) represented the respondents. Giving the judgment of the court, SLADE LJ said: This is the judgment of the court on an appeal by way of case stated pursuant to section 3(4) of the Lands Tribunal Act 1949 in respect of a reference by consent to the Lands Tribunal wherein the Lands Tribunal gave a decision on February 26 1982. The appellant is Washington Development Corporation (‘the corporation’). The respondent is Bamlings (Washington) Ltd (‘the claimants’). The decision was given following a preliminary hearing arising out of a reference by consent by the claimants and the corporation, in respect of the price payable by the corporation upon the acquisition, under an agreement between the parties dated May 13 1975, of the claimants’ freehold interest in land at Glebe House Farm, Washington, Tyne and Wear. On September 16 1981 an application was made by the claimants, to which the corporation consented, for an order pursuant to Rule 49 of the Lands Tribunal Rules 1975. Mr V G Wellings was duly selected by the President of the Lands Tribunal to deal with the case. There is no dispute as to the facts. At all material times the claimants, who are market gardeners, nurserymen and greengrocers, owned Glebe House Farm. It extended to some 25 acres and included the farmhouse and buildings shown on a plan attached to the notice of reference, which distinguished four plots respectively shown as Plot 5, Plot 7, Plot 7A and Plot 7B. In 1973 the corporation made a compulsory purchase order under the New Towns Act 1965 authorising it to acquire compulsorily areas which included the whole of the claimants’ property. Objections were made to the confirmation of this order by the Secretary of State, including an objection by the claimants, and a local inquiry was held in June 1974. Certain modifications were then made to the order, which as so modified was confirmed by the Secretary of State on April 1 1975 and became operative on April 8 1975. There were two cottages on Plot 5. The corporation wished to rehouse one of the claimants’ tenants who lived in one of the cottages on this plot. They wished to do this very promptly and thereafter to demolish both the cottages before they would be ready to proceed with the acquisition of all the land comprised in the confirmed order. To facilitate that arrangement, the claimants and the corporation entered into a written agreement dated May 13 1975 for the sale and purchase of all the claimants’ property which was comprised in the modified and confirmed order. The agreement, so far as material, provided as follows: (1) The Vendor will sell to the Corporation the unincumbered fee simple in the said land or all that their interest if less than the unincumbered fee simple at a price to be agreed with the District Valuer or failing agreement to be settled by the Lands Tribunal as if the necessary steps for acquiring such interest compulsorily had been taken under the New Towns Act 1965 and a notice to treat had been served on date hereof. (2) The Vendor will make a good statutory title to the said land to the Corporation. (3) The Corporation shall be entitled to take possession of the said land at any time after the signing of this Agreement, on giving fourteen days notice in writing to the Vendor of its intention to take possession. (4) Interest shall be paid on the said price at the rate prescribed from time to time under the Regulations made under section 32 of the Land Compensation Act 1961 from the date that the Corporation takes possession of the said land . . . (6) Completion of the purchase will take place within six weeks of the purchase price being agreed. It is common ground that the reasons for the conclusion of the agreement are as we have stated them. We therefore infer that it was entered into for the convenience of the corporation, rather than that of the claimants. It is also common ground that clause 3 of the agreement entitled the corporation, if it chose, to take possession of the land piecemeal. This was what it did. Possession was taken of the several parcels of the claimants’ property as follows: (1) A cottage and part of Plot 5 on June 11 1975. (2) Another cottage and the remainder of the land comprised in Plot 5 on November 20 1975. (3) Part of Plot 7 on June 1 1976. (4) The remainder of Plot 7 on May 1 1979. (5) The land and former chapel comprised in Plot 7A on April 11 1980. (6) The land and public house comprised in Plot 7B on April 11 1980. The point of law which the member was asked to decide by way of preliminary issue raised the question of what was or were the relevant date or dates as at which the price payable to the claimants by the corporation under the agreement should be assessed. The corporation contended that the proper date was, in respect of the entirety of the land, the date of the agreement. The claimants, on the other hand, contended that the proper date was in respect of each of the several parcels of land the date on which the corporation took possession thereof. The member answered the preliminary issue in favour of the claimants. The argument submitted to the tribunal by Mr Fryer-Spedding on behalf of the corporation appears to have rested heavily on a contention that the agreement was unlike a compulsory purchase, on the grounds that, under the agreement, the equitable interest passed to the purchaser as soon as the contract was made, whereas under a compulsory purchase order the equitable interest would not pass until compensation had been assessed. On behalf of the claimants, the member was referred to the speeches in the House of Lords in Birmingham Corporation v West Midland Baptist (Trust) Association [1970] AC 874, and in particular a passage in the speech of Lord Donovan which we will cite hereafter. The member accepted the corporation’s submissions to this extent, that the equitable interest in the land passed to the purchaser when the contract was made. However, he did not accept that the relevant date for assessment of the purchase price was the date of the agreement. The most material passage in his judgment is the following: It appears to me that at that date the purchaser was potentially entitled to specific performance, and that, for that reason, it obtained an immediate equitable interest in the property contracted to be sold: see Megarry and Wade, Law of Real Property (4th ed) p 575. However, the contract, on its true construction, in my opinion, intended the purchase price to be assessed as if there were no contract and as if the acquisition were compulsory and, therefore, as if the equitable interest did not pass on the making of the contract. Accordingly the date which is relevant for the purposes of valuation is not the date of the contract but, in the circumstances of the present case, there are several dates, namely, the actual dates on which the Corporation took possession of the individual parts of the property contracted to be sold … In the course of his decision, the member referred to another point which arose during the hearing of the preliminary issue, as to which he said this: I learned for the first time that, notwithstanding the contract, on February 17 1977 the Corporation made a general vesting declaration in respect of the land and premises which were the subject of the contract. The general vesting declaration became operative on March 29 1977. Mr Fryer-Spedding said that its effect was to transfer the legal estate in the land and premises to the Corporation. It in no way affected the matter which I had to decide. I am prepared to accept that Mr Fryer-Spedding is right on this point although I have some reservations about it. It may be, for example, that it indicates that the earliest date which is relevant for valuation purposes is the date on which the vesting became operative, namely March 29 1977. The second of the three questions on which the decision of this court is sought by the case stated is whether the member erred in law in accepting the concession of the corporation’s counsel that the general vesting declaration of February 17 1977 did not affect the matter which he had to decide. The third question asks in effect whether, notwithstanding all the circumstances to which we have referred, the member ought to have decided that the date on which the vesting declaration became operative was the relevant date for the assessment of the purchase price. We can deal with the second and third questions very shortly. Though Mr Moriarty on behalf of the corporation very properly drew these issues to our attention, he did not seek leave to withdraw the concession which had been made before the tribunal. He did not attempt to persuade us to answer either of these two questions. Nor did he challenge the submission made by Mr Boydell on behalf of the claimants that the court does not have before it the requisite documentary evidence as to the vesting declaration which would suffice to enable it to determine them. Nor did he apply for leave to adduce further evidence as to these matters. In these circumstances, neither counsel having asked this court to determine the second and third questions put to it by the case stated, the court should merely declare that it does not see fit to answer them. In saying this, however, we would make it clear that we express no opinion one way or the other as to whether the concession in question was correctly made. We now turn to the first and principal question raised for the decision of this court, namely, whether on the true construction of the agreement the member erred in law in holding that the purchase price payable thereunder was intended to be assessed as if there were no contract and as if the acquisition were compulsory and therefore as if the equitable interest did not pass on the making of the contract. Where an authority which has the power to acquire land compulsorily serves a notice to treat and that notice is followed by an unconditional agreement fixing the price, made between the owner and the authority, all the elements of a complete agreement are present and it becomes a bargain made under legislative enactment between the acquiring authority and the owner whose land the authority is authorised to acquire. An arrangement of this nature is sometimes referred to as a ‘parliamentary contract’ (see, for example, Duttons Brewery Ltd v Leeds City Council (1981) 43 P & CR 160 at p 182 per Fox LJ). Mr Moriarty submitted (and we accept) that the agreement in the present case was not a parliamentary contract but in substance a common form of contract for the sale of land applying the Law Society’s General Conditions of Sale (1973 revision) so far as not varied by the agreement. As he pointed out, the effect of a contract for sale by agreement is different from that of service of a notice to treat. As Wilberforce J said in Capital Investments Ltd v Wednesfield Urban District Council [1965] Ch 774 at p 794: A notice to treat does nothing more than establish conditions in which a contract might come into existence, either a voluntary contract or a statutory contract . . . It has been said that for certain purposes and to a certain extent the notice to treat constitutes the relation of vendor and purchaser, but in the same passages in which this statement has been made it has also been made clear that the notice does not constitute a contract but only a preliminary step bringing the parties together, either to agree or to refer the matter to a jury or other tribunal. There was an element of futurity in the agreement in the present case in that the purchase price payable thereunder fell to be agreed in the future with the district valuer, or failing such agreement to be settled by the Lands Tribunal according to the formula prescribed by clause 1. However, it has not been suggested that this element of futurity rendered the agreement anything other than a binding contract. As Lord Diplock said in Sudbrook Trading Ltd v Eggleton [1983] AC 444 at p 478: A contract is complete as a contract as soon as the parties have reached agreement as to what each of its essential terms is or can with certainty be ascertained: for it is an elementary principle of the English law of contract id certum est quod certum reddi potest. In these circumstances, Mr Moriarty submitted that the tribunal had been correct in its conclusion that under the agreement the equitable interest in the relevant land passed to the corporation on the date when the contract was made. Undoubtedly the general rule is that a purchaser under an ordinary contract for the sale of land at a fixed price, being potentially entitled to the equitable remedy of specific performance, obtains an immediate equitable interest in the property contracted to be sold. However, even accepting, as we do, that this agreement was a valid contract, we are not totally convinced that its somewhat peculiar provisions would necessarily have operated to give the corporation an equitable interest in the land at a time before the price had been agreed or otherwise ascertained. The member himself in the present case appears to have reached a different conclusion on this particular point from that reached by him in an earlier decision based on similar facts, to which he drew17 attention. In Marchment and Others (Executors) v Hampshire County Council (1979) 43 P & CR 431, he had said (at p 434) that it appeared to him that: in the case of a contract for the sale of land under which the price is to be determined at valuation, arbitration or indeed by the Lands Tribunal, the equitable title does not pass until the price has been fixed and that this is so because the criterion is the date from which an order for specific performance could be expected. However, in this court the claimants have not sought to challenge the correctness of the conclusion of the tribunal that the equitable interest in the relevant land passed to the corporation on the signing of the agreement. They have not sought to put in a respondent’s notice asserting the contrary view. In these circumstances, without attempting to decide the point one way or the other, we shall for the rest of this judgment proceed on the assumption that the corporation is correct in submitting that the equitable interest in the land passed to it the moment when the agreement was signed. It is common ground that the assessment of compensation for compulsory acquisition of land under the New Towns Act 1965 is now regulated by six rules set out in section 5 of the Land Compensation Act 1961. Rules (1), (2), (5) and (6) read as follows: (1) No allowance shall be made on account of the acquisition being compulsory: (2) 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: . . . (5) Where land is, and but for the compulsory acquisition would continue to be, devoted to a purpose of such a nature that there is no general demand or market for land for that purpose, the compensation may, if the Lands Tribunal is satisfied that reinstatement in some other place is bona fide intended, be assessed on the basis of the reasonable cost of equivalent reinstatement. (6) The provisions of rule (2) shall not affect the assessment of compensation for disturbance or any other matter not directly based on the value of land. These rules replaced the six rules set out in section 2 of the Acquisition of Land (Assessment of Compensation) Act 1919. There is no difference between the two sets of rules material for present purposes. Before the Birmingham Corporation decision it had been assumed for over a century that the notice to treat fixed the day on which the property eventually taken was to be valued for the purposes of calculating the compensation under rule (2). On the particular facts of that case, as it happened, the compensation fell to be assessed under rule (5), but in determining the construction and effect of rule (5) their lordships inevitably dealt also with rule (2). It may be that, as Mr Moriarty suggested, their observations concerning rule (2) are, strictly, obiter. Nevertheless they can, in my opinion, be regarded as providing authoritative guidance as to rule (2) as well as rule (5). The conclusion reached in that case was that the previously existing practice with regard to rule (2) was wrong (see, for example, at p 899G per Lord Reid). Lord Reid put the matter thus (at p 899B-C): The only other difficulty is to find the right date for the assessment of compensation. No stage can be singled out as the date of expropriation in every case. Sometimes possession is taken before compensation is assessed. Then it would seem logical to fix the market value of the land as at that date and to take actual consequential losses as they occurred then or thereafter, providing that the dispossessed owner had acted reasonably. But if compensation is assessed before possession is taken, taking the date of assessment can, I think, be justified 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 Morris of Borth-y-Gest stated the relevant principle in very similar terms (at p 907G): I consider, therefore, that the date by reference to which the value of land should be assessed under rule (2) is the date when the value is being agreed or is being assessed by the appropriate tribunal or, if it is earlier, the date when possession was taken. Lord Donovan (at p 911F) put the point slightly differently, saying: I am of the opinion that the contention of the appellants that the date of the notice to treat is the date when values are to be ascertained for the purpose of compensation is invalid; and that the true date for such purpose is the date when the title to the property passes or compensation is agreed or paid. It may be that these dates will frequently coincide, and unlikely that there will be much difficulty in practice in determining the relevant date. The guiding principle should be, I think, that 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, is the date according to which the necessary values should be ascertained. Lord Upjohn (at p 908) agreed with the speeches of Lord Reid, Lord Morris and Lord Donovan. Lord Wilberforce (at p 913) agreed with the speech of Lord Reid. Though this was not precisely the way he put them, we think the essence of Mr Moriarty’s argument may be summarised in the following propositions: (1) According to the general principles established by the decision in the Birmingham case, the date by reference to which the value of land falls to be assessed on a compulsory acquisition is the date when the acquiring authority becomes the owner of the land in equity if that date is earlier than the date on which the authority takes possession of the land. (2) The corporation in the present case became the owner of the relevant land in equity on May 13 1975 when the agreement was signed. (3) On the true construction of clause 1 of the agreement, the formula for assessing the compensation payable by the corporation obliged the Lands Tribunal, for the purpose of the assessment, to take into account both the existence of the agreement and the fact that the equitable interest in the land had passed thereunder to the corporation on May 13 1975. (4) If the Lands Tribunal had applied the formula in this manner, it should and would have concluded that the proper date of valuation was May 13 1975. We have already said that we are prepared to assume the correctness of proposition (2) for the purpose of this appeal. However, we cannot accept the correctness of the crucially important proposition (1), which seems to us a broader proposition than is warranted by the Birmingham case. As we read the speeches of, at least, Lord Reid, Lord Morris and Lord Wilberforce in that case, the general principle thereby established is that the date by reference to which the value of the land falls to be assessed on compulsory acquisition is the earlier of the two following dates, namely (a) the date when the value is agreed or is assessed by the appropriate tribunal; or (b) the date when possession is taken by the acquiring authority. It is at first sight true that Lord Donovan’s speech appears to suggest a rather different valuation date, namely the earlier of (a) the date when the authority becomes the owner of the property, whether in law or in equity; or (b) the date when possession is taken. However, we infer that Lord Donovan, when referring to the authority ‘becoming the owner of the property in equity’ had simply in mind the point made by Lord Reid in his speech, namely that if compensation is assessed (or agreed) before possession is taken, either party thenceforth is in a position to sue for specific performance of a (parliamentary) contract at that price; in such a situation there is thus a readily intelligible justification for saying that the date of valuation should be the date of assessment or agreement. This, we infer, is the reason why Lord Upjohn saw no difference between the statements of principle contained in the respective speeches of Lord Reid, Lord Morris and Lord Donovan, with all of which he agreed. We think that none of their lordships in the Birmingham case (certainly not Lord Reid, Lord Morris or Lord Wilberforce) were intending to suggest that the mere existence of a (non-parliamentary) contract for the sale of land to an acquiring authority, at a price to be determined by agreement or in default of agreement by an appropriate tribunal, would by itself render the date of the agreement the appropriate date for valuation purposes. They were clearly not directing their minds to the situation where there exists an ordinary contract for sale between owner and acquiring authority. Since the agreement in the present case was concluded more than five years after the House of Lords decision in the Birmingham Corporation case, we think that the parties must be deemed to have contracted having in mind the ordinary principles established by that decision as to the date by reference to which the value of the land falls to be assessed on a compulsory acquisition. In other words, we think they must have contracted having well in mind that, in accordance with these ordinary principles, the date is the date when the value falls to be agreed by the parties or to be assessed by the Lands Tribunal or, if it should be earlier, the date when possession is taken. We now revert to consider the particular terms of the agreement. In compliance with the formula laid down by clause 1, it was the duty of the Lands Tribunal to settle a price ‘as if the necessary steps for acquiring such interest compulsorily had been taken under the New Towns Act 1965 and a notice to treat had been served on date hereof’. In our judgment, therefore, it is clear that for the purpose of18 assessing a price in accordance with this formula, it was the duty of the Lands Tribunal to ask itself the following question: ‘What would have been the proper date for ascertaining the price payable by the corporation to the claimants if the necessary steps for acquiring the claimants’ interest in the land compulsorily had been taken under the New Towns Act 1965 and a notice to treat had been served on May 13 1975?’ The Birmingham Corporation case makes it quite clear that if the necessary steps had been taken under the Act of 1965 and a notice to treat had been served on May 13 1975, the last-mentioned date would not have been the proper date for ascertaining the price. Yet it is that date for which the corporation is now contending. In our judgment, the contention is unsustainable. For the reasons which we have already explained, the proper date for ascertaining the price, in the contingency postulated by clause 1, was, in our opinion, to be the date when the value fell to be agreed by the parties or assessed by the Lands Tribunal or, if it should be earlier, the date when possession was taken by the corporation. In the events which happened, the proper date was therefore the respective date when the corporation took possession of the several parcels of land. We respectfully agree with and adopt the member’s conclusion that clause 1 on its true construction ‘intended the purchase price to be assessed as if there were no contract and as if the acquisition were compulsory and therefore as if the equitable interest did not pass on the making of the contract’. The subsequent clauses of the agreement contain nothing which is inconsistent with this construction of clause 1. It is common ground, as we have said, that clause 3 entitled the corporation to take possession of the land by instalments. Clause 4 provided for interest on the purchase price to be payable as from the time of taking possession. There are, however, two further factors which, in our opinion, lend positive support to the claimants’ construction of the agreement. First, as Mr Boydell has emphasised, the agreed facts show that the contract was entered into not for the convenience of the claimants but for that of the corporation, who wished very promptly to rehouse one of the claimants’ tenants on Plot 5 in advance of proceeding with the acquisition of the rest of the land, and thereafter to demolish both of the cottages on that plot. We think these circumstances, as part of the ‘matrix’ of the transaction, are admissible for the purpose of construing not only clause 3 but also the other provisions of the agreement. It seems to us inherently unlikely that the claimants, in agreeing to accommodate the corporation by entering into the agreement, would have contemplated that their rights to compensation should be tied to an amount to be frozen as at the date of the agreement, even though possession of some parts of the land might not be taken for a substantial time thereafter, and, in the absence of a contract, they could have reasonably expected it to be assessed as at the date when possession was taken. Secondly, even if it be not permissible to take into account these particular circumstances in construing the agreement, the court can, in our opinion, take judicial notice of the fact that 1975 was an inflationary period when, in general, land values were rising at a rapid rate. As Lord Morris commented in the West Midland case (at p 904E): But why should the value of the land be other than the value either at the date when possession is taken or the value at the date when the valuation is being made? What justification can there be for taking an out-of-date valuation? The word ‘compensation’ would be a mockery if what was paid was something that did not compensate. The only justification for taking an out-of-date valuation in the present case could be the placing of a highly sophisticated construction on clause 1 of the agreement which was based on the technicalities of land law, did not accord with the natural meaning of the words and was unlikely to have represented the intentions of the parties. With all respect to Mr Moriarty’s skilful argument, we do not think it is well founded. For the reasons which we have given, we think the member reached the right conclusion. We accordingly dismiss this appeal. We answer the first question raised for the decision of this court in the negative. In regard to the second and third questions, we merely declare that by consent of both parties the court does not see fit to answer them. The appeal was dismissed with costs. Leave to appeal to the House of Lords was refused.