PURFLEET FARMS LIMITED v SECRETARY OF STATE FOR TRANSPORT, LOCAL GOVERNMENT AND THE REGIONS [2002] EWCA Civ 1430

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
[2002] EWCA Civ 1430Case No Case No: C/2001/1636Venue Royal Courts of Justice, Strand,, London, WC2A 2LL
Between
PURFLEET FARMS LIMITEDAppellantSECRETARY OF STATE FOR TRANSPORT, LOCAL GOVERNMENT AND THE REGIONSRespondent
Before
Lord Justice PotterLord Justice ChadwickMr Justice WallMichael Barnes QC (instructed by Rowe & Maw) for the claimantGuy Roots QC and Robert Walton (instructed by Ashurst Morris Crisp) for the respondentDate 15 October 2002

Lord Justice Potter:

INTRODUCTION

[1]This is an appeal on a point of law pursuant to s.3(4) of the Lands Tribunal Act 1949 as amended by the Civil Procedure (Modification of Enactments) Order 2000. It relates to an award of costs dated 3 July 2001 made by the Lands Tribunal (The President and P.H. Clarke FIRCS) by way of an Addendum dated 3 July 2001 (“the Costs Addendum”) to the Decision of the Lands Tribunal dated 10 April 2001 ordering the respondent Secretary of State to pay compensation to the claimants in respect of the compulsory purchase of the claimants’ land. The appeal concerns the principles underlying the exercise of the discretion of the Land Tribunal in making awards of costs in such cases and, in particular, whether they are or should be the same as those applicable to an award of costs in civil litigation under the Civil Procedure Rules (CPR). THE BACKGROUND[2]The reference to the Lands Tribunal (made on 3 February 2000) concerned the compensation payable for an area of open land of 21.6 acres situated between Purfleet and Grays in Essex which had been compulsorily acquired from the claimants by the respondent in connection with the construction of part of the Channel Tunnel Rail Link. The land was vacant and it was agreed between the parties that it was suitable for development for warehouse purposes and enjoyed a deemed planning permission for that use. The compensation for the acquisition under s.5 of the Land Compensation Act 1961 was the open market value of the land, that is the amount which the land if sold in the open market by a willing seller on 30 May 2000 might be expected to realise. It was that sum which the Lands Tribunal had to determine. The claimants sought an award of compensation of £12,260,000. The respondent valued the compensation at £3,750,000. However, on 1 December 2000, the respondent made a sealed unconditional offer in the sum of £5,000,000. After a nine-day hearing, the Lands Tribunal determined the compensation at £6,660,000.[3]The assessment of the open market value of an area of land on the assumption of a sale for the purpose of development for warehousing purposes involved a series of questions, most of which had to be addressed by expert witnesses. It is not necessary to detail all the issues which underlay the differences between the respective valuations. They were summarised by the Lands Tribunal at paragraph 23 of its decision. Thirteen discrete issues fell for determination. However, there were six main issues involved, upon which the Lands Tribunal found as follows:(1) As to the basic land value to be derived from the comparables relied upon by the rival experts, the Lands Tribunal found for a figure substantially nearer that of the respondent i.e. £475,000 per acre. The respondent had advanced a figure of £460,000 per acre whereas the figure advanced by the claimants’ principal expert was £638,015 per acre.(2) There was a highway issue which had major implications for the cost of development mainly whether a satisfactory access could be taken from a private road along the western boundary of the land. On this issue the Lands Tribunal found for the claimants.(3) The respondent sought a reduction of £40,000 per acre (£760,000 overall) from the value on account of the alleged necessity for a planning agreement. The tribunal rejected this contention.(4) A land drainage question was raised late in the proceedings by the respondent. Eventually there was a large measure of expert agreement on the issue arising.(5) There was an issue mainly of law, on the exact amount of the net developable area within the total 21.7 acres. The Lands Tribunal found a figure between the contentions of the parties, but substantially closer to that of the respondent.(6) The respondent contended that the deemed planning permission for warehousing was to be deferred for delay or uncertainty. This issue of law was decided in favour of the claimants.[4]In its written decision of April 2001, the Lands Tribunal invited written submissions on costs in relation to which the Lands Tribunal Practice Direction , (5 April 2001) had just come into effect. Following receipt of the parties’ submissions, by its Costs Addendum, the Lands Tribunal ordered the respondents to pay three-quarters of the costs of the appellant. THE POWER OF THE LANDS TRIBUNAL TO AWARD COSTS[5]S.3(5) of the Lands Tribunal Act 1949 provides: “Subject to the following provisions of this section the Lands Tribunal may order that the costs of any proceedings before it incurred by any party shall be paid by any other party and may tax or settle the amount of any costs to be paid under any such order or direct in what manner they are to be taxed”.[6]S.4(1) of the Land Compensation Act 1961 provides, so far as relevant:
“Where either – (a) the acquiring authority have made an unconditional offer in writing of any sum as compensation to any claimant and the sum awarded by the Lands Tribunal does not exceed the sum offered; or (b) ...; the Lands Tribunal shall, unless for special reason it thinks it proper not to do so , order the claimant to bear his own costs and to pay the cost of the acquiring authority so far as they were incurred after the offer was made ....”
(emphasis added)[7]Rule 52(1) of the Lands Tribunal Rules 1996 S.I. 1996/1022 (as amended) provides: “Subject to the provisions of Section 4 of the [Land Compensation Act 1961] and of Rule 28(11), the costs of and incidental to any proceedings shall be in the discretion of the Tribunal.” [Rule 28 (11) is not relevant for the purposes of this case][8]Paragraph 11 of the Lands Tribunal Practice Direction (5 April 2001) provides: “1. Introduction 1.1 Procedure in the Lands Tribunal is governed by the Lands Tribunal Rules 1996 (S.I. 1996 No 1022) as amended by the Lands Tribunal Amendment) Rules of 1997 and 1998 (S.I. 1997 No 1965 and S.I. 1998 No 22). Practice Directions, issued from time to time by the President, contain information on the way in which the procedure contained in the rules is operated. These Practice Directions supersede all those previously issued. They apply to all proceedings, including references by consent. 2. The overriding objective 2.1. The Civil Procedure Rules, which apply to the ordinary civil courts of law (The Court of Appeal, the High Court and the county courts) have no application in the Lands Tribunal. Nevertheless, in following its procedures the Tribunal does so on the basis of the same overriding objective as that in the CPR. The overriding objective is to follow procedures that enable the Tribunal to deal with cases justly. Dealing with a case justly includes, so far as practicable –(a) ensuring that the parties are on an equal footing;(b) saving expense;(c) dealing with the case in ways which are proportionate - (i) to the amount of money involved; (ii) the importance of the case; (iii) to the complexity of the issues; (iv) to the financial position of each party;(d) ensuring that it is dealt with expeditiously and fairly; and(e) allotting to it an appropriate share of the Tribunal’s resources while taking into account the need to allot resources to other cases. 2.2. The Tribunal expects parties to assist it to further the overriding objective. 19. Costs19.1 .....19.2 Costs are in the discretion of the Tribunal and this discretion will usually be exercised in accordance with the principles applied in the High Court and county courts. Accordingly, the Tribunal will have regard to all the circumstances, including the conduct of the parties; whether a party has succeeded on part of his case, even if he has not been wholly successful; and admissible offers to settle (see paragraphs19.3 and19.4 below). The conduct of a party will include conduct during and before the proceedings; whether a party has acted reasonably in pursuing or contesting an issue; the manner in which a party has conducted his case; and whether or not he has exaggerated his claim. 19.3 The general rule is that the successful party ought to receive his costs. On a claim for compensation for compulsory acquisition of land, the Tribunal, applying this general rule, would normally make an order for costs in favour of a claimant who receives an award of compensation. Special rules, however, apply by virtue of Section 4 of the Land Compensation Act 1961. Under this provision, where an acquiring authority has made an unconditional offer in writing of compensation and the sum awarded does not exceed the sum offered, the Tribunal must, in the absence of special reasons, order the claimant to bear his own costs thereafter and to pay the post-offer costs of the acquiring authority. However, a claimant will not be entitled to his costs if he has failed to deliver to the authority, in time for them to make a proper offer, a notice of claim containing the particulars set out in Section 4(2). Where a claimant has delivered the claim containing the required details and has made an unconditional offer in writing to accept a particular sum, if the Tribunal’s award is equal to or exceeds that sum the Tribunal must, in the absence of special reasons, order the authority to bear their costs and to pay the claimants’ post–offer costs. .... 19.8 Where, as is almost invariably the case, the Tribunal issues a written decision determining the substantive issues in the proceedings, this will be sent to the parties with an invitation to make written submissions as to costs. Following consideration of these submissions the Tribunal will issue an addendum to the decision determining the liability of the costs. It may be possible, particularly where there are only two possible outcomes of the proceedings, for the Tribunal to invite submissions as to costs at the conclusion of the hearing. This procedure will be followed wherever possible. Where the issue of costs is particularly complicated the Tribunal may hold a costs hearing before making an award. THE DECISION OF THE LANDS TRIBUNAL. The submissions of the parties[9]In the light of the arguments advanced for the claimants on this appeal, it is pertinent to refer to the submissions on costs which the parties made to the Lands Tribunal.[10]The claimants, having set out the relevant figures contended for and awarded stated:
“6. The claimants make their application for costs following the general rule which applies in litigation, and that which applies particularly to claims for compensation for the compulsory acquisition of land. We cite the opening sentences of paragraph 19.3 of the Practice Direction issued by the Tribunal in April 2001. “The general rule is that the successful party ought to receive his costs. On a claim for compensation for compulsory acquisition of land, the Tribunal applying this general rule, would normally make an order for costs in favour of a Claimant who receives an award of compensation.”
[11]The claimants’ submissions then made reference to s.4(1) of the Land Compensation Act 1961 as a provision or rule which only made sense on the postulate that, in a case where there was no sealed offer, or where the award exceeded the amount of such sealed offer the normal rule is that the Acquiring Authority will pay to the Claimants their costs.[12]It was then submitted that the normal or general rule might be departed from by the Lands Tribunal in its discretion in an appropriate case, it being submitted that:
“In general there are two categories where it might be appropriate to depart from the general rule. One is where the conduct of the Claimant has been in some way unreasonable. The other is where there has been an issue or series of issues which have taken up a great deal of time and which are discrete issues on which the Claimants have failed.”
[13]The claimants submitted that the first category did not apply. In relation to the second category, they made short submissions upon the six issues which I have already set out in paragraph 3 above. It was submitted that, on that brief analysis, it was not clear either that the respondent succeeded on a majority of issues or that, on consideration of the particular issues, any departure from the general rule was justified. Indeed, the claimants had wholly succeeded on the majority of the enumerated issues.[14]The claimants’ submission concluded “We therefore apply for an order for costs based on(a) the general rule as to costs applicable in litigation and before the Lands Tribunal and(b) on the fact that there are no particular circumstances in this case which would justify any departure from that general rule.”[15]In the short submissions of the respondent, it was accepted that the Lands Tribunal Practice Direction provided that the general rule was that the successful party ought to receive his costs but suggested that in the instant case there was no clear winner, the award falling significantly closer to the respondents’ valuation than that of the claimant. Reference was made to paragraph 19.2 of the Practice Direction and the respondent quoted the observations of Lord Woolf MR in A.E.I. Limited –v- Phonographic Performance Limited [1999] 1 WLR 1507 at 1522-3 in relation to the effect of the new CPR Rules as follows:
“I draw attention to the new Rules because, while they make clear that the general rule remains, that the successful party will normally be entitled to costs, they at the same time indicate the wide range of considerations which will result in the court making different orders as to costs. From 26 April 1999 “following the event principle” will still play a significant role, but it will be a starting point from which a court can readily depart .... The most significant change of emphasis of the new rules is to require Courts to be more ready to make separate orders which reflect the outcome of different issues ... it is now clear that too robust an application of the “follow the event principle” encourages litigants to increase the cost of litigation, since it discourages litigants from being selective as to the points they take. If you recover all of your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.”
[16]Despite that quotation, however, the respondent did not invite the Lands Tribunal to make separate orders reflecting the outcome of any identified issues. The submission simply asserted that, in the light of those observations and of the partial success by both parties on the issues raised, it was appropriate that no order for costs be made, subject to the fact that, on two occasions, the respondent had incurred costs unnecessarily through adjournments of the hearing on account of the claimants’ late production of proofs of evidence in relation to which the respondent sought an order for costs. The Costs Addendum[17]Having referred briefly to the submissions of the parties the Lands Tribunal stated:
“119 .... the general rule that costs follow the event is now only the starting point for an award of costs; a party’s conduct should be taken into account, including whether or not the claim has been exaggerated (see AEI Ltd –v- Phonographic Performance Limited [1999] 1 WLR 1507 at pages 1522-3 and the Tribunal’s Practice Direction para 19.2). 120 Our award exceeds the figure put forward by the Secretary of State at the hearing (£3,750,000) and his sealed offer (£5,000,000). We agree that the starting point for our determination of costs is that the claimants have been successful and should receive their costs. We agree, however, with the Secretary of State that this is only a starting point; all the circumstances should be taken into account including whether the claim has been exaggerated and the relationship between the award and the contentions of the parties. 121 Although the Civil Procedure Rules do not apply to proceedings in this Tribunal, we should have regard to them where applicable, in particular with regard to the award of costs. Rule 44.3(2) provides;- “If the Court decides to make an order about costs – (a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but (b) the Court may make a different order.”
Rule 44.3(4) requires regard to be had to all the circumstances including “the conduct of all the parties”. “Conduct” includes “whether a claimant who had succeeded in his claim, in whole or in part, exaggerated his claim” (Rule 44.3(5)(d)).[18]There followed a reference to a quotation of the first two sentences of the observations of Lord Woolf in the AEI decision quoted at paragraph 15 above. The Costs Addendum concluded:
“122. Our determination of compensation at £6,660,000 is well below the claimants’ figure of £12,260,000. It is £2,910,000 above the Secretary of State’s figure but £5,600,000 below the claimants’ figure. In our judgment the latter was significantly higher than can be supported by reliable evidence, particularly with regard to the price per acre (£638,015 based on comparables south of the Thames, which we found to be wholly dissimilar to the reference land and unreliable in other respects, compared to our determination of £475,000 and the Secretary of State’s figure of £460,000). Overall, we find that the claimants’ value was assessed at a particularly high figure and this should result in a reduction in costs. The claimants’ entitlement to the recovery of their costs should be reduced to three-quarters. We do not think that the adjournments of the hearing merit a separate order for costs.”
THE SUBMISSIONS OF THE PARTIES ON APPEAL[19]Mr Michael Barnes QC for the claimant has mounted a twofold attack upon the reasoning of the Lands Tribunal. The first line of attack is a challenge to the overall approach of the Lands Tribunal on the basis set out in the Practice Directions which effectively equate the principles applicable to the exercise of the discretion of the Lands Tribunal in respect of costs with the principles which today govern awards of costs in civil litigation generally, as set out in Rule 44.3 of the CPR. It will thus be apparent from paras 10-16 above that Mr Barnes’ primary position jettisons the basis on which the claimants’ submissions as to costs were made to the Lands Tribunal [in which they referred without qualification to a “general rule applicable in litigation and before the Lands Tribunal”] and submits that a different principle or approach is appropriate to the award of costs by the Lands Tribunal in relation to a claim for compensation for the compulsory acquisition of land (“a compensation reference”). In such a case, he submits, it is clear that a full award of costs should be made to a claimant whose compensation award exceeds the sum offered unless there is ‘special reason’ not do so: c.f. s.4(1) of the 1961 Act. He does not suggest that s.4(1) so provides in terms, concerned as it is with the position where a claimant fails to beat the respondent’s unconditional offer, but submits that it is the clear implication of the sub-section that, where the compensation does exceed the amount of the unconditional offer, the claimant ought to be awarded his costs unless there is special reason to the contrary. He goes on to submit that such special reason should only be found in ‘highly exceptional circumstances’. Second, he submits that, even if the general principles governing the award of costs in compensation references are similar to those set out in the CPR, they should be applied in a flexible manner which reflects the nature of the particular proceedings and, in particular, the rationale underlying awards of compensation in respect of compulsory purchase, namely that of “equivalence” (see further below), which principle he submits should be carried through and given effect in any award of costs made. Mr Barnes submits that it is plain from the passages of the Costs Addendum which I have quoted above, that the Lands Tribunal did not give due weight to that principle.[20]In response, Mr Guy Roots QC for the respondent submits that there is nothing inconsistent between the provisions of s.4(1) of the 1961 Act and the approach to costs adopted in the CPR in the name of the overriding objective. He points out that, in the claimants’ submissions on costs made to the Lands Tribunal, no such inconsistency was suggested and he asserts that the costs order made was readily explicable in the light of the way the proceedings went before the Lands Tribunal (see further below). As to the suggestion that the principle of ‘equivalence’ should affect or modify the approach of the Lands Tribunal when applying, or proceeding analogously to, the CPR, Mr Roots submits that it is not relevant, because it is a principle which relates to the assessment of the compensation and not to the award of costs. He submits that costs in relation to a reference to the Land Tribunal should be determined, as in ordinary litigation, in accordance with the principles set out in the Practice Direction. DISCUSSION[21]The principle of equivalence underlies the law of compensation for compulsory purchase in this country. In Horn –v- Sunderland Corporation [1941] 2 KB 26 at 49 Scott LJ stated:
“The statutory compensation cannot, and must not, exceed the owner’s total loss, for, if it does, it will put an unfair burden on the public authority or other promoters who on public grounds have been given the power of compulsory acquisition, and it will transgress the principle of equivalence which is at the root of statutory compensation, the principle that the owner shall be paid neither less nor more than his loss .”
(emphasis added) The principle was referred to by Lord Nichols in Director of Buildings –v- Shun Fung Limited [1995] 2 AC 111 at 125 as follows:
“The purpose of these provisions in Hong Kong and England, is to provide fair compensation for a claimant whose land has been compulsorily taken from him. This is sometimes described as the principle of equivalence. No allowance is to be made because the resumption or acquisition was compulsory; and land is to be valued at the price it might be expected to realise if sold by a willing seller, not an unwilling seller. But subject to these qualifications, a claimant is entitled to be compensated fairly and fully for his loss. Conversely, and built into the concept of fair compensation, is the corollary that a claimant is not entitled to receive more than fair compensation; a person is entitled to compensation for losses fairly attributed to the taking of his land, but not to any greater amount. It is ultimately by this touchstone, with its two facets, that all claims for compensation succeed or fail.”
[22]Equivalence is a principle which, so far as previous English authority is concerned, has been articulated in relation to the provision of compensation rather than the award of costs in the proceedings to determine that compensation. However, Mr Barnes has submitted that, if a claimant is compelled to take proceedings in the Lands Tribunal in order to get his compensation determined, and such compensation is determined significantly above the sum previously offered to him by the acquiring authority, then if he does not receive an order for the whole of his costs, the principle of equivalence is flouted. Just as in Harvey –v- Crawley Development Corporation [1957] 1 QB 485, a householder whose home had been compulsorily purchased was held entitled as part of her compensation to her surveyor’s fees, legal costs and the travelling expenses incurred in attempting to buy and eventually buying a new home, so this principle should be carried through into the award of a successful claimant’s costs.[23]Mr Barnes has referred us to the decision of the Court of Session of Scotland in Emslie & Simpson Limited –v- Aberdeen District C ouncil [1995] RVR 159 as affording support for the approach which he advocates, albeit the judgments in that case made no reference to a doctrine of “equivalence” in Scottish law. In that case the claimant had put forward a claim for compensation of over £400,000, but was awarded the sum of only £75,400 against an offer by the respondent of £55,390. The Lands Tribunal for Scotland awarded to the claimant the whole of its costs. A number of large items of the claim were excluded by the Lands Tribunal. It held nonetheless that the claimants were the successful party and the fact that the amount awarded fell far short of that which had been claimed was not a major consideration. The first issue before the Court of Session was whether the making of an advance payment of a part of the compensation was equivalent to a sealed offer as regards a decision on costs. It is not relevant to this case. The second issue was whether, assuming that the principles which govern costs in ordinary litigation applied, the Tribunal had erred in law in its costs decision. It was held that it had not. The third issue was, whether there was any distinction between(i) the approach which the Tribunal should take as to costs in cases of disputed compensation for the compulsory purchase of land and(ii) the approach which is taken by the courts.[24]Lord Morison, with whose judgment Lord President Hope and Lord Weir agreed, stated at p.162:
“I am not persuaded that the expenses of a reference to determine the amount of disputed compensation for compulsory purchase should necessarily be treated in the same way and according to the same principles as those which apply to litigation in the courts. A person whose interest in land is under threat of compulsory acquisition is in an unenviable position. He is compelled either to accede to the acquisition or to take the steps provided by the legislature to oppose it. If the order is confirmed he has no option but to comply with it and to have the amount of compensation determined either by agreement, if he can secure it, or if not, by a reference to the tribunal within the statutory framework which is laid down for that purpose. In these respects it appears to me that he is in a different position from that that of the ordinary litigant and my understanding is that, if a person unsuccessfully opposes confirmation of the compulsory purchase order, he is not ordinarily found liable for the expenses of the statutory procedures which are laid down for the hearing of his objection. In respect of these procedures the principles applying to expenses in the courts do not apply, and it seems to me that there is justification for the adoption of a similar practice in respect of the other procedures which are laid down for determination of the amount of compensation after an order has been confirmed ….”
[25]Later, in relation to the facts of the case before him he stated at p.163:
“If the advance payment is disregarded, the District Council is left to rely on the fact that the sum awarded is very much less than that which had been claimed, and that it excluded a large number of very substantial items upon which the total claim was based. In ordinary litigation the question whether such a consideration has any effect on expenses and if so what is very much a matter for the exercise of discretion by the court which has decided the case, and appeals based on this kind of consideration are discouraged. There are some cases in which such a feature may lead to determination that there has been divided success and that expenses should be modified on that account. In most cases however it is perfectly reasonable that, having been put to the expense of establishing a right which has been disputed, a claimant should put forward his claim on the maximum basis which he can reasonably support and should be entitled to the expenses of doing so if he is successful in the general assertion of his right. The protection afforded to a defender in an ordinary action in which only the amount of an award is in issue, in regard to liability for expense arising from proof of any part of the claim for which he is ultimately found not to be liable, is the lodging of a tender … In the absence of an offer equalling or exceeding the amount of the award, the tribunal were fully entitled to hold, as they did, that “in normal course (the claimants) would be found entitled to their expenses on the general principle that expenses followed the event.”
The claimants were required to go the tribunal to establish that they were entitled to a substantially greater sum than that which had been offered…. The tribunal were therefore entitled to regard the fact that the award exceeded by a substantial margin the compensation which had been offered as the major consideration bearing on expenses in the circumstances of the case. Their decision to that effect is not only one which lay within their discretion, it is also one with which I see no reason to disagree, particularly in view of the fact that the exclusion of certain large items of their claim depended on narrow and complex determinations of law on which the claimants could not reasonably have refrained from making submissions if they chose , as they did, not to accept the offer made to them.”[26]In agreeing with Lord Morison, Lord President Hope said at p.164:
“I am not satisfied that the position in cases of disputed compensation is the same as that which applies to litigation generally. It seems to me that the underlying principle in these cases is that the acquiring authority is liable to pay compensation to the owner or occupier of the lands taken. The expenses of determining the amount of disputed compensation may be seen to be part of the reasonable and necessary expense which is attributable to the taking of the lands compulsorily by the acquiring authority. The principle which applies to litigation as applied by Lord President Robertson in Shepherd –v- Elliott and quoted by Maclaren on Expenses at p.21 is that the cost of litigation should fall on him who caused it. The cost of determining the amount of the disputed compensation would seem, according to this principle, to fall on the acquiring authority without whose resort to the use of compulsory powers there would have been no need for the owner or occupier to be compensated. That seems to me to be the proper starting point for an examination of the question of expenses in these cases. While I think that the tribunal should be guided in the exercise of a discretion which is given to it by Art 33(1) of the Lands Tribunal for Scotland Rules 1971, by the general rules as explained in Maclaren at pp21-23, particular account should be taken in these cases of the underlying principle - especially when questions arise as to what constitutes success and whether the proceedings were necessary. Accordingly, I share Lord Morison's reservations about the dictum in McLaren’s Trustee –v- Secretary of State for Scotland . In my view the passage quoted from the opinion of the Land Tribunal is preferable, as it recognises that there is a distinction to be made in cases of disputed compensation arising from the compulsory acquisition of land from the rules which apply to litigation generally.”
[27]In English Property Corporation –v- Royal Borough of Kingston-Upon-Thames (1998) 77 P&CR1, this court upheld a decision of the Lands Tribunal in which the Tribunal, having been referred to the decision in the Emslie & Simpson case, accepted as its starting point that the cost of determining the amount of disputed compensation should fall on the acquiring authority to whose use of compulsory powers the need to determine compensation was attributable, but refused the costs of the claimants insofar as they were increased by a claim for compensation which failed on the grounds that it had no statutory basis. In delivering his judgment, with which the President and Sir Patrick Russell agreed, Morritt LJ observed:
“For my part, I consider that the tribunal was entitled to treat the failure of the severance claim in respect of the Green Land and the Orange Land as a special reason for departing from the normal rule. Whether to do so, and if so, what other order for costs to make was a matter for the exercise of their discretion in respect of which no error of law has been shown.”
[28]It seems to me that, in their overall context, the terms of that judgment, delivered prior to the introduction of the CPR, may be regarded as a tacit endorsement of the observations of Lord President Hope and Lord Morison quoted above as applicable also to compensation references before the Lands Tribunal in England, while at the same time affirming the view of the Lands Tribunal in the English Property Corporation case that, where a claimant, as part of his case, advances a claim which has no statutory basis and is therefore misconceived, such conduct affords a special reason for departing from the usual order for costs to which the successful claimant is otherwise entitled. However, there is nothing in the decision which defines or delimits the circumstances in which the conduct of the claimant, whether in relation to a specific issue or on a broader basis, may constitute a special reason for departing from the usual order.[29]Leaving aside the impact or influence (if any) of the CPR upon awards of costs in the Lands Tribunal it is my view that the proper approach of the Tribunal for the costs of a successful claimant (i.e. a claimant who is awarded more than the amount of an unconditional offer by the respondent) should be that he is entitled to his costs incurred in the proceedings in the absence of some ‘special reason’ to the contrary. Whether such special reason exists in any given case is a matter for the judgment of the Lands Tribunal. Plainly it may exist where wasted or unnecessary costs have been incurred for procedural reasons as a result of the conduct of the claimant (e.g. abandoned issues, unnecessary adjournments, or failure to comply with directions of the Tribunal). However, so far as the nature and substance of the case advanced by the claimant is concerned, special reasons should only be regarded as established where the Tribunal considers that an item of costs incurred or an issue raised was such that it could not on any sensible basis be regarded as part of the reasonable and necessary expenses of determining the amount of the disputed compensation. This would apply not only to a claim advanced without any statutory basis but to other examples of manifestly unreasonable conduct which may give rise to unnecessary expense in the course of the proceedings. It means, in my view, that, following the hearing of a compensation reference in the Lands Tribunal in which the claimant has been successful, a special reason for departing from the usual order for costs should only be found to exist in circumstances where the Tribunal can readily identify a situation in which the claimant’s conduct of, or in relation to, the proceedings has led to an obvious and substantial escalation in the costs over and above those costs which it was reasonable for the claimant to incur in vindication of his right to compensation.[30]Having expressed the matter in that way, it is difficult to identify a specific example of a situation in which pursuit of a particular issue or conduct in ordinary litigation would merit the court’s departure from the general rule that a successful party ought to receive its costs, whereas it would not lead to the same result in proceedings before the Lands Tribunal. In the case of Emslie & Simpson the Court of Session did not attempt to cite such an example; indeed it made clear that it regarded the exercise of discretion by the Tribunal in that case as appropriate under both regimes. The difference is in my view to be found in the observations of Lord President Hope and is essentially one of emphasis, that is to say that there is a particular need in the case of a compensation reference before the Lands Tribunal to take as a proper starting point the fact that the claimant has had both the procedure and the need to vindicate his right to compensation thrust upon him by use of compulsory powers, in which context, taking up the words of Lord Morison quoted at paragraph 25 above, it is:
“perfectly reasonable that .. [the claimant] .. should put forward his claim on the maximum basis which he can reasonably support and should be entitled to the expenses of doing so if he is successful in the general assertion of his right.”
[31]I now turn to the guidance afforded by the Lands Tribunal Practice Directions. Paragraph 2 rightly states that the CPR has no application in the Lands Tribunal. However, it makes clear in paragraph2.1 that in following its procedures the Tribunal acts in accordance with the overriding objective as therein set out and in paragraph2.2 that the Tribunal expects the parties to assist it in furthering the overriding objective. This includes dealing with the case in ways which are proportionate(i) to the amount of money involved(ii) the importance of the case(iii) to the complexity of the issues and(iv) to the financial position of each party. The procedures for dealing with the case are the subject of early consideration, close case management and directions tailored to the requirements of the case under one of the four procedures provided for in paragraph 3 (Case Management) of the Practice Directions. That gives the Tribunal early opportunity to lay down the lines of, and impose limitations on, the steps which the parties are required to take for the expeditious and economical disposal of the proceedings. No doubt the failure of a claimant to comply with such an order may be made the subject of an adverse costs order following the event and Mr Barnes does not suggest that such a course would be inappropriate or open to objection.[32]The general position as to the burden of the successful parties’ costs is dealt with under paragraph 19 of the Practice Direction. It has been the submission of Mr Barnes that the first sentence of paragraph 19.2 of the Practice Direction is apt to give rise to error, in that it indicates that the discretion will ‘usually’ be exercised in accordance with the principles applied in the High Court and County Courts. Mr Barnes does not submit that the sentences which follow in paragraph 19.2 and which set out the matters to which the Tribunal will have regard when considering the incidence of costs, are matters which, either in principle or under previous case law, were irrelevant to the Tribunal’s exercise of its discretion before the issue of the Practice Directions. Nor does he criticise (indeed he adopts) the statement in paragraph 19.3 that the general rule is that the successful party ought to receive its costs. The point which he makes is that the effect of the statement in the Practice Directions that discretion will usually be exercised in accordance with the principles applied in the High Court implicitly adopts the approach set out in the AEI case (see paragraph 15 above) and, in particular, the observation of Lord Woolf that ‘the following the event principle will still play an important role’, but that ‘it will be a starting point from which the court can readily depart’). Mr Barnes submits that it was this observation, coupled with the terms of Rule 44.3(5)(d), (‘whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim’) which led the Lands Tribunal in this case to make the order which it did. He submits that the Lands Tribunal would, or at any rate should, not have made that order if the approach set out in the Emslie & Simpson case had been applied.[33]I do not accept that submission.[34]By way of preliminary, I should make clear that certain matters are not in dispute between the parties. First, on a fair reading of paragraphs 121 and 122 of the Costs Addendum, the principal reason for the Tribunal’s progression/departure from the starting point that the claimants had been successful and should therefore receive their costs (see paragraph 120), was not simply that ‘the claimants’ value was assessed at a particularly high figure’, but that this resulted from the use by the claimants’ expert valuer of comparables ‘wholly dissimilar to the reference land and unreliable in other respects’ (see paragraph 122). The reasons for those observations appear in paragraph 104-106 of the main decision. Shortly, the comparables which the Tribunal found of assistance were sites which yielded figures close to the value per acre put forward by the respondent’s expert. In order to counter this position, the claimants’ expert relied upon three particular ‘comparable’ sites all of which, if truly comparable, supported the very much higher figure for which he contended. The utility or applicability of each of those sites as a valid comparable was roundly rejected by the Tribunal as flawed, unreliable and worthy of no weight at all. Second, while neither of the parties could give accurate estimates to us of the overall time and expense involved in the investigation of the rejected comparables, both agreed that it must have been substantial.[35]Finally it has not been in dispute that, at the outset of the proceedings an adjournment was necessary, involving a delay of more than a day as a result of the late production of the claimant’s proofs of evidence. There was then a second adjournment following the resumption of the hearing, necessitated by an error in the claimants’ analysis of highway evidence in respect of which the claimants accepted responsibility. Mr Barnes has not disputed that the Tribunal plainly had a discretion, if it saw fit, to make an order for some reduction in the costs recoverable by the claimants to reflect that position. However, he points out that the reduction of one quarter of the claimant’s costs made by the Lands Tribunal appears from the wording of paragraph 122 to have been attributable solely to the view of the Tribunal that the claimants has ‘exaggerated’ their claim. He submits that, given the claimants were the successful party by a substantial margin, to criticise them for advancing a far higher figure than they eventually recovered is no good reason to condemn them in costs, is a breach of the principle of ‘equivalence’ and represents a departure from the views of Lord Morison and Lord Hope in Emslie & Simpson.[36]I accept Mr Barnes’s submission that, if as a result of applying the principles of ordinary litigation to the hearing of compensation references, the Lands Tribunal adopts a practice of ‘ready departure’ from the principle that the successful claimant is entitled to his costs in the absence of a special reason to the contrary, that would involve a change of approach which has previously and properly been adopted in compensation reference cases. However, I equally consider that, in exercising its wide discretion under S.3(5) of the 1949 Act and Rule 52(1) of the 1996 Rules, and in considering the question of whether or not special reason exists to depart from the usual order, it may usefully ‘have regard’ to the matters set out in paragraph 19.2 of the Lands Tribunal Practice Directions including whether or not the claimant has exaggerated his claim. In considering that last question, however, exaggeration alone is not enough in the event of a large disparity between the sum claimed and the sum awarded. The matters to which the Tribunal should have regard are(a) the reasons for that disparity and(b) their effect upon the conduct of the claim. As to (a), if the reasons are defensible, in the sense that there was a legitimate, albeit unsuccessful, argument put forward in support of the figure concerned, there can be no good reason to regard the claim as exaggerated in the pejorative sense necessary to justify a sanction in costs. As to (b), if, in any event, the effect on the proceedings in terms of the time spent and the costs incurred in disposing of the issue or argument concerned is relatively insignificant, then again an adverse order is unlikely to be appropriate.[37]Turning to the question of expert evidence, if the amount of the ‘exaggerated’ claim is based on the valuation, opinion and evidence of the claimant’s expert witness, it will rarely be appropriate in my view to make an adverse costs order against the successful claimant. Valuation is an inexact science. In any case where, by reason of the nature or features of the subject site and/or the state of the market in respect of sites for similar development, there is no close or obvious comparable available, there is bound to be legitimate room for argument and difference of opinion as to the validity or usefulness of a proffered comparable, whether by reason of its location, nature or proposed use. If the Tribunal concludes that, on examination, or as a result of argument, the comparison between the comparable relied on and the subject site is inapt or unhelpful, that should not ordinarily invite a penalty in costs on the grounds that its assertion or resultant discussion has taken up the time of the Tribunal unnecessarily.[38]In my view, Mr Barnes is correct when he submits that, in such cases, disallowance of a proportion of the claimant’s costs will usually only be justified where the Tribunal is satisfied that a) no competent valuer could reasonably have regarded the comparable as of real relevance or assistance in the valuation exercise; b) as a result of its introduction and discussion, a significant amount of the Tribunal’s time has been wasted and the proceedings unduly prolonged; c) no equivalent or near equivalent proportion of the proceedings has been spent dealing with issues unreasonably and unsuccessfully raised by the respondent; d) the amount or proportion of the costs disallowed is proportionate to the time wasted.[39]In the light of those observations, I do not consider that Mr Barnes has demonstrated any error by the Lands Tribunal in its decision as to costs in this case. While certain sentences of the Costs Addendum (notably the first two sentences of paragraph 122), read in isolation, might suggest that the ‘exaggeration of the claim’ referred to was based simply upon the discrepancy between the amount claimed and the amount received, read as a whole it is plain that the decision of the Tribunal was founded upon its view that the ‘unreliable’ nature of the expert evidence resulted in a substantial amount of wasted time for which there was no reasonable justification. It is also clear that, while the Tribunal took the view that the adjournments did not merit a separate order for costs, it took them into account in reaching the overall view that the claimants’ award of costs should be reduced by one quarter. In my view, whether considered as an exercise equivalent to that appropriate under the CPR, or as a ‘stand alone’ exercise of its discretion on principles traditional to the Lands Tribunal, no misexercise of discretion can be demonstrated. In the light of the language of the Lands Tribunal in paragraph 122 of the Costs Addendum, as illuminated by the earlier paragraphs 104-106 of their main decision, it seems clear that the Tribunal formed a strongly adverse view of the evidence of the claimant’s expert in relation to the comparables upon which he principally relied, sufficient to justify disallowance of a proportion of the claimant’s costs on the basis that a substantial amount of the Tribunal’s time had been wasted. Accordingly I would dismiss the appeal.[40]I would only add by way of footnote that, although I do not consider that the effective adoption of the CPR criteria led to error in this case, I am concerned that, if the Practice Directions remain in their present form, the effect will be that the approach of the Lands Tribunal in compensation references will simply be carried forward on the tide of the development of the CPR jurisprudence in relation to the incidence of costs in ‘ordinary’ litigation, to a point where partial costs orders may be made in circumstances which do not sufficiently take into account the origin and nature of compensation proceedings in the Lands Tribunal. Despite the similarities in procedure, a compensation reference before the Lands Tribunal does not itself constitute ‘ordinary litigation’ and, for the present at least, remains outside the purview of the CPR.

Lord Justice Chadwick:

[41]I agree that this appeal should be dismissed. I add some observations of my own to the reasons which Lord Justice Potter has set out in his judgment only to emphasise that I share his concern that, unless paragraph 19.2 of the Lands Tribunal Practice Direction issued by the President in April 2001 is read with the principle of equivalence well in mind, there is a danger that the Tribunal will be led into error when exercising its discretion to award costs in compensation cases.[42]As Lord Nichols pointed out, in the passage in Director of Buildings v Shun Fung Limited [1995] 2 AC 111, 125 to which Lord Justice Potter has referred, a claimant whose land has been taken from him under compulsory powers is entitled to “compensation for losses fairly attributable to the taking of his land”. In a case where the acquiring authority have made an unconditional offer of an amount of compensation which exceeds the amount subsequently awarded on a reference to the Lands Tribunal, it can be seen that (at least prima facie ) the costs incurred by the claimant in pursuing the reference after the offer has been made are not fairly attributable to the taking of his land; those costs are attributable to the claimant’s attempt to obtain more than the amount of the loss in respect of which he is entitled to compensation. That is the premise which underlies the provision in section 4(1)(a) of the Land Compensation Act 1961 which requires that, in such a case, the Tribunal shall (in the absence of special reason) leave the claimant to bear his own costs of pursuing the reference after the offer has been made. But, where there has been no offer or where the amount of the award exceeds the amount of the offer, then (again, prima facie ) “the expenses of determining the amount of disputed compensation may be seen to be part of the reasonable and necessary expense which is attributable to the taking of the lands compulsorily by the acquiring authority”, as the Lord President observed in Emslie & Simpson Limited v Aberdeen District Council [1995] RVR 159, at page 164. In such a case the refusal to allow the claimant some part of his costs of the reference must be justified by a finding that the costs to be disallowed have not been incurred as part of the reasonable and necessary expense of pursuing the reference. As Lord Justice Potter has put it, the Tribunal must be able to identify circumstances “in which the claimant’s conduct of, or in relation to, the proceedings has led to an obvious and substantial escalation in the costs over and above those costs which it was reasonable for the claimant to incur in vindication of his right to compensation”. Costs attributable to conduct of that nature can form no part of “the losses fairly attributed to the taking of his land” in respect of which the claimant is entitled to compensation.[43]It follows that the fact that the claimant has not been awarded as much as he was seeking by way of compensation – or that the award is nearer (even much nearer) to the amount that the acquiring authority had offered than to the amount sought – cannot, of itself, be a reason for depriving the claimant of his costs of the reference. But that does not lead to the conclusion that the claimant’s conduct in exaggerating his claim can be of no relevance. The Tribunal may be satisfied, in the particular case before it, that the fact that the claimant has exaggerated his claim has led to costs which were not reasonable for the claimant to incur in pursuit of the compensation to which he was entitled; or that it has been the pursuit of issues which it was not reasonable for the claimant to pursue that has led to the exaggeration of the claim. Where the Tribunal makes an award of compensation which is well below the amount claimed, it is appropriate for it consider, in the context of an award of costs, both whether the fact that the claim was exaggerated has led the claimant to incur costs which (given a more realistic evaluation of his claim) he would not have incurred and whether the explanation for the difference between the award and the amount claimed is that issues were pursued on which the claimant had no real chance of success.[44]Taken alone – or in conjunction only with the first two sentences in paragraph 122 of the Costs Addendum to the Tribunal’s decision – the observation, in the fourth sentence of that paragraph, that “Overall, we find that the claimants’ value was assessed at a particularly high figure and this should result in a reduction in costs” would not be a sufficient reason for the Tribunal’s decision to disallow one quarter of the claimants’ costs. But, as Lord Justice Potter has shown – and as indicated in the third sentence of paragraph 122 itself – that observation must be read in the light of the findings which the Tribunal had made in its earlier decision. Read in that light, it is plain that the Tribunal had taken the view that the exaggeration of the claim was the product of the claimants’ reliance on expert evidence which should have been recognised as unreliable; and that the decision to rely on that evidence had led to the waste of substantial time and expense. On that basis, the Tribunal was entitled to exercise its discretion as to costs in the way that it did. Mr Justice Wall:[45]I agree.

Order

(Order does not form part of the approved judgment)

Cited in 7 later judgments