CHAPTER GROUP PLC v LONDON REGIONAL TRANSPORT (1) LONDON UNDERGROUND LIMITED (2) CON/87/2004

UPPER TRIBUNAL
LANDS CHAMBER
CON/87/2004Case No CON/87/2004
Between
CHAPTER GROUP PLCApplicantLONDON REGIONAL TRANSPORT (1) LONDON UNDERGROUND LIMITED (2)Respondent
Before
His Honour Michael Rich QCVenue Procession House, 110 New Bridge Street, London EC4V 6JLDate 25 January 2006Hearing 19 January 2006Property: Commercial Freehold / Leasehold Land, 9 & 9A St Thomas Street, London SE1 9RYCatchwords: COMPENSATION – Costs – Sealed offer accepted - S.4(1) of Land Compensation Act 1961 – s.3(5) of Lands Tribunal Act 1949 - Reasonable time for acceptance of sealed offer – Guidance as to form of sealed offer
[1]This is a reference by consent of the amount of compensation for injurious affection to be paid to the claimant in respect of works to construct the Jubilee Line Extension. The parties agreed such reference by an agreement dated 2 December 1991 under which the claimant agreed to withdraw its petition against the Bill authorising such work.[2]By letter dated 3 February 2005, the Tribunal gave notice of a hearing fixed for 3 October 2005, and on 2 August 2005, the President gave directions as to the exchange of outstanding evidence in preparation for such hearing date. On the same day the Authority delivered to the Tribunal a copy in an enclosed envelope of an unconditional offer of the sum which it was prepared to agree to pay by way of compensation (“the sealed offer”).[3]The sealed offer was sent by the Authority’s solicitors “by fax and post” addressed to the claimant’s solicitors in a letter in the following terms:
“We write to let you know that the Compensating Authority London Regional Transport and London Underground Limited, are prepared to offer your client the sum of £60,000 plus your client’s standard basis costs (to be assessed failing agreement) in full and final settlement of your client’s claim under the above reference. This offer is made pursuant to Rule 44 of the Lands Tribunal Rules 1996.”
On 26 September 2005 the claimant’s solicitors replied “We are instructed to accept the offer contained in your fax dated 2 August 2005.” There is no issue between the parties that by this exchange of correspondence they agreed the amount of the compensation due to the claimant for injurious affection by the works, and the sum of £60,000 has been duly paid. I shall refer to this agreement by exchange of letters as “the settlement”.[4]In response to the claimant’s solicitors’ fax of 26 September, however, the Authority’s solicitors wrote “No doubt you will be preparing a draft Consent Order for our consideration and signature in due course. Please can you ensure that the draft Consent Order provides that the “compensating authority” should pay your client up to 2 August 2005 and that your client should pay the “compensating authority’s” costs after that date.” That proposal as to how the costs should be provided for in a form of Order which both parties agree to be necessary in order to implement the agreement which they had made, if only in order to provide for the assessment of the costs agreed to be paid in case the parties failed to agree them, was not agreed.[5]The Reference has accordingly been brought on for hearing solely in order to determine the provision to be made as to costs. Since both parties contended, amongst other things, that the settlement had determined what those provisions should be, there was a risk that the 2 arbitration agreement by which the Reference had been made did not cover the dispute. For the avoidance of doubt, the parties, by their counsel, undertook “To enter into an arbitration agreement that the Lands Tribunal may determine, so far as is necessary in order to resolve the dispute between the parties, the meaning of the agreement entered into by the exchange of letters dated 2 August 2005 and 26 September 2005.”[6]Miss Ward, for the claimant, contends that “plus your client’s standard basis costs” means all costs incurred by the claimant up to the date of his acceptance of the Authority’s offer, and I think she would say up to the date of the Tribunal’s making the Consent Order which the parties accepted was necessary. Only if that was held not to be right, did she submit that the Tribunal had jurisdiction to award such further costs and should award them to the claimant, although she accepted that the costs of resolving the dispute which arose after the settlement should in that event lie where they fell.[7]Mr Holland submits that “the costs” referred to in the letter of 2 August means only the costs incurred up to that date. He further submits that the settlement means that costs after that date are to be paid by the claimant to the Authority. I agree with the first part of his submission but reject the second.[8]The reference in the sealed offer to Rule 44 makes it clear that the sealed offer is made for the purpose of obtaining the protection of s.4 of the Land Compensation Act 1961. That being its purpose its meaning can be construed by reference to the provisions of that Section. Sub-section(1) provides so far as offers by the Authority are concerned: “Where .. (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 to that claimant does not exceed the sum offered … 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 .. authority so far as they were incurred after the offer was made …” (my underlining). The sub-section does not require that the offer should deal with costs at all. It operates if the sum awarded exceeds the unconditional offer “of any sum as compensation” (again my underlining). The offer must, however be unconditional, that is to say that it cannot be time- limited. Once made, it is open to acceptance even during the course of the hearing, and subject to the Lands Tribunal’s finding special reasons for a different order (which in case of an acceptance in such circumstances, it well might) the costs consequences would follow. To construe the offer made in this sealed offer as being not only of those costs already incurred, to which the claimant would ordinarily be entitled, as to that extent a successful claimant, even if he recovered less than the sealed offer, but also of any further costs which might be incurred on an open-ended basis, in respect of which it is the purpose of the subsection to debar him from entitlement except for special reason unless he recovers more than the offer, is so far at variance with the purpose of the sealed offer as to be an impossible construction of it, unless 3 the words used could bear no other meaning. On the contrary, I think that the natural meaning of “your client’s costs” is those costs as already incurred and I so construe the settlement.[9]But it is equally impossible to construe the sealed offer as requiring the claimant to agree to bear his own costs subsequent to the date of the offer, and to bear the authority’s costs from that date. Such would have been the result, subject to a finding of special reasons for a different order, if the claimant had rejected the offer and the Tribunal had proceeded to make an award of compensation in a sum which did not exceed the sealed offer. But the claimant accepted the offer, and the Tribunal did not therefore award a sum by way of compensation at all. The sum has been agreed and paid, and even if it had not been paid the Tribunal would merely have recorded the agreed sum as part of its Order. It would not have been necessary to make an award.[10]The settlement so construed makes no provision for costs incurred subsequent to the offer, although it would seem to me that ordinarily the claimant could expect to be offered the costs of considering the offer and of drawing the necessary order. The Lands Tribunal however is given jurisdiction by s.3(5) of the Lands Tribunal act 1949 to “.. order that the costs of any proceedings before it incurred by any party shall be paid by any other party ..” and, in my judgement can make appropriate orders in respect of any costs, not the subject of agreement in the settlement. This is the procedure expressly dealt with in paragraph 20.6 of the Practice Directions dated 4th January 2005 in regard to Calderbank offers which, in my judgement, subject to s.4(1) of the Act of 1961, applies equally to sealed offers:
“Where an offer is accepted, the Tribunal retains jurisdiction over the costs of the proceedings except to the extent that these are covered by the agreed terms”
. It is on the basis that these post-offer costs are not covered by the agreed terms of the settlement, that I will deal with them as a matter of discretion in accordance with Rule 52 of the Rules. But before doing so, I should refer to two decisions of Mr. P.H.Clarke FRICS, sitting as a Member of the Lands Tribunal, to which I was referred in the course of argument.[11]In the first of these Decisions, Stanford Marsh Ltd v Secretary of State for the Environment [1997] 1 EGLR 175, the acquiring authority sent a sealed offer to the claimants on 5 December 1996, just 11 days before the hearing fixed for 16 December. The claimants accepted the offer immediately before the start of the hearing. Mr Clarke rejected a submission on behalf of the Authority, not made before me, that s.4(1) of the Act of 1961 applied although the offer had been accepted. He regarded himself as having jurisdiction under s.3(5) of the Act of 1949, to determine the costs subsequent to the offer, the costs up to the date of the offer having been agreed to have been part of the offer. He had regard to the fact that the claimants had amended their claim even after the offer, on 9 December, to conclude that they had not been prejudiced in their consideration of the offer by the Authority’s serving a revised valuation report only on 13 December. He decided in the circumstances that it would have been reasonable to expect the claimants to have accepted the offer on or before 11 December that is within five working days of its receipt. He accordingly ordered that the authority should 4 pay the claimants’ costs up to (and including) 11 December but that they should bear their own costs and pay the costs of the authority incurred after that date.[12]The second Decision to which I was referred, however shows that Mr Clarke did not think that an authority could rely on serving an offer only at the last minute. In Tague v Lancaster City Council [1999] 2 EGLR 103, after the market value of the subject premises had been determined, there was to be a second hearing, fixed for 15 September 1998 as to disturbance or home loss. The council sent an (unsigned) unconditional offer of £11,000 expressed to be “exclusive of costs” to the claimant on 9 September. A signed copy followed on 11 September. The offer was accepted only on the morning of the hearing, and the claimants asked for and were awarded their costs up to that date. Mr Clarke said at p.108 that “ .. the offer has two defects. First it was made too close to the hearing. … [The claimants] accepted the offer at the earliest reasonable opportunity (the first day of the hearing) and should have their costs up to and including that day.”[13]He then went on to identify the second defect as follows:
“The second defect is that the offer is expressly stated to be exclusive of costs. In my view, it was reasonable for the claimants to defer their response until the question of costs had been clarified. The council could have included an offer as to costs in their letter, thus dealing with both outstanding issues. An offer during proceedings in this tribunal should have the dual purpose of settling the outstanding claim and compromising the reference. The general rule is that an acquiring authority should normally bear the costs of proceedings in the Lands Tribunal and therefore an offer that makes no reference to costs is defective in that respect.”
I do not think that, in the context, Mr Clarke was intending to say that a sealed offer which failed to deal with the costs of the reference was defective as a sealed offer. It clearly is not, because the offer is required to be only as to the amount of the compensation. It is however defective as an offer whose acceptance would bring all proceedings to an end. In order to achieve that it would be necessary to make a fair offer as to costs either in the sealed offer letter or in a contemporaneous letter in the form of a Calderbank offer. The latter might be more appropriate when it would be appropriate to limit the offer as to costs as to time for acceptance, but where the reasonable period to allow for consideration and acceptance of the offer can be seen at the time of the offer, because a sufficient period remains before the time of escalation of costs immediately before the hearing, it would be sensible to include in the unconditional offer, an offer to pay the claimant’s costs of the reference to be assessed on a standard basis if not agreed up to the end of a named reasonable period for consideration and acceptance of the offer. In my judgement it would be difficult for a claimant to argue that the period allowed for acceptance of an offer made under Part 36 of the Civil Procedure Rules, namely 21 days, was less than reasonable. If an offer so made is accepted after the expiry of such period, such offer would leave no room for the Tribunal to exercise a discretion in respect of that period, but there would be little room for argument that the claimant should be entitled to any further costs thereafter. Any risk that the claimant may incur costs unnecessarily during the period that would thus be available for consideration of the offer is met by noting that costs are recoverable on the standard basis only if they are reasonably incurred and are reasonable in amount and are proportionate to the matters in issue (see CPR Part 44.4). Moreover, for 5 reasons which I will explain in deciding the award of costs in this case I would think that the authority should usually be entitled to its costs after that date.[14]The proper approach to the Tribunal’s exercise of its discretion as to costs, was explained by the Court of Appeal in Purfleet Farms Ltd v. Secretary for Transport, Local Government and the Regions [2002] EWCA Civ 1430. It is that “a successful claimant “ “is entitled the costs incurred in the proceedings in the absence of some ‘special reason’ ” ( see per Waller LJ at 29. In my judgement a claimant whose claim is satisfied by an offer which he accepts is successful claimant. The reason for so treating him is set out in Par 20,3 of the Practice Directions as follows:
“The general rule is that the successful party ought to receive his costs. On a claim for compensation for compulsory acquisition of land, the costs incurred in establishing the amount of disputed compensation are properly seen as part of the expense imposed on him by the acquisition. The Tribunal will, therefore, normally make an order for costs in favour of a claimant who receives an award of compensation unless there are special reasons for not doing so.”
[15]In this case the next step to be taken under the directions made on 2 August, the day upon which the sealed offer was made was for the claimants to serve their expert report, for which time was extended to 12 August. Thereafter the time for agreement of the statement of facts was extended to 5 September. I see no reason why the claimants should not have been allowed until 23 August to consider and accept the sealed offer, and no evidence has been adduced as to why a longer period should be allowed. I think that the claimants should have their costs to that date. On the other hand, in the absence of explanation as to why the acceptance was delayed, I think that the delay beyond a reasonable time for acceptance must be treated as unreasonable conduct in the proceedings. I do not, therefore, think that they are entitled to further costs until the date of their acceptance of the offer. Moreover, since their unreasonable conduct has put the Authority to expense there is a special reason for a different order. Accordingly the Authority should be awarded its costs from 24 August until 26 September.[16]Thereafter as it appears to me, on the basis of my analysis of the appropriate order, both sides took up unsustainable positions as to the appropriate award as to costs. It is right, as Mr Holland has pointed out, that those instructing him did on 10 October say “As an absolute maximum we would argue, by analogy with the provisions contained in the Civil Procedure Rules, that a 21 day period should apply” but there was no offer to agree costs on that basis. This is not, in my judgement, sufficient to constitute a special reason to make an order of costs in favour of the Authority, although as Miss Ward accepted the Claimant’s position could not justify an award in its favour. In the absence of any proper offer on the part of the authority, the costs of disputing the order as to costs from the date of the settlement should therefore lie where they fall and there should be no order as to costs from 26 September, including the costs of the hearing on 19 January 2006, which it was agreed that I should deal with in this Decision without further submission. 6[17]Accordingly the amount of compensation having been agreed in the sum of £60,000 and paid, it is ordered that the Authority pay the claimants costs of the reference up to and including 23 August. 2005 that the claimant pay the Authority’s costs from 24 August until 26 September 2005 and that thereafter there shall be no order as to costs. Dated 25 January 2006 His Honour Michael Rich QC 7