JAYNE FAYLE v SEFTON METROPOLITAN BOROUGH COUNCIL ACQ/359/2008

UPPER TRIBUNAL

LANDS CHAMBER

ACQ/359/2008

Case No ACQ/359/2008

Between

JAYNE FAYLEApplicant

SEFTON METROPOLITAN BOROUGH COUNCILRespondent

Before

N J Rose FRICS

Hugh Derbyshire (instructed by Sharman and Son, solicitors of Crosby, Liverpool) for Claimant

Frances Patterson QC (instructed by Eversheds LLP, solicitors of Manchester) for Acquiring Authority

Venue Liverpool Crown Court, The Queen Elizabeth II Law Courts

Date 6 April 2009

Hearing 11 February 2008

Property: 99 Balliol Road, Bootle, Merseyside, L20 7EH

[1]This is a reference to determine the compensation payable by Sefton Metropolitan Borough Council (the acquiring authority) arising from the compulsory acquisition of the long leasehold interest in a dwellinghouse known as 99 Balliol Road, Bootle, Merseyside, L20 7EH from the leaseholder, Miss Jayne Fayle. The subject property was compulsorily acquired under the Sefton Metropolitan Borough Council (Queen’s Road and Bedford Road, Bootle) Compulsory Purchase Order 2005, made on 29 June 2005 and confirmed by the Secretary of State for Communities and Local Government on 12 January 2007. The acquiring authority executed a general vesting declaration in respect of the property on 5 November 2007 and the valuation date is 22 January 2008, the vesting date.

[2]It is agreed that the claimant is entitled to a home loss payment of 10% of the market value of the subject property plus disturbance compensation of £2,000. The only matter in issue is the market value. The claimant’s valuation is £120,000 and the acquiring authority’s figure is £87,500.

[3]By order of the Registrar the reference was conducted in accordance with the Tribunal’s simplified procedure (rule 28, Lands Tribunal Rules 1996). The Tribunal’s Practice Directions dated 11 May 2006 contained the following guidance (para 17.1):

“In simple cases, permission will usually be granted for a surveyor or valuer to represent a party in order to avoid the additional costs of separate representation. In those cases allocated to the simplified procedure under LT Rule 28, such representation may well be the norm.”

[4]Notwithstanding that guidance, solicitors and counsel were instructed by both parties. Mr Hugh Derbyshire appeared for the claimant. He called the claimant to give factual evidence and, as expert witness, Mr M G Hardie LLB, MRICS, a director of Dears Brack, chartered surveyors of Liverpool. Counsel for the acquiring authority, Miss Frances Patterson QC, called expert evidence from Mr A G Massie, BSc (Hons), MRICS, IRRV, MCIArb, a partner in Messrs Keppie Massie of Liverpool. On 13 February 2009, in company with the two experts, I inspected the site of the subject property, which is now cleared, together with the surrounding area and certain other properties which had been cited as comparables. Facts

[5]From the evidence I find the following facts. Prior to demolition the subject property comprised a two storey mid-terrace property, of brick construction under a pitched tiled roof with a small single storey porch to the front, erected in late 1989. It was one of a terrace of four similar houses fronting the south side of Balliol Road, a short distance east of the junction 2 with Kings Road, some 0.75 miles to the south of Bootle town centre. The gross external area was 797 sq ft. Immediately to the west were two of the other houses in the terrace and a former clinic, now used for educational purposes as part of the Hugh Baird College Complex. The fourth house in the terrace − 97 Balliol Road − lay immediately to the east and beyond that was Marble Close, a small cul-de-sac running south from Balliol Road and containing four blocks of two flats, built in the 1980s in similar style to that of the subject property and rented by a registered social landlord to retired people. On the opposite side of Balliol Road to the subject property are three non-residential buildings. One is currently used for storage purposes by the Bootle and Sefton Play Council and one is another campus for Hugh Baird College. Between those two buildings is the former Bootle baths complex, which is vacant and derelict.

[6]The ground floor of the subject property was of solid construction and the first floor was of suspended timber. Windows throughout were timber framed and single glazed. There was a full gas fired central heating system. On the ground floor the accommodation comprised an entrance porch, living/dining room and kitchen. There were two double bedrooms and a bathroom/wc on the first floor. There was a predominantly lawned, relatively enclosed front garden and a large rear garden with an adjacent off-site car parking space, accessed from Marble Close.

[7]The claimant occupied the subject property under a 999 year lease from 25 March 1893 at a fixed rent of £20 per annum.

[8]The property was situated close to the north-western corner of the CPO area. The order land comprised mainly residential properties with some commercial properties, laid out in a regular gridiron network of streets. In total there were more than 200 properties within the order lands, containing a total of 400 separate dwellings. Most of the buildings dated from the Victorian period. They were extremely large and generally arranged on three storeys, with two or three storey outriggers to the rear. In addition there were a number of more modern properties within the CPO area, including those in the terrace containing the subject property. The CPO was promoted in order to bring about the improvement of the economic, social and environmental conditions in one of the most deprived areas of Merseyside. Evidence

[9]In arriving at his valuation of £120,000, Mr Hardie relied generally upon his considerable local valuation experience and in particular on three properties in Bootle which were sold in the period leading up to the valuation date, located within 500 metres of the subject property. Nos.7 and 11 Clareville Close were both sold in March 2007. They were two-storey, end terrace or semi-detached houses, of similar age and style to the subject property, approximately 60 sq ft smaller and without central heating but with a parking space within the curtilage. Mr Hardie said that No.7 had been sold for £85,000, which reflected the fact that it had been repossessed by mortgagees and required significant re-plastering, upgrading of electrical circuitry, provision of central heating, renewal of windows, refitting of the kitchen and bathroom which had been vandalised, external repairs and landscaping. Mr Hardie considered that the property would have been worth in the region of £120/£125,000 once it was fully 3 repaired and refurbished. 11 Clareville Close had sold for £105,000, which reflected the fact that it had the original kitchen and bathroom fittings.

[10]The third property to which Mr Hardie referred was 181A Gloucester Road, which he said had sold for £125,000 in 2007. Mr Massie responded that the Land Registry records did not refer to such a transaction and Mr Hardie informed me during the site inspection that he no longer wished to rely on this comparable.

[11]Mr Hardie said that the acquiring authority had been purchasing houses to the south of the subject property for several years before the valuation date. Once acquired, the buildings remained vacant and the owners of the remaining houses in the area were unwilling to upgrade them. The declining physical and social fabric behind the subject property was therefore the result of the scheme underlying the acquisition and should be ignored. Moreover, while Balliol Road was a main road, the fact that it was busy and well lit improved the security of the adjacent properties by comparison with those in the remainder of the CPO area further to the south.

[12]Mr Massie emphasised that the subject property comprised an infill development within an area of predominantly pre-1919 properties. The area suffered from a variety of social problems and was characterised by many vacant properties, numerous buildings in poor repair or derelict and a significant transient population. It suffered from high levels of crime, vandalism and anti-social behaviour. Furthermore, the subject property had direct frontage to Balliol Road, which was one of the busiest freight traffic routes in the area.

[13]Mr Massie said that historically prices in the CPO area − which he referred to as Queens Bedford since it surrounded Bedford Road and Queens Road − had been significantly lower than those in the rest of Bootle. This reflected the unpopularity of the area and its poor environmental and social quality. There was very little demand for houses, many of which lay empty and derelict whilst others, although occupied, were in very poor repair. Many of the larger Victorian properties had been converted into flats or bedsits.

[14]Because of the significant difference in house prices in Queens Bedford compared to the rest of Bootle, it was difficult to draw direct comparisons with properties outside the immediate area without having to make large adjustments to the transactional evidence. Mr Massie considered that the best evidence available was to be drawn from Queens Bedford, and in particular similar modern infill developments within the existing Victorian housing stock. The number of such properties was very limited and consequently only a few transactions were available as evidence, particularly close to the valuation date.

[15]Mr Massie produced details of a number of transactions in Queens Bedford. He considered, however, that the acquisition of 22 Keble Road provided the most compelling evidence available. Keble Road runs parallel to and three streets to the south of Balliol Road. No.22 was within a modern infill development in a quieter part of the area away from Balliol Road. It was a mid-terraced house with three bedrooms and in excellent condition. It had 4 UPVC double glazing and central heating. It was privately owned and, after negotiations with a local firm of estate agents acting on behalf of the owner, it was acquired for £85,000 on 19 September 2007.

[16]Although the property did not have on-site parking, in this part of Keble Road the carriageway had been widened to provide an on-street parking area for residents. The property was in significantly better condition than the subject property, it was larger and was also well away from the busy main road. The appearance of the house, however, was perhaps not as attractive as the subject property and it had a smaller garden. Mr Massie felt that the balancing effect of these factors meant that there was no need to adjust the sale price to reflect the different circumstances of the two properties. He did not think there had been any material change in market conditions between the date of the transaction and the valuation date. This evidence, therefore, fully justified his valuation of the subject property at £87,500.

[17]Outside Queens Bedford, Mr Massie considered that the most comparable properties in locational terms were to be found within the adjoining residential area immediately to the south. These were similar in terms of age, although generally larger. Two transactions in particular were relevant, namely 32 Macbeth Street and 38 Oriel Crescent. Having adjusted these transactions to accord with the characteristics of the subject property, they showed figures in the range of £72,250 to £81,500.

[18]Elsewhere in Bootle there had been a number of transactions which Mr Massie considered to be helpful. They were, however, all in better locations than the subject property. Making appropriate adjustments to reflect differences they showed a range of values between £75,000 and £85,500.

[19]Overall, Mr Massie thought the comparables indicated a value range between £72,250 and £85,500. The acquisition of 22 Keble Road for £85,000, however, was the most relevant and compelling evidence. With this in mind he felt that a valuation at the top of the range suggested by the comparables could be justified. In his opinion the market value of the subject property at the valuation date was £87,500. Conclusions

[20]I consider firstly the comparable evidence relied upon by Mr Hardie. By the end of the site inspection this had boiled down to the sales of two properties in Clareville Close. Subsequent to the hearing Mr Hardie produced a copy of a valuation of No.7, prepared in 2008. This did not, as he had thought to be the case, value the house at £125,000 in refurbished condition. Assuming in the claimant’s favour, however, that the Clareville Close transactions did indeed support a value in the region of £120,000 or £125,000 when refurbished, it would be necessary to reduce such figure significantly to reflect the fact that the location of Clareville Close, in a more attractive setting immediately to the south of the Strand Shopping centre and close to Bootle Oriel Road railway station, is significantly better than that of the subject property. In any event, I do not think it is appropriate to value the latter on the basis of prices 5 obtained or values attributed to newly refurbished properties. Although the subject property had been well maintained, its windows were single glazed. It also had the original kitchen and bathroom fittings and it is likely that a new owner would have wished to replace these.

[21]The subject property was about ten per cent larger than the Clareville Close houses and, unlike them, it had an orthodox staircase leading to the first floor. Nevertheless, the only reliable conclusion that I feel can be drawn from the evidence in Clareville Close is that the subject property was worth significantly less than £120,000.

[22]Mr Massie produced details of various transactions in Queens Bedford and elsewhere in Bootle. He fairly recognised the difficulty of making accurate adjustments to reflect the many differences between the subject property and buildings outside Queens Bedford. Having considered all the evidence, I agree with him that the most helpful is that provided by the price paid for 22 Keble Road. Mr Derbyshire urged me to treat prices agreed under the shadow of compulsory acquisition with caution. Mr Massie disagreed. He pointed out that, in the case of 22 Keble Road and many others, the owners had been professionally represented and he said that the prices had been agreed in accordance with the statutory compensation code.

[23]The fact that the compensation payable for a property pursuant to a CPO or under the shadow of compulsory acquisition is agreed between surveyors does not mean that it provides evidence of the same quality as an unblighted sale in the open market. Nevertheless, having carefully considered all the available comparable evidence outside Queens Bedford I am satisfied that the price paid for 22 Keble Road was not less than the price it would have realised in the no scheme world. It suggests to me that, if the subject property and its off-site parking space had been situated in Keble Road, it, too, would have been worth £85,000.

[24]Mr Hardie expressed the view that the prices paid for properties within Queens Bedford did not provide helpful evidence, because the terrace containing the subject property was severed from the surrounding poor housing stock. I think it is going too far to refer to severance. There was no clear physical barrier separating the properties in the north-western corner of Queens Bedford from the remainder of the CPO area. I am satisfied, however, that those properties, including Nos. 97-103 Balliol Road and those fronting Marble Close, were in a more desirable location than the remainder of the CPO properties. They were much more modern than most, of more attractive appearance and contained accommodation which was much smaller, and therefore in much greater demand, than the majority of the other houses. Moreover, their principal outlook was away from the troubled CPO area, in contrast to 22 Keble Road and other modern infill houses in the neighbouring streets to the south.

[25]In a written statement the claimant said that, before the acquiring authority started purchasing properties in the area, only one of the four houses in her terrace had become available on the open market and it was then sold immediately. This statement was not challenged. It painted a picture in striking contrast to the general position in Queens Bedford, where 26% of the properties were vacant when the acquiring authority first embarked on its programme of voluntary acquisition in 2002. 6

[26]I bear in mind that the subject property fronted on to a busy road. I find that it was worth ten per cent more than if it been located on the site of 22 Keble Road. I determine that the compensation payable by the acquiring authority for the long leasehold interest in 99 Balliol Road, Bootle, is £93,500, to which is to be added a home loss payment of £9,350 and disturbance compensation of £2,000, making a total of £104,850. In addition the acquiring authority will pay a surveyor’s fee, which it is agreed is to be based on the old Ryde’s scale, and reasonable legal costs of transfer, if any.

[27]Both parties said that they wished to make representations on costs. A letter on that subject accompanies this decision, which will become final when the question of costs has been determined. Dated 3 March 2009 N J Rose FRICS Addendum

[28]I have received written submissions on costs from the parties. The acquiring authority points out that the amount of compensation awarded was less than the unconditional offer of £106,500 that it made on 9 January 2009. It is willing to meet its own costs of the reference up to the date of the sealed offer, but seeks orders that the claimant pays her own costs and the acquiring authority’s costs after that date.

[29]The acquiring authority recognises that the starting point when considering costs in cases conducted under Rule 28 is that there should be no award of costs. That rule, however, is specifically not appropriate in cases, such as the present, to which section 4 of the Land Compensation Act 1961 applies. Under section 4, where the acquiring authority has made an unconditional offer in writing of any sum as compensation to any claimant and the sum awarded by the Tribunal to the claimant does not exceed the sum offered the Tribunal shall, unless for special circumstances it thinks proper not to do so, order the claimant to bear his own costs and to pay the costs of the acquiring authority so far as they were incurred after the offer was made. 7

[30]The acquiring authority accepts that, where it has made a sealed offer, the general rule is that the claimant should be awarded his costs up to the date of the sealed offer even though he has not himself made an offer. The Tribunal may, however, depart from the general rule if there are special reasons for doing so (Colneway Limited v Environment Agency (2004) RVR 37).

[31]The acquiring authority submits that there are special reasons for departing from that general procedure, as follows. It would be unfair for the authority to have to pay the claimant’s costs between the reference and the sealed offer, given that the acquiring authority was trying to reach a settlement and the claimant was not. As soon as the acquiring authority received the statement of case it agreed the disturbance element in its statement of reply. The claimant’s valuation was stated as £134,000. Given the evidence on which this valuation was based was later found to be wrong, it is clear that the claim was flawed from the beginning. It would therefore be unfair for the acquiring authority to have to pay any of the claimant’s costs.

[32]Moreover, the acquiring authority’s solicitors had been involved in all aspects of the CPO. They had all the background information and documents relating to both the subject property and the CPO. At the outset of the proceedings the authority was served by the claimant’s solicitor with a copy of the claimant’s statement of case. The involvement of the acquiring authority’s solicitors was reasonable and proportionate.

[33]It had also been clear to the acquiring authority that detailed evidence as to the poor condition of the Order land before demolition would need to be presented to the Tribunal. This was crucial to the acquiring authority’s case and for this reason the standard procedure was requested at the outset. The evidence and enclosures put forward by the acquiring authority’s valuer at the hearing were reasonable, proportionate and necessary to explain the acquiring authority’s case. The acquiring authority’s evidence assisted the claimant in putting her case and assisted the Tribunal in reaching its assessment.

[34]The claimant’s lack of contact with the acquiring authority’s valuer and subsequent reliance on inaccurate evidence caused the acquiring authority to incur expense unnecessarily. It was reasonable for the authority to appoint leading counsel to present its case to the Tribunal and cross-examine the claimant’s expert. Leading counsel had previously appeared for the acquiring authority at the CPO inquiry and the subsequent High Court challenge. She was fully aware of the background, required no conferences beforehand and was able to discount her brief fee for these reasons.

[35]The acquiring authority’s sealed offer was made over a month before the hearing. The claimant’s sealed offer was made three working days before the hearing. It was not accepted because it was unreasonably high, being about £20,000 more than the Tribunal’s award. The claimant’s valuation was unreasonably exaggerated in amount.

[36]The claimant referred to the following additional provisions. Firstly, Rule 52(4) of the Lands Tribunal Rules 1996, which provides: 8 “If the Tribunal directs that the costs of a party to the proceedings are to be paid by another party it may settle the amount of costs by fixing a lump sum or direct that the costs be taxed by the Registrar on such basis as the Tribunal thinks fit, being a basis that would be applied on a taxation of costs of High Court or County Court proceedings”.

[37]Secondly, section (4) of the Land Compensation Act 1961, which provides that the Lands Tribunal may in any case disallow the cost of counsel.

[38]Thirdly, paragraphs 3.3 and 3.4 of the Tribunal’s Practice Direction dated 11 May 2006, which provides that the purpose of the Tribunal’s simplified procedure includes, amongst other things, the economical determination of cases and moving to a hearing as quickly as possible with the minimum costs.

[39]Fourthly, paragraph 22.3 of the Tribunal’s Practice Direction, which provides that, on a claim for compulsory acquisition of land, the Tribunal will normally make an award for costs in favour of a claimant who receives an award of compensation.

[40]The claimant did not seek to challenge the acquiring authority’s contention that the position regarding the sealed offer was set out in Colneway. She denied, however, that there was no attempt to negotiate as contended by the acquiring authority. She contended that her solicitors wrote to the acquiring authority’s valuer on 4 July 2008 informing him of their instructions. Any negotiations should have been conducted through the claimant’s solicitors, but the acquiring authority failed to make any contact. It disputed the contention that the claim was unreasonably flawed from the beginning. As found at paragraph 9 of the Tribunal’s decision, the claimant’s valuer relied generally on his considerable local valuation experience. Any errors in the claimant’s valuer’s evidence did not influence the acquiring authority’s valuation. The determinative factor which the acquiring authority completely failed to address was that as a consequence of making a reference the claimant had been awarded £6,000 more in respect of market value than the acquiring authority’s valuation and this alone justified an award of costs in the claimant’s favour for the period up to the sealed offer.

[41]In respect of the costs after the offer, the claimant challenged the acquiring authority’s contention that they should be paid by the claimant. The sealed offer dated 9 January 2009 was on the basis that each party would be responsible for its own costs of the reference. This was inconsistent with the principles in Colneway. This amounted to a special circumstance. Furthermore, the claimant said that there were special circumstances why the claimant should not pay the acquiring authority’s costs, or in the alternative justifying an award of only a restricted portion of those costs from the date of the offer. It was clear that the acquiring authority was concerned that this reference might set a precedent in outstanding compensation claims. It was anxious for commercial reasons to limit the number of such claims by adopting a full frontal assault on the claimant’s reference. This approach was disproportionate and it would be wholly unreasonable if the costs of it were visited upon the claimant. The sealed offer could only be properly considered when the claimant had the acquiring authority’s evidence which was 14 days before the hearing of the reference. The acquiring authority could 9 and should have presented the evidence in support of its revised offer at the time it made that revised offer.

[42]The acquiring authority had made it clear that it wanted the reference to be heard under the standard procedure. The Tribunal refused to adopt that procedure. Incurrence of costs by the acquiring authority in a manner commensurate with the standard procedure should not fall on to the claimant, when the reference proceeded under the simplified procedure.

[43]The reference was made by a claimant with limited means and whose home in one of the most deprived parts of the country was compulsorily acquired from her. The claimant urged the Tribunal to take into account the need not to dissuade claimants with limited means from pursuing references in respect of low value compensation claims by making punishingly high awards of costs in favour of the acquiring authority. This would be inconsistent with the Practice Direction provisions on saving costs and expense where the simplified procedure was used and, indeed, the rationale for that procedure.

[44]The claimant rejected the acquiring authority’s contentions about lack of knowledge of the claimant’s evidence and a failure to make contact before the hearing. The claimant’s evidence was sent directly by the claimant’s then valuer on 1 November 2007 and a copy was included in her answer to the notice to treat on 11 January 2008. The claimant said that both experts made errors in the information they presented to the Tribunal. The claimant’s valuer relied upon his considerable local valuation experience and the Tribunal determined a value higher than that put forward by the acquiring authority’s valuer.

[45]I start by considering the costs incurred up to the date of the acquiring authority’s sealed offer. The general rule is that these should be awarded to the claimant unless there are special reasons suggesting otherwise. I do not consider that there are any such reasons. Until the date of the sealed offer, the maximum market value on offer from the acquiring authority was £87,500 and the claimant has been awarded a higher sum. She was therefore justified in holding out until 9 January 2009 for more than £87,500. Whether or not she was prepared to enter into meaningful negotiations is immaterial. There would have been no need for the reference if the acquiring authority had not compulsorily acquired her home. The authority had the assistance of highly competent advisers and it was free to make a sealed offer of at least £93,500 before 9 January 2009 had it wished to do so. It did not do so and it must bear the consequences.

[46]Since the acquiring authority’s unconditional offer exceeded the sum awarded by the Tribunal, the claimant should bear her own costs and pay the costs of the acquiring authority incurred after the offer was made, unless for special reasons the Tribunal thinks it proper not to make such an award. In my judgment such reasons exist. This was a straightforward valuation exercise, involving a comparison between the subject property and other houses in Bootle. There was a detailed history of poor living conditions in the area, but the acquiring authority’s surveyor was perfectly capable of describing them to the Tribunal, and he did so very well. Rule 28(9) of the Lands Tribunal Rules 1996 provides that hearings under the simplified procedure should be informal. The acquiring authority on several occasions made it clear that 10 it wanted the hearing to be conducted in accordance with the standard procedure. The Tribunal decided otherwise, but the acquiring authority proceeded to present its case as it would have done had the standard procedure been ordered. The claimant said that, because of the heavy fire power applied by the acquiring authority, she decided to obtain the best legal representation that she could afford. I accept that as the position. The acquiring authority’s tactical decision has thus involved the claimant in significant legal costs, which she would not have incurred had the acquiring authority been represented, as para 17.1 of the Tribunal’s Practice Direction suggests, by its surveyor alone. This is a special circumstance which I consider justifies a departure from the general rule.

[47]Accordingly, the acquiring authority must pay the claimant’s costs of the reference up to the date of the sealed offer, such costs in default of agreement to be assessed by the Registrar of the Lands Tribunal on the standard basis. Otherwise I make no order as to costs. Dated 6 April 2009 N J Rose FRICS 11