B e f o r e :
LORD JUSTICE WARD
LORD JUSTICE MANCE
and
SIR MARTIN NOURSE
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Between:
| | Smith and anor
| Appellant
|
| | - and -
|
|
| | South Gloucestershire Council
| Respondent
|
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Mr Stephen Jourdan (instructed by Messrs. Burges Salmon of Bristol) for the Appellant
Mr Richard Lynagh, QC and Mr D Shapiro (instructed by Messrs Wansboroughs of Devizes) for the Respondent
Hearing dates : 29th May, 2002.
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Sir Martin Nourse :
- This is a dispute as to the date on which compensation payable by a registering authority under Section 10 of the Local Land Charges Act 1975 (compensation for non-registration or defective official search certificate) ought to be assessed.
- The claimants, Colin Albert Michael Smith and his wife, Kathleen Smith, are the freehold owners of a property known as Beanwood Farmhouse, Beanwood Farm, Westerleigh, Bristol. They purchased it at auction on 22nd February 1995 from the then mortgagee in possession, National Westminster Bank plc, at a price of £150,000, and it was conveyed to them on 22nd March 1995. Before that, on 24th February 1989, planning permission had been granted for the erection of an agricultural worker’s dwelling and garage on land near the property, subject to a number of conditions, one of which was in the following terms:
“the occupation of the existing dwelling on the holding shall be limited to a person solely or mainly employed, or last employed, in the locality in agriculture as defined in section 290(1) Town and Country Planning Act 1971, or in forestry….. or a widow or widower of such a person.”
That condition (“the occupancy condition”), being a local land charge within section 1 of the 1975 Act, was required to be registered in the local land charges register maintained by the defendants, South Gloucestershire Council, as the registering authority.
- The other material events which occurred before Mr and Mrs Smith’s purchase of the property were as follows. On 25th January 1995 solicitors acting on behalf of National Westminster Bank plc submitted a requisition for search and official certificate of the register of local land charges in respect of the property. In response, on 31st January 1995 the solicitors were issued with an official certificate of search in respect of the property, in which the occupancy condition was not shown as being registered in the local land charges register. The search was one of the documents made available to prospective bidders at the auction.
- Mr Smith’s evidence, which appears to have been unchallenged in essential respects, was to the following effect. He said that there were three reasons for his purchasing the property: first, it included buildings from which it was suitable to conduct his business; second, it provided (or would provide following renovation) a good family home; third, it offered a considerable development opportunity, in that it was derelict at the time of the purchase and he hoped that, following renovation, it could be sold on at a profit over and above the basic rise in the property market. He said that he only saw the local search on the day of the auction and that if he had known about the occupancy condition beforehand he did not believe that he would have bought the property. After the purchase he set about renovating the property, his best estimate being that by November 1998 he had expended about £226,450 in doing so. In November 1998, and for the first time, Mr Smith learned from a neighbour of the existence of the occupancy condition. He thereupon ceased work on the renovation, sought advice from a planning consultant and a solicitor and unsuccessfully attempted to get the occupancy condition lifted. Further parts of Mr Smith’s evidence will be referred to later.
- So far as material, section 10(1) of the 1975 Act provides:
“Failure to register a local land charge in the appropriate local land charges register shall not affect the enforceability of the charge but where a person has purchased any land affected by a local land charge, then….
(b) in a case where a material official search of the appropriate local land charges register was made in respect of the land in question before the relevant time, if the charge was in existence at the time of the search but (whether registered or not) was not shown by the official search certificate as registered in that register,
the purchaser shall …… be entitled to compensation for any loss suffered by him in consequence.”
Sub-section (3)(b)(i) of section 10 provides that where, as here, the acquisition of the purchaser’s interest was preceded by a contract for its acquisition “the relevant time” is the time when that contract was made. Sub-section (4) provides that any compensation for loss under the section shall be paid by the registering authority in whose area the land affected is situated. Sub-section (7) provides that in the case of an action to recover compensation under the section the cause of action shall be deemed for the purposes of limitation to accrue at the time when the local land charge comes to the notice of the purchaser.
- The Council having denied liability and refused to pay them anything, on 8th March 2000 Mr and Mrs Smith issued proceedings in the Chancery Division claiming compensation under section 10 of the 1975 Act to be assessed. Preliminary issues were directed and were tried by His Honour Judge Weeks, QC, sitting as a judge of the High Court in Bristol. On 1st December 2000 he made an order declaring, first, that the certificate of search dated 31st January 1995 was a “material official search” within section 10(3)(d) of the 1975 Act; secondly, that the search did not show the occupancy condition; and, thirdly, that as a consequence of that omission Mr Smith had purchased the property at the auction held on 22nd February 1995. The order further provided that Mr Smith was entitled to compensation (to be assessed) pursuant to section 10 of the 1975 Act in respect of the loss he had suffered.
- Although no appeal was brought against Judge Weeks’s decision that Mr Smith was entitled to compensation, the Council did not make or offer him any payment until August 2001, when £100,000 was paid on account of their liability. The assessment of compensation took place on 20th and 21st September 2001, again before Judge Weeks. By that time Mrs Smith, as the joint owner of the property, had been joined as a claimant in the action. By his order made on 21st September, the judge ordered the Council to pay to Mr and Mrs Smith £197,500 in respect of the diminution in value of the property, together with £44,760 by way of interest at 8% up to the date of judgment. He also ordered the Council to pay further sums to Mr and Mrs Smith in respect of matters which are no longer in dispute. He granted Mr and Mrs Smith permission to appeal on the issue of the valuation date.
- It was common ground in the court below, first, that the amount of the compensation was to reflect the difference between the value of the property without the occupancy condition and its value subject to that condition; secondly, that the date when Mr and Mrs Smith’s cause of action accrued (22nd February 1995) was not the appropriate date for the compensation to be assessed; thirdly, that the value of the property subject to the occupancy condition was £277,500 in November 1998 (when its existence was discovered) and £357,500 in September 2001 (the date of the compensation hearing). The Council argued for the earlier of those dates and Mr and Mrs Smith for the later. No other date was suggested.
- The judge held that compensation was to be assessed at November 1998, not September 2001. He found that the value of the property without the occupancy condition was £475,000 in November 1998 and £650,000 in September 2001. Those findings produced differences in value of £197,500 at November 1998 (being the amount awarded by the judge) and £292,500 at September 2001. If account is taken of the interest at 8% on £197,500 up to the date of judgment (£44,760), the total amount of the award was £242,260 as opposed to the £292,500 which would have been awarded at September 2001, a difference of £50,240. It is in respect of that difference that Mr and Mrs Smith appeal.
- The entitlement to compensation under Section 10(1) of the 1975 Act is the equivalent of a cause of action in tort. The general rule in tort, as in contract, is that damages are assessed at the date of the breach of duty. In this case that would have meant that the compensation should be assessed at 22nd February 1995. Having made that point, the judge said:
“It is common ground, however, that to take such date would be unfair to the Smiths because it was not until November 1998, some three years later, that their attention was drawn to this planning restriction and so for three years or more they were unable to do anything about the planning restriction or to realise the property to quantify this loss.”
Although the Council do not seek to go back on their concession that the compensation should be assessed at November 1998, they have suggested that it may well have been generous. I do not agree. In my view the concession was in line with what the law would have required. To have applied the general rule would have been to cause a manifest injustice to Mr and Mrs Smith.
- For their part, Mr and Mrs Smith claim that the justification for the concession as stated by the judge, namely that they were unable to do anything about the occupancy condition or to realise the property in order to quantify their loss, applied equally to the period between November 1998 and the date of the compensation hearing. In his third witness statement made on 27th June 2001 Mr Smith put it thus:
“One of the questions that I have been asked is why I did not try to sell Beanwood Farmhouse having discovered the occupancy condition in November 1998. The answer to that is, first, I thought the Council might recognise their mistake and lift the condition, but they did not do that. Secondly, we could not afford to move. All my money was tied up in Beanwood. I would have to have sold it subject to the occupancy condition and the amount I would have been likely to obtain for it would have been insufficient to have bought another property suitable for my purposes or in line with our expectations. Also, considering I had spent £150,000 on the original purchase and well in excess of £200,000 in carrying out the renovation, excluding the cost of my own time, I would probably have suffered a considerable loss had I sold then. I would not have been able to raise any further funds to buy another suitable property.”
- Having referred to the Council’s contention that the measure of the compensation should be the difference in value at November 1998 plus interest, Mr Smith continued:
“The problem is that compensation calculated on that basis will not properly compensate me. As I have explained in this statement, we have effectively been paralysed from selling. We could not have simply gone out and bought another property on discovering the occupancy condition. We need the compensation to buy a comparable and suitable property. We cannot do that until the compensation is paid. The other factor is that property prices have increased between November 1998 and now more than is reflected by the Court interest rate. If we had received proper compensation in November 1998 we would then have been able to buy another property and would have been able to benefit from the rise in property prices since then. Compensation based on November 1998 values, even with 8% pa interest, would not now enable us to buy another, comparable property. It would result in us losing out on the profit we would have expected to make on the sale of Beanwood.”
- Does that factual state of affairs, which appears to have been unchallenged in the court below, entitle Mr and Mrs Smith to have the compensation assessed at the date of the compensation hearing? That is a question to which no clear answer is to be found in the authorities, many of which were cited in counsel’s written submissions and some of which were examined in argument. Before the judge counsel were agreed that an analogy could be drawn between compensation assessed under Section 10 of the 1975 Act and damages recoverable in respect of a negligent survey of a house for a private purchaser. In the latter class of case the general rule, almost the invariable rule, is that the damages are assessed by reference to the diminution in value of the house as at the date of purchase, being the date of the breach of duty; see Philips v Ward [1956] 1 WLR 471, Perry v Sidney Phillips & Son [1982] 1 WLR 1297 and Watts v Morrow [1991] 1 WLR 1421. However, an agreement between counsel as to an analogy cannot prevent a higher court from taking a different view, especially where it is already evident that some date later than the date of breach is appropriate. This being a case where the defect was one of title, I see some force in the submission put to us by Mr Jourdan, for Mr and Mrs Smith, that, so far as analogies are to be considered, it is closer to a negligence claim against a solicitor acting in a conveyancing transaction, where the authorities support a more flexible rule as to the date on which damages should be assessed; cf Portman Building Society v Bevan Ashford [2000] 1 EGLR 81.
- The authorities being inconclusive, it is necessary to resort to principle. The most recent case in which this sort of question has been considered at the highest level is Alcoa Minerals of Jamaica Inc v Broderick [2002] 1 AC 371, a decision of the Privy Council, which, though it led him to a different conclusion, was considered by Judge Weeks. In that case Mr Broderick claimed that a nearby smelting plant operated by Alcoa had caused erosion to the galvanised zinc panels of the roof of his house. In 1989, on the second occasion that the damage occurred, he was unable to pay for the necessary repairs. In 1990 he commenced proceedings against Alcoa claiming damages in nuisance and putting his special damage at $135 for each square foot of the roof. Alcoa denied liability. The value of the Jamaican dollar having fallen rapidly over the next few years, in March 1994 Mr Broderick was given leave to amend his claim for the cost of repairing the roof to $600 per square foot and in February 1995 the trial judge found for him on liability and awarded him special damages at that rate. The Court of Appeal in Jamaica confirmed the award and Alcoa’s appeal to the Privy Council was dismissed.
- The judgment of the Board was delivered by Lord Slynn of Hadley. Having recorded Alcoa’s contentions that the general rule in tort should be applied and that Mr Broderick’s impecuniosity should be ignored in so far as the delay in repairing was due to his lack of funds, Lord Slynn continued at p. 377G:
“There are thus really two separate but related questions: (a) is the plaintiff entitled to have damages assessed at a date other than the date by which the physical damage was complete; and (b) does the fact that he could not afford to pay for repairs until he had obtained judgment have to be ignored when fixing the date by which damages must be assessed?”
- In dealing with the first question Lord Slynn said that Alcoa was entitled to say that the starting point for assessing damages was the so-called “breach date” rule, but he pointed out that in Miliangos v George Frank (Textiles) Ltd [1976] AC 443, 468, Lord Wilberforce had made it clear that the rule was subject to exceptions. At p. 378A Lord Slynn said:
“it seems to their Lordships that, in a case where damages are the appropriate remedy, if adoption of the breach date rule in assessing them produces injustice the court has a discretion to take some other date…….
In a case where repairs have to be done at what is a heavy cost in relation to the plaintiff’s financial position there may be stronger grounds for delaying the date of assessment than in a case where a plaintiff has undertaken a contractual obligation to buy and pay for goods where he could go out into the market and buy the goods at or near the same price. There is in their Lordships’ view force in the statement of I.N. Duncan Wallace in ‘Costs of Repairs: Date for Assessment’ (1980) 96 LQR 341, 342-343 that ‘failure by a wrongdoer to accept liability will in many cases be a crucial factor in justifying a plaintiff in postponing work of repair until final judgment’.
The breach date rule is therefore not a conclusive answer to the plaintiff’s claim.”
- Lord Slynn then addressed the second question, which he said turned on a consideration of the decision in The Liesbosch. [1933] AC 449. At p. 379G he said that courts had from time to time distinguished that decision or sought to set limits to its scope. He considered a number of later decisions in this court and in other jurisdictions, including Dodd Properties Ltd v Canterbury City Council [1980] 1 WLR 433 and Perry v Sidney Phillips & Son (supra). From the latter case he read a passage in the judgment of Oliver LJ [1982] 1 WLR, at p. 1305:
“One reason, no doubt, [for not carrying out the repairs] was the plaintiff’s poverty. As I said, if that were the only reason, The Liesbosch might well provide an answer for the defendants. But in fact the plaintiff’s conduct in not carrying out the repairs was quite reasonable for a number of other reasons; and one of the reasons why he did not do them was because the defendants were strenuously resisting any liability at all for the repairs and denying that they were responsible.”
- Lord Slynn also read a passage from the judgment of Kerr LJ in that case, at p. 1307:
“If it is reasonably foreseeable that the plaintiff may be unable to mitigate or remedy the consequences of the other party’s breach as soon as he would have done if he had been provided with the necessary means to do so from the other party, then it seems to me that the principle of The Liesbosch no longer applies in its full rigour.”
At p. 382A, as a footnote to his review of the authorities, Lord Slynn observed that in regard to contract Denning LJ had said in Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297, at p. 306:
“It was also said that the damages were the result of the impecuniosity of the sellers and that it was a rule of law that such damages are too remote. I do not think that there is any such rule. In the case of a breach of contract, it depends on whether the damages were reasonably foreseeable or not.”
Lord Slynn added that in the opinion of their Lordships the position in contract and tort in that respect was and should be the same.
- In considering the facts of that case, Lord Slynn, at p. 382H, said that the need to repair the roof was a direct consequence of the tort and that the real question was whether Mr Broderick was in breach of his duty to mitigate his damage. It seemed to their Lordships to have been obviously foreseeable that if the house of a person in the position of Mr Broderick was seriously damaged, he would not or might not have the wherewithal to repair it and that his ability to do so would depend on his establishing the liability of, and recovering damages from, the defendant. At p. 383E-F he said:
“Whether Alcoa promised to pay or whether it was strenuously denying liability it was reasonable for Mr Broderick to wait either until Alcoa paid or liability was established. There is no question here of Mr Broderick deliberately delaying doing the repairs so as to increase the defendant’s liability. What he wanted was the cost of repairs either, if liability had been accepted in 1990, at those values, or at 1995 values when liability was eventually established. There is no windfall in it for him. On the contrary it would he a hardship to him not to get the cost of repairs the first time it was clear that Alcoa had to pay. Alcoa has not shown that Mr Broderick could and should have gone ahead with and paid for repairs at an earlier stage.”
- Viewing the question which arises in the present case as one of principle I would say, first, that its facts are of the same order as those in Alcoa and, secondly, that to adopt November 1998 as the date on which the compensation should be assessed would produce injustice to Mr and Mrs Smith. Mr Lynagh QC, for the Council, has argued that Alcoa, like Dodd Properties (Kent) Ltd v Canterbury City Council (supra), was one of repair costs, not of difference in value, so that the breach date or the nearest practicable date should be adopted. I accept the premise of that argument but reject the conclusion. The breach date has already gone, and no just basis for reintroducing it has been demonstrated. Moreover, as I read their Lordships’ judgment in Alcoa they did not regard themselves as deciding a case which fell into some special category. They decided it on the principle that if adoption of the breach date rule in assessing damages produces injustice the court has a discretion to take some other date.
- Reverting to the facts of the present case, I refer to the following points in support of the view that they are of the same order as those in Alcoa. First, on learning of the existence of the occupancy condition in November 1998 Mr Smith ceased work on the renovation, sought advice from a planning consultant and a solicitor and unsuccessfully attempted to get it lifted. In my view he acted reasonably in taking those steps and in not seeking to sell the property in the meantime. Secondly, there was agreed evidence from the valuers on each side that a reasonable period for marketing the property would have been one year. Thirdly, the Council denied liability and refused to pay Mr and Mrs Smith anything, even after the order of 1st December, 2000 had established their entitlement to compensation. Only in August 2001, the month before compensation was to be assessed, was any payment made and then only of £100,000. Fourthly, and most importantly, without the compensation Mr and Mrs Smith would not have been able, with the proceeds of a sale of the property subject to the occupancy condition, to go out and buy another comparable and suitable property. As Mr Smith put it, “all my money was tied up in Beanwood….. we have effectively been paralysed from selling”. Again, they acted reasonably in not seeking to sell the property before they had received adequate compensation. In all the circumstances, it having been reasonably foreseeable by the Council that Mr and Mrs Smith might be unable to sell the property as soon as they would have done if they had received adequate compensation, the only just remedy is to adopt the date of the compensation hearing as the correct date for its assessment.
- For these reasons, I would allow the appeal and vary the judge’s order of 21st September 2001 by substituting the figure of £292,500 for that of £197,500 and by deleting the order for payment of £44,760 in respect of interest.
Lord Justice Mance: I agree.
Lord Justice Ward: I also agree.
