UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2015] UKUT 195 (LC)

UTLC Case Number: LCA/21/2014                                                                                         

 

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

 

COMPENSATION – PROCEDURE – temporary possession – whether reference may be made to Tribunal before end of period of possession – application to strike out reference – Crossrail Act 2008 – application dismissed

 

 

IN THE MATTER OF A NOTICE OF REFERENCE

 

 

BETWEEN                                                        

BPP (FARRINGDON ROAD) LIMITED

Claimant

 

and

 

 

CROSSRAIL LIMITED

Compensating                                                     

Authority

 

Re: Caxton House, Farringdon Road, London EC1

 

 

Before: Martin Rodger QC, Deputy President and Peter McCrea FRICS

 

Sitting at: Royal Courts of Justice. Strand, London WC2A 2LL

on

26 March 2015

 

Robin Purchas QC and Rebecca Clutten, instructed by Bircham Dyson Bell LLP, for the claimant

Michael Barnes QC and Eian Caws, instructed by Ashurst LLP, for the compensating authority

 

© CROWN COPYRIGHT 2015

 

 

 

 

 

 

 

The following cases are referred to in this decision:

 

Yorkshire Electricity Board v British Telecommunications Plc [1986] 1 WLR 1029

Colac v Summerfield [1893] AC 187

 

                                                                    DECISION

1.             On 12 January 2015 Crossrail Limited (“Crossrail”) applied to the Tribunal under rule 8(3)(c) of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 to strike out this reference by the claimant, BPP (Farringdon Road) Limited, for compensation for the taking of temporary possession of the basement of Caxton House, a building standing at the junction of Farringdon Road and Charterhouse Street in London.  The grounds of the application are that the proceedings are premature and have no reasonable prospect of success because, as yet, the claimant has no cause of action.

2.             The reference is currently listed for hearing in November 2015, together with a second reference for compensation for the permanent acquisition of the claimant’s interest in part of the same site.  The hearing is expected to occupy 28 hearing days and a substantial body of factual and expert evidence, including evidence of valuation, has already been exchanged.

3.             The application to strike out the reference was explained in a document of 28 pages supplemented by a skeleton argument of a further 13 pages.  It was resisted by the claimant in a 23 page response backed by a 55 page skeleton argument.  Between them the parties supported their respective arguments with citation of 49 authorities and statutory references.  We do not propose to consider this material in detail in this decision, as we have concluded, in agreement with the claimant, that the reference is well arguable and that before a proper examination of the evidence, it is not possible to conclude that it has no reasonable prospect of success.

4.             The claimant’s interest in Caxton House comprises a number of leases.  On 2 August 2007 an agreement was entered into between the claimant and the Secretary of State for Transport under which the Secretary of State was to be entitled to take temporary possession of the basement of Caxton House for use as a working site in connection with the Crossrail project.  The Secretary of State subsequently nominated Crossrail as the undertaker of that project.  It was agreed that compensation would be payable in respect of the temporary possession of the site as if that temporary possession had been acquired compulsorily under Schedule 5 to the Crossrail Bill which was then passing through Parliament.  The Bill provided for the nominated undertaker to pay compensation to the owners and occupiers of land of which possession was taken under paragraph 1(4) of Schedule 5 “for any loss that they may suffer by reason of the exercise in relation to the land of the powers conferred by this paragraph.”

5.             Temporary possession of the basement of Caxton House was taken by Crossrail on 6 January 2010.  It is anticipated that possession will be returned to the claimant at some time in 2018 (although the possibility of an earlier return has been hinted at by Crossrail).    

6.             At the time of the 2007 agreement, the Crossrail Bill was passing through Parliament.  As enacted, the Crossrail Act 2008 dealt specifically at s. 47 with temporary possession agreements  including those entered into before the commencement of the Act, such as the 2007 agreement entered into between the claimant and Secretary of State.  Where such an agreement provided for the owner’s interest to be subject to paragraph 1 of Schedule 5, the 2008 Act is modified.  The land to which the agreement relates, in this case the basement of Caxton House, is treated as land of which possession was taken under the Act and by s. 47(11) the agreement is treated as having been entered into on the date of commencement of the Act.

7.             Although there has been some dispute between the parties as to whether the claimant’s right to compensation is properly regarded as being purely contractual, or as having been conferred by statute as a result of s. 47(11) of the Act, the position taken by Crossrail in paragraph 6 of the application to strike out was that “it does not matter for the purposes of the present reference or for the purposes of this application to strike out the reference which is correct.  It is therefore agreed that for the purposes of the reference the second of the two alternatives is taken to be correct.”  A number of the claimant’s subsequent submissions seemed to depart from that approach, and to rely on the consequences of the claim being said to be contractual.  For the purpose of the application to strike out we will proceed on the basis that it is Crossrail’s position that, if it matters, the entitlement to compensation is properly treated as being conferred by statute. 

8.             It is agreed between the parties that a major scheme of redevelopment of Caxton House for office and retail purposes (for which planning permission was granted on 23 December 2008) would have been capable of being carried out in early 2011 but for temporary possession of the basement having been taken by Crossrail.  It is also agreed that such a scheme of redevelopment cannot now commence until possession is returned, but that such a scheme may commence at or not long after the return of the site in or about 2018. 

9.             The claimant’s factual case is that, but for temporary possession having been taken, it would have begun to redevelop the site in January 2011 and would have completed its project by the end of 2013.  It would then have had a valuable asset in respect of which it would have received rental income which it could have re-financed to enable it to make further investments in the property market.  By deferring the redevelopment of the site for approximately 8 years the claimant says that it has been denied the benefit of that redeveloped asset.  Its loss is therefore the deferment of the opportunity for redevelopment until the beginning of 2019.  As at 30 September 2014 the claimant valued that loss at £15.5m.  It says that its loss will increase to £25.6m by 31 December 2018.  That figure is arrived at on the basis that the value of the claimant’s interest in Caxton House for redevelopment in early 2011 was £38m, a sum which, if deferred until the beginning of 2019 at a deferment rate of 15%, is reduced to £12.4m.  The claimant’s primary head of compensation is therefore the difference between those sums, which is £25.6m.  In the alternative the claim is quantified up to the date of the reference, with the intention that a further claim will be brought for losses sustained between that date and the return of possession.

10.         The claimant also claims that by the time it commenced the reference it had already incurred separate losses in excess of £4m in wasted planning and design costs for its previous development scheme which will be redundant by 2019, and in holding costs and the relevant costs of preparing the claim.

11.         Crossrail disputes the claimant’s assessment of the value of Caxton House in 2011 and the deferment rate to be applied to that figure in order to assess the loss suffered by the claimant as a result of the deferment of the development opportunity.  More significantly for the purpose of the application to strike out the reference, Crossrail submits first that a claim for prospective future loss is not within the language of paragraph 1(4) of Schedule 5 to the 2008 Act and, secondly, that the claimant must give credit in the assessment of compensation for any increase in real terms in the value of its interests in Caxton House when possession is returned, as compared to the value of those interests in 2011.  Crossrail therefore argues that it is impossible to determine any claim for compensation (including for sums already laid out) until possession of the site is returned to the claimant.  Only then will the date to which any losses run be known so that the amount of those losses can be determined, and only then will the value of the site for development be known and (if the site is then worth more in real terms than in 2011) the credit which Crossrail says must be given against such losses be capable of being calculated.

12.         At a case management hearing which took place in September 2014 Crossrail invited the Tribunal to stay the temporary possession reference until possession had been returned.  It proposed that such a stay should be partial and that at the hearing of the permanent acquisition reference in November 2015 the Tribunal should also determine what had been the value of the Caxton House site in 2011.  Since the Tribunal would be considering the permanent acquisition reference it would be sensible, Crossrail suggested, to deal at the same time with other valuation issues which could be addressed on the basis of the facts as they were then known.  It was not suggested at that stage that the claimant did not yet have (and might never acquire) a cause of action.  The Tribunal refused the request that the temporary possession claim be stayed on the grounds that the claimant was entitled to seek compensation for future losses and that the quantification of those losses could be undertaken on the basis of expert evidence without the need to wait until possession was returned.

13.         On 12 January 2015 Crossrail applied to strike out the reference.  A re-amended response to the claimant’s statement of case which had been provided in December 2014 explained the thinking behind this application in considerable detail.

14.         For the purpose of the application to strike out the reference Crossrail accepts that the factual basis of the claim must be taken to be true but nonetheless submits that the claimant can have no cause of action under the 2008 Act for loss sustained as a result of a period of temporary possession until that period has come to an end.  Until then it is not possible to know if a loss will be sustained at all because of the need to give credit for any change in the value of Caxton House while redevelopment is prevented by the taking of temporary possession.  As no loss can be pleaded, no cause of action can exist.  This is not a matter of quantification of loss, but more fundamentally whether there will be a loss at all.  Additionally, any attempt to calculate the claimant’s loss up to 2018 in advance of that date would be speculative because it is impossible to predict intervening events which may have a profound impact on the claimant’s position.

15.         Mr Barnes QC, who appeared on behalf of Crossrail with Mr Caws, proposed that at the date of the commencement of any proceedings in which a sum of money is claimed for a loss, whether for common law damages or under the contract or for compensation due under statute, all of the events which give rise to the liability to make the payment must have occurred and been completed.  The only circumstances in which a court could award a sum for future and prospective events is under s. 50 of the Senior Courts Act 1981 (which confers power to grant damages in lieu of specific performance or an injunction) which has no relevance to the present reference.  Mr Barnes submitted that to a substantial extent the events which will determine the amount of any loss to the claimant have not yet occurred, so there could be no cause of action at the date of the reference.

16.         Support for that proposition was derived from the decision of the House of Lords in Yorkshire Electricity Board v British Telecommunications Plc [1986] 1 WLR 1029, and in particular from the speech of Lord Bridge of Harwich at 1032 C-H.  That case concerned a defence of limitation which turned on the true construction of s. 26(6) of the Public Utilities Street Works Act 1950 by which a statutory undertaker was required to pay to an owner compensation “equal to the expense reasonably incurred” by the owner of making good apparatus which had been damaged by the statutory undertaker in the course of its works.  It was held that the owner’s cause of action for compensation accrued when it incurred the expense of making good damage, and not when the damage itself had occurred.

17.         Paragraph 1(4) of Schedule 5 of the 2008 Act provides that:

“The nominated undertaker shall pay compensation to the owners and occupiers of land of which possession is taken under the paragraph for any loss which they may suffer by reason of this exercise in relation to the land of the powers conferred by this paragraph.”

18.         Mr Barnes submitted that the language of paragraph 1(4), and in particular the reference to loss which “they may suffer” demonstrated an intention that no compensation should be payable until after a period of temporary possession has concluded with the return of possession so that an assessment can then be made of whether, taking into account all of the circumstances of the case, any loss has in fact been suffered.  If, he submitted, it was correct that a claim could be made under paragraph 1(4) whenever possession had been taken, that would have a number of anomalous consequences: a series of separate references claiming compensation for temporary possession could be made during the period of that possession; a compensating authority could make a reference of its own immediately after the initial taking of possession; land owners could in some cases be deprived of compensation for a fall in the value of their property during the period of the possession.  These unfair consequences indicated that the claimant’s construction of paragraph 1(4) could not be correct. 

19.         In reply, Mr Robin Purchas QC, who appeared with Miss Rebecca Clutten on behalf of the claimant, submitted that no part of the temporary possession claim should be struck out as there was a reasonable prospect of it succeeding as a whole. 

20.         Regarding the proper construction of paragraph 1(4) of Schedule 5 to the 2008 Act, Mr Purchas submitted that the expression “any loss which they may suffer” was entirely unrestricted as to the form of that loss.  The loss must arise by reason of the exercise of the powers conferred by the Act but those powers were not restricted to taking possession and included the continuing use of the premises while possession was retained.  The Act did not say in terms that a claim was only available once possession had been completed and there was no restriction on when compensation was recoverable.  This was in contrast to other provisions of the Act for compensation including, for example, paragraph 2(5) and (7) of Schedule 5 which required Crossrail “to reimburse to the planning authority any expenses which it reasonably incurs” in assisting Ministers in formulating a scheme regulating the condition in which land was to be returned on temporary possession being given up, or paragraph 11 of Schedule 17 which is one of a number of provisions requiring the reimbursement of “reasonable expenses incurred”. 

21.         We agree with Mr Purchas that the language considered by the House of Lords in the Yorkshire Electricity case was not comparable to paragraph 1(4) of Schedule 5 to the 2008 Act and that the decision does not support a general proposition that at the time proceedings are brought all events which give rise to liability to pay compensation must have occurred.  The relevant statutory language in this case, “any loss which they may suffer”, is prospective, and is to be contrasted with “expense reasonably incurred” which refers to money already laid out. 

22.         Reference was made by Mr Purchas to the decision of the Privy Council in Colac v Summerfield [1893] AC 187, an appeal from the Supreme Court of Victoria under a statute which entitled the owners or occupiers of any land to obtain compensation “for any damage which they may sustain through the exercise of any of the powers conferred by this section.”  It was suggested on behalf of the compensating authority that a landowner could not sue for compensation in respect of future damage.  This was treated by the Privy Council as raising a question of construction of the statute which, as Lord Watson explained, indicated plainly the intention that an owner or occupier injuriously affected by the exercise of the statutory power was to be entitled to have compensation for damage to his land assessed once for all and was not to be compelled to raise further actions for damage subsequently accruing.  Thus, Mr Purchas argued, once any relevant loss had been suffered by the claimant it was entitled to seek compensation for that loss, including such prospective loss as it was able to prove by evidence.  A number of other provisions of the Act included a similar formulation giving rise to an immediate obligation to pay compensation.  We do not consider it is necessary to refer to those provisions individually as we accept Mr Purchas’s contention that it is at the very least arguable (and we consider likely to be correct) that the claimant’s cause of action arises on entry providing the claimant can prove that by reason of the exercise of the power of temporary possession, they will suffer loss.

23.         We are not persuaded that the statutory language prevents the Tribunal from assessing loss prospectively, but even if Mr Barnes is right about that, the claim and the evidence in support of it include loss up to 13 March 2014, the date of the reference. The only obstacle to the recovery of that loss is the submission that the claimant must give credit for any rise in the value of the site while it is deprived of the opportunity to develop it by Crossrail’s temporary possession.  Mr Barnes referred to authorities illustrating the proposition that in determining the basis on which damages or compensation are to be assessed, a court will also take account of the overall position of a claimant.  If it transpires that the claimant has made a profit, rather than incurring a loss, no compensation at all would be payable. 

24.         In response Mr Purchas emphasised that the claimant’s claim to have sustained loss depended on the evidence of that loss and, as a matter of discretion, it would be better for the existence of a cause of action to be tested in the light of that evidence at the hearing of the reference, rather than being dealt with on a preliminary basis while the reference was at a relatively advanced stage of preparation.  Mr Purchas pointed out that a significant element of the claim was in respect of costs which had already been incurred, and for losses which were continuing at a known rate.  There was no element of speculation in the quantification of these sums.  More significantly for the claim as a whole the claimant’s case on the facts is that it would have redeveloped Caxton House, would have retained it and, by refinancing and reinvesting in further development opportunities, it would have benefitted from any general growth in the property market until 2018.  There was no reason why the Tribunal should not assess that factual case on the basis of evidence presented at a hearing in 2015, before the return of possession of 2018. 

25.         If after hearing its evidence the Tribunal is persuaded by the claimant’s case on the facts, we think it unlikely that it would be appropriate to require the claimant to give credit for any increase in the value of Caxton House as a redevelopment opportunity.  Any such increase would not have been created by Crossrail and would have been available to the claimant if temporary possession had not been taken.  The claimant intends to seek to prove that it would have been in a position to secure for itself a similar increase by investment in similar property elsewhere, and it is unlikely to be possible to reach a conclusion which requires that credit be given independently of an assessment of the claimant’s evidence.   

26.         Finally Mr Barnes referred to general principles of the law of contract and submitted that a person who claims money payable under a contract either as damages or compensation must seek and can only obtain a lump sum awarded at one time and unconditionally; a claimant is required to bring forward his whole claim at one time, and any subsequent claim will be liable to be struck out as an abuse of process; where a person agrees under a contract to confer some benefit in return for a payment or compensation, in the absence of some provision to the contrary, that person has no cause of action until the service has been completed.  Given the claimant’s acceptance that the claim for compensation is a claim under the statute, and not under contract, it does not seem to us necessary to consider these points for the purpose of determining whether the reference has any reasonable prospect of success.  Whether the same considerations apply to a claim under paragraph 1(4) of Schedule 5 to the 2008 Act is a question of construction of the statute which we consider best resolved in the light of the facts of the case.

27.         We have not sought to make any final assessment of Crossrail’s contentions, which were advanced in a series of eleven propositions copiously supported by authority, most of which were uncontroversial in themselves but which led to a conclusion which we found improbable and unconvincing.  The reference is already significantly advanced in preparation for its hearing.  The parties have exchanged their extensive expert and factual evidence.  We do not consider it appropriate in those circumstance to decide the issues without the benefit of hearing the evidence.  We have therefore sought to do no more than to indicate the three aspects of Crossrail’s argument by which we are currently unpersuaded, namely: its reliance on the Yorkshire Electricity case as establishing a general principle applicable to the 2008 Act; its construction of paragraph 1(4) of the Schedule 5 to the 2008 Act as excluding the possibility of a claim for prospective loss; and its assertion that, before any examination of the facts of the case, it is inevitable that account must be taken of a general increase or decrease in property values.

28.         We are therefore satisfied that the claimant’s case is properly arguable and has a reasonable prospect of success, and that no case has been made out for striking out the reference.

 

 

                                                                                                                                                                                                                                    Martin Rodger QC,

                                                                                    Deputy President

 

 

                                                                                    P.D. McCrea FRICS

                                                                                    27 April 2015