Compulsory Purchase

February 12th, 2016

In Phoenix Developments v Lancashire County Council [2016] UKUT 38(LC) it was held in the Upper Tribunal (Lands) that the Tribunal had jurisdiction under Section 1 of the Land Compensation Act 1961 to determine compensation for land in Accrington acquired by compulsory purchase from a property development company, notwithstanding that an expert had previously determined a price for the land, under an option agreement.  The Council had entered into an option agreement to purchase land at a price, to be determined by an expert as the market value of the land plus all other sums the landowner would be entitled to if the land was acquired compulsorily.  The Council sought to exercise the option and the expert determined a price.  However, the sale was not completed as the landowner was dissatisfied with the expert’s determination and sought to withdraw.  The Council then acquired the land through the use of its compulsory powers.  The Council submitted that (1) the Tribunal had no jurisdiction to determine the compensation payable for the land, as the expert’s binding determination of the contractual purchase price meant that there was no question of “disputed compensation” capable of being referred to the Tribunal; (2) there was an implied term of the option agreement that any price determination by the expert would remain binding between the parties in the event of compulsory purchase.  Martin Rodger QC, Deputy President, refused the application.  He held that the expert’s determination was irrelevant to the question whether the Tribunal had jurisdiction to entertain the reference.  The land was acquired by the exercise of compulsory powers and there had been no agreement between the parties on the compensation payable in respect of that acquisition.  The expert’s determination had been made for a different purpose.  Even if the price determined by the expert included a sum reflecting statutory compensation, there had been no agreement by the landowner to treat that determination as conclusive of the value of its entitlement. The Deputy President further held that there was no implied term. It was neither necessary nor obvious that the expert’s determination of the contractual purchase price would have been intended by reasonable people in the position of the parties to be determinative also of the claimant’s statutory entitlement in the event of the land being acquired by the exercise of compulsory powers.  It could not be said that the contract would lack commercial or practical coherence without such an implied term.

As to (1), the position was the converse of that in BP Oil UK Ltd v Kent County Council [2003] EWCA Civ 798.  The question in that case was whether an agreement entered into after an acquiring authority had entered and taken possession of land had the effect that the landowner’s statutory entitlement to compensation had become a contractual right to a purchase price which, in default of agreement, was to be determined by the Lands Tribunal applying the statutory compensation code; the question was significant because the reference had been made to the Tribunal after the expiry of the limitation period for a statutory claim arising on the date of entry.  Carnwath LJ, as he then was, observed that the fact that the contractual method of calculating the consideration payable for the land would replicate the method that would apply under the statutory code, “did not deprive the clause of contractual effect” (as the acquiring authority had argued). The Court of Appeal was not dealing with a case such as the present, in which an enforceable contractual right to acquire land at a determined price had been put on one side by the acquiring authority in favour of the exercise of compulsory powers.

As to (2), the Deputy President applied the Supreme Court decision in Marks & Spencer v BNP Paribas Securities (2015) UKSC 72.  A term can be implied only if, without the term, the contract would lack “commercial or practical coherence”.

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