BP Oil UK Ltd. v Kent County Council

This is an appeal from a decision of the President of the Lands Tribunal, on a preliminary issue. He held that the claim of the appellants (“BP”) for compensation was statute barred. I can take the basic facts from the Tribunal’s decision:

“On 12 March 1992 KCC made the Kent County Council A299 Thanet Way Dualling (Whitstable to Herne Bay) Compulsory Purchase Order 1992. It was confirmed with modifications by the Secretary of State for Transport on 5 October 1994. Included in the CPO as Plot 92 was the land that is the subject of this notice of reference. A petrol filling station included a large forecourt and a shop/kiosk. There was access to it from the A299 Thanet Way east of the Eddington Roundabout and from Canterbury Road to the south of the roundabout. To the east of the Thanet Way access was an area of woodland. Plot 92 comprised an irregular strip of land along side Thanet Way. It consisted of open land in front of the petrol filling station, the area of woodland, and half the width of Canterbury Road.

The purpose of the CPO was the improvement of the highway intersection by the construction of the new underpass with the roundabout above. A new slip road was to give access to the claimant’s site. Notice to treat and notice of entry were served on or about 20 January 1995”.

Before the Tribunal there was a dispute as to the date of entry. The Tribunal determined that the County Council entered the land pursuant to the notice of entry on 8^th August 1995. There has been no appeal from that determination.

BP’s notice of reference to the Lands Tribunal was dated 24^th January 2002, which was more than six years after the date of entry as so found. Accordingly, subject to the effect of the agreement to which I will come, it was outside the limitation period applicable under the Limitation Act 1980 s9 (see Hillingdon LBC v ARC Ltd [1999] Ch139 CA, where it was held that s9 is applicable to a claim to compensation for compulsory acquisition). The issue before us is whether BP’s claim is saved by virtue of an agreement entered into with the County Council in February 1996.

The agreement was contained in a letter of 8 February 1996 signed by the Head of Kent Estate Management, with a signed acceptance of its terms appended on behalf of BP on 16 February 1996. It stated:

“This agreement is between Kent County Council (KCC) and BP Oil UK Ltd (Freeholders) for sale of land by the latter and its purchase by the County Council for the purposes of the A299 Dualling Scheme (Whitstable to Herne Bay Section) for which the Council has received planning permission and has made Compulsory purchase and Side Roads Orders. The Orders were confirmed by the Secretary of State for Transport on 28 September 1994 and Notice to Treat and Notice of Entry have been served by the County Council.

KCC accepts that due to the construction of the dualled roads, the Links Service Station will not be able to trade effectively unless the access and forecourt layout is amended and works of re-organisation and reinstatement are carried out within the boundaries of the existing property.

(1)

BP Oil has prepared an agreed scheme and secured the necessary consents for re-organised facilities as shown on Drawings Nos LSS/2/D, LSS/3, LSS/10/A, LSS/20/B, LSS/30 and WD1 0852 and a contract for these works will be let to Dakin Service Station Contractors (the Contractors).

(2)

KCC will transfer the freehold interest of the land coloured green on Drawing No. LSS40 to BP Oil UK Ltd to enable a revised access road to be constructed and will grant early possession of the land to the freeholders for this purpose.

(3)

Upon KCC proceeding with the A299 Dualling Scheme the freeholders will:

(a)

Yield up possession of the land shown coloured pink on Drawing No.7052/207 (which is required by the Council for incorporation into the highway) to permit construction of the new accesses to the re-organised facilities.

(b)

Transfer the freehold estate in the land shown coloured pink to KCC with the benefit of vacant possession.

(4)

KCC to pay to the freeholders by way of consideration for the loss of the land compensation to be agreed but assessed in accordance with the statutory Compulsory Purchase Code ie value of land taken, severance/injurious affection and disturbance (including temporary loss of profits if any) the cost of carrying out accommodation works together with legal costs in deducing title and making the conveyance of surveyors fees calculated in accordance with Ryde’s Scale (1991).

The liability of the Council under this Clause shall expressly include payment of the sums quoted in a priced Bill of Quantities dated November 1995 (and attached to these Heads of Agreement) in respect of those items listed under the headings of "preliminaries", "landscaping" and "external works" together with such of the "prime costs, provisional sums and contingencies" as are actually incurred by the freeholders.

The Council shall additionally pay any sums which are not referred to in the Bill of Quantities but which are reasonably and necessarily incurred in carrying out and completing the works.

The specification and estimated costs of any such works to be agreed in advance between Kent County Council and the Freeholders.

The procedure shall be as follows:

[(a)…(f)… ]

(5)

In the event of the parties failing to agree on the compensation to be paid the matter to be determined by the Lands Tribunal.”

There was a further exchange of letters in June 1996 dealing with an error in the plan and incidental matters, but nothing in the argument before us has turned on that later exchange.

The Tribunal recorded the submission of counsel then instructed for BP as follows:

“Mr Nardecchia, in his supplemental further submissions, says that BP’s submission -

‘is that its statutory right to compensation is retained but in a form which is modified altered and extended by the terms of the agreement for the sale of its land. The claim therefore arises from the agreement as do the rights of the parties.’”

The Tribunal commented

“I cannot see how the contention in the second sentence follows from the first sentence. If the statutory right to compensation is retained but in a form that is modified by the agreement, the right to compensation necessarily, it seems to me, arises under the statute.”

The Tribunal noted that Mr Tait, for the Council, accepted that, if the agreement “supplanted” the parties’ statutory rights, the claim would not be statute barred. However he agreed with Mr Tait that this was not the correct analysis:

“Mr Tait submits, however, that the agreement did not supplant the parties’ statutory rights. This is, he says, evident from the document itself, which recites the fact of service of notice to treat and notice of entry and refers to "compensation" rather than to the purchase price, making provision for the assessment of compensation in terms that did no more than re-state the parties’ actual position in law. It is also evident, Mr Tait says, from the factual matrix in which the agreement was made. The purpose of the agreement was to provide for the accommodation works, and in the absence of the need to make this provision it would have had no purpose. I accept these submissions, and, as I have said, Mr Nardecchia’s contention is not that the agreement supplants, but rather that it retains, the statutory right to compensation. What the agreement does is to make detailed provision for accommodation works and payment for them, but not to alter the claimant’s statutory right to compensation. Of course the amount payable as compensation would have to reflect the agreement that the parties had reached in relation to the accommodation works and the transfer to BP of the small area of land for a revised access road. In this respect, however it was no different from any agreement between claimant and acquiring authority, after entry and before a Lands Tribunal determination, agreeing particular items of claim. It conferred no new right to compensation.”

In this court, Mr Davidson QC, who did not appear below, puts BP’s case more simply. He says it is not necessary to decide whether the agreement “supplanted” any statutory rights. The relevant question is whether the agreement conferred on BP a contractual right to consideration on the sale of the land, which he says it plainly did. He does not dispute the Tribunal’s comments on the main purpose of the agreement, related to accommodation works, he says that this is irrelevant to the construction of the agreement which must depend on its terms.

In my view, Mr Davidson’s submission is correct. It is unnecessary and artificial to attempt to draw a precise dividing line between the statutory and contractual aspects of this process. There is no doubt that it began as a statutory procedure leading to entry by the Council, pursuant to a notice of entry under the Compulsory Purchase Act 1965 s 11(1). That gave the Council a right to occupy the land and use it for the statutory purpose, which is what has happened. In terms of compensation, the main significance of the date of entry is that it fixes the date for the assessment of compensation (see West Midland Baptist Association v Birmingham City Corp [1970] AC 874), and that interest runs from the date of possession on “any compensation agreed or awarded for the land of which possession is taken” (1965 Act s 11(1)).

However entry under s 11 does not give the authority title to the land. In some cases this may not matter very much. For example, in this case they apparently have been able to use the land as part of the road for a number of years without obtaining full title. In other cases, where for example the authority wish to transfer the land to a developer, early acquisition of title may be important. The Compulsory Purchase Acts contain procedures for securing title, even without the co-operation of the vendor, for example by a vesting declaration (under the Compulsory Purchase (Vesting Declarations) Act 1981) or, where the notice to treat procedure is followed, payment of compensation into court, followed by a deed poll (Compulsory Purchase Act 1965 s 9). Apart from those procedures, the normal pattern will be for the authority to enter following notice to treat and notice of entry, and for compensation to be agreed or determined by the Tribunal, following which there is the equivalent of a contract for the sale of the land which can be specifically enforced (see Capital Investments Ltd v Wednesfield UDC [1965] Ch 774, 794 per Wilberforce J). The 1965 Act makes clear that, even where land is “subject to compulsory purchase” (in the sense that compulsory purchase has been authorised by an order: see s 1(3)), the authority may enter into agreement with those interested for the acquisition of the land for “a consideration in money or money’s worth”.

Against that background, if one turns to the agreement of February 1996, its effect seems to me to be reasonably clear. There were three principal substantive obligations: (1) KCC would transfer the freehold in the land coloured green to BP; (2) BP would transfer the freehold of the land coloured pink to KCC; (3) KCC would pay to BP “by way of consideration for the loss of the land” compensation to be assessed in accordance with “the statutory compulsory purchase code”, to include payment for the accommodation works. The agreement also contained an obligation on BP to “yield up possession” of the pink land, but this seems to date back to a clause in earlier draft, which had in practice been superseded by the actual taking of possession under the statute.

Mr Tait accepts that the respective obligations on the Council and BP to transfer interests in land were specifically enforceable contractual obligations. However, he seeks to distinguish the obligation in relation to consideration on the grounds that it does “no more than re-state the statutory obligation of KCC which flows from the exercise of its compulsory purchase powers”. He submits that it is necessary to decide whether the agreement supplanted, or merely modified, the existing right to compensation, because the authority is not empowered to acquire land by both methods at the same time.

With respect I find this argument difficult to understand. Once it is accepted, as it is, that the agreement of February 1996 is an enforceable contractual agreement, then it must be interpreted in accordance with its terms. Clause (4) is expressed as a clear contractual obligation on the authority to pay to BP “by way of consideration” an amount calculated in a particular way. I see no reason why this should not be treated as an enforceable obligation in the same way as the other terms of the agreement. The fact that the method of calculation may replicate the method that would apply under the statutory code does not deprive the clause of contractual effect. In fact the clause is not identical to the statutory code, because, in particular, special provision is made to ensure that the cost of the accommodation works is included in the compensation. Apart from the agreement, this might have been a matter depending on the statutory rules in relation to disturbance and injurious affection.

Nor do I find it necessary to decide whether this agreement “supplanted” the rights under the statute. This would only become a live issue, if for some reason the agreement had ceased to be binding on the parties, for example by frustration. In those circumstances, it might have been necessary to consider whether the parties should be able to revert to their statutory rights. If, however, the agreement was implemented in accordance with its terms, then subject to two points, it is difficult to see any reason why the parties would in practice have needed to rely on the continuance of any statutory rights.

The two possible exceptions to that view, which are relied on by Mr Tait, are first, the provisions for advance payments under s 52 of the Land Compensation Act 1973, and the provision for interest under s 11 of the Compulsory Purchase Act 1965, to which I have already referred. Neither was in terms provided for by the agreement. Accordingly, it is said, BP could only claim those rights by virtue of the statutory code.

The former does not assist Mr Tait’s argument in my view. Section 52 provides that where an authority have taken possession of any land then they must make an advance payment “on account of any compensation payable by them for the compulsory acquisition of any interest in the land”. Mr Tait says that, apart from the statute, there can be no right to an advance payment under this provision. Whether that is right or wrong it does not it seems to me material to Mr Davidson’s argument. BP has not sought an advance payment of compensation, even though the authority have had the use of the land for a number of years without making any payment for it at all. Whether they could have done so, following the February 1996 agreement, is an academic question.

I see more force, however, in the other point relating to interest. It would certainly be surprising if the agreement had been intended to deprive BP of its right to interest on the amount of any compensation running from the date of possession. Mr Davidson does not suggest that they intended to give it up. On the other hand there is nothing in terms in the agreement which preserves or confers a right to such interest.

Mr Davidson’s answer to this lies in the terms of section 11(1) of the 1965 Act, read against the background of section 3. The latter specifically provides for the authorised acquisition to proceed by way of agreement for a monetary consideration. Section 11 provides for interest to run on “any compensation agreed or awarded”. Mr Davidson submits that the expression “compensation agreed” is sufficiently flexible to include consideration on an agreed sale under section 3. Alternatively, he submits that the reference in clause (4) of the agreement to compensation to be “agreed but assessed in accordance with the statutory compulsory purchase code” must be taken as impliedly including the right to interest in accordance with the statutory code. The various heads of compensation mentioned in Clause (4), although introduced by the term “i.e.” are not to be taken as excluding other elements which are conventionally treated as part of the code.

It is unnecessary for us to reach a final decision on these alternative submissions. Had the issue arisen in a context unaffected by limitation considerations, I doubt whether there would have been any dispute that interest from the date of possession was to be included in the payment made by the authority. On balance, I am inclined to prefer the former submission, although this does carry with it, as Mr Davidson I think recognises, the consequence that there may be a six-year time limit on the period for which interest can be claimed.

The alternative contention depends on an imprecise reading of the term “i.e.”. Furthermore, Mr Tait suggests that, if this approach is taken, then one should also treat as impliedly incorporated the limitation periods which apply to claims under the compulsory purchase code. Again, I do not find it necessary to reach a decision on that point. However, it seems to me that there is a defensible distinction between the two. Section 11 of the 1965 Act, which confers the right to interest, is one of the key provisions in the compulsory purchase code, since it gives the right to possession. By contrast, the limitation period arises under a separate statutory code, which is part of the general law applicable to actions and claims of all kinds. I see no difficulty in treating the first as implicitly part of the “statutory compulsory purchase code”, while excluding the latter.

In any event, I am satisfied that on an ordinary reading of the February 1996 agreement, BP obtained contractual rights which are enforceable, notwithstanding any statutory limit which would arise apart from the agreement. It is right to note that this has the effect that the reference to the Tribunal takes the form of an arbitration (under its jurisdiction to act as arbitrator by consent: Lands Tribunal Act 1949 s 1(5)), rather than as the Tribunal authorised to determine disputed compensation (under s 1(3)). This may have some effects on the procedure. However, it is accepted that the notice of reference in this case was couched in terms which were apt to invoke either jurisdiction.

Finally I should mention Mr Davidson’s alternative submission that, even if the basis of his claim lies in the statute, nonetheless the agreement must be treated as an “acknowledgment” of a “liquidated pecuniary claim” for the purpose of the Limitation Act 1980 s 29(5), with the effect that time begins to run again from that point. In view of my conclusion on the first point I find it unnecessary to consider that submission. I would only comment that the authority principally relied on by Mr Davidson, Amantilla Ltd v Telefusion plc [1987] 9 ConLR 139 was concerned with very different subject matter (a quantum meruit claim under a building contract). Even if it were binding upon us, I would need some persuading that it supported the (to me) unlikely proposition that a claim for compensation which has yet to be determined by the Lands Tribunal can be regarded as “liquidated”.

For these reasons I would allow the appeal and direct that the reference should proceed as a reference under s 1(5) of the Lands Tribunal Act 1949. The parties were agreed that subject to one point the costs, here and below, should follow the event. The one point was that the issue under the Limitation Act s 29(5) was raised very late in the day and for that reason caused additional costs on both sides in preparing supplementary skeleton arguments. I agree with Mr Tait that some allowance should be made for that aspect. However, the amount of extra work on both sides would have been limited, and the issue took up very little time before us. In my view, that point will be adequately reflected if the claim in the BP schedule of costs (otherwise agreed) is reduced by £1,000 + VAT.

I agree.

I also agree.