Bridgestart Properties Ltd v London Underground Ltd

This appeal raises an issue about the circumstances in which an acquiring authority exercising compulsory purchase powers is estopped from relying on the Limitation Act 1980 as a defence to a claim for injurious affection.

The facts which gave rise to the claim are not complicated. The appellant (“Bridgestart”) is a wholly owned subsidiary of Peer Group plc and the freehold owner of property known as The Hop Exchange, 24 Southwark Street, London SE1. The proposed route for the extension of the Jubilee Line of the London Underground ran through the subsoil beneath Bridgestart’s premises. By the London Underground Act 1992, London Underground Limited (“LUL”) were empowered to construct works and to acquire land and rights for that purpose, including the provision of tunnels. Two running tunnels were authorised, both passing beneath Bridgestart’s premises, and LUL were empowered to enter upon and take so much of the subsoil as they might require for the purposes of constructing the works. Notice to treat in respect of the acquisition of strata of subsoil, as authorised by the 1992 Act, was served on the Peer Group on 28 July 1994, as was notice of entry. On 29 July 1994, there was actual entry, in that tunnelling operations for the west bound tunnel entered Bridgestart’s land beneath their premises. The tunnelling operations appear to have advanced beyond those premises by mid-February 1995. Trains carrying passengers first ran beneath the premises on 24 September 1999, and on 22 December 1999 the full extension to Stratford was open to the public.

Bridgestart’s premises consist of a Grade II listed building in use as offices. It is alleged that as a result of the tunnelling operations, settlement occurred, causing cracking to the building. Consequently Bridgestart claimed compensation for injurious affection and, when no agreement was reached with LUL, the matter was referred to the Lands Tribunal. Notice of Reference was given in the name of Peer Group plc on 21 October 2002 and in the name of Bridgestart on 12 November 2002. As it happens, nothing turns on which of those dates is taken as the date of reference. The claim in respect of injurious affection is now based solely on section 63 of the Land Clauses Consolidation Act, 1845 (“the 1845 Act”). However, LUL contended that the reference was statute-barred, as more than six years had elapsed between the date of entry and the notice of reference to the Lands Tribunal. The response of Bridgestart was to assert that LUL were estopped from relying on the Limitation Act or had waived their right to do so. That argument, however, was rejected by the Lands Tribunal in a judgment given by its President, Mr George Bartlett, QC, and dated 30 September 2003. He held the claim to be statute-barred. It is that decision which is now challenged by Bridgestart.

The 1845 Act is applied by section 24 of the London Underground Act, 1992. Section 63 of the 1845 Act is in similar terms to the more recent provision in the Compulsory Purchase Act 1965 (“the 1965 Act”), section 7. Section 63 states:

“In estimating the purchase money or compensation to be paid by the promoters of the undertaking, in any of the cases aforesaid, regard shall be had by the justices, arbitrators, or surveyors, as the case may be, not only to the value of the land to be purchased or taken by the promoters of the undertaking, but also the damage, if any, to be sustained by the owner of the lands by reason of the severing of the lands taken from the other lands of such owner, or otherwise injuriously affecting such other lands by the exercise of the powers of this or the special Act, or any Act incorporated therewith.”

Like section 7 of the 1965 Act, section 63 has been held to entitle the landowner to compensation in respect of injury to his retained land not only from the execution of the authorised works but also from their subsequent use: Cowper Essex –v- Acton Local Board [1889] 14 App. Cas 153; Rockingham Sisters of Charity –v- R. [1922] 2 A.C 315. In this respect these provisions differ from section 10 of the 1965 Act, the terms of which provide for compensation for injurious affection but only insofar as that derives from the execution of the works. On the other hand, the injurious affection provisions of section 63 of the 1845 Act and section 7 of the 1965 Act only operate where land has been acquired from the claimant and the other land which he has retained has been reduced in value as a consequence. That was the situation alleged by Bridgestart to exist in the present case.

For some time it appears to have been thought that there was no time-limit on referring a question of disputed compensation to the Lands Tribunal (see the comment by the Lands Tribunal member in Lillis –v- North West Water Limited [1999] RVR 12 at page 18). That seems to have been based on the Divisional Court decision in Turner –v- Midland Railway Company [1911] 1 K.B. 832. However, in Hillingdon London Borough Council. –v- A.R.C. Limited [1999] Ch. 139, (to which I shall refer as “Hillingdon No. 1”), this court held that that assumption was wrong and that a reference to the Lands Tribunal of a question of disputed compensation is to be regarded as “an action to recover” a sum recoverable by virtue of any enactment, within the meaning of section 9(1) of the Limitation Act 1980. As a result a limitation period of six years operates, normally from the date of entry onto that land, since that is generally the date at which the cause of action arises. In the present case there is no dispute that section 9(1) applies and that the six year period ran from the date of entry, though Mr Glover for Bridgestart says that the 6 years should run from the date when entry could lawfully have been made under the notice of entry, namely 1 month later. The reality is that that makes no material difference in the present case and it is unnecessary to resolve the point. The six years expired on 29 July 2000 or (if Mr Glover is right) on 29 August 2000. The notice of reference to the Lands Tribunal was, as I have said earlier, given on 21 October 2002. So on either basis the reference was patently given after the expiry of the six year period. This is not in issue between the parties.

What is in issue and indeed at the heart of this appeal is whether there is an estoppel or alternatively a waiver by LUL which prevents LUL from relying on the limitation point. It is submitted by Bridgestart that LUL are prevented from taking the limitation point because of an estoppel by convention or equitable estoppel or waiver. It is argued that the facts establish that there existed either a mutual assent that, so long as Bridgestart put in a claim for injurious affection based on repairing costs within two years of the opening of the extension, time would not run unless or until LUL gave notice that it would (estoppel by convention), or a representation by LUL that they would not rely on the six year time limit so long as such a claim was submitted within that two year period (equitable estoppel or waiver)). Both arguments require an examination of the conduct of the parties, and to that I turn.

Some oral evidence was called by Bridgestart at the Lands Tribunal hearing, but all the submissions have concentrated upon the documentary evidence in the case. The oral evidence only seems to have potential significance insofar as Mr Robert Couchman, a director of Peer Group plc, stated in his evidence that reliance was placed by Bridgestart on what they understood LUL to have represented. The documentary evidence is covered in some detail by the President of the Lands Tribunal, and I propose therefore to deal with it, as far as possible, in a more summary form in this judgment.

The notice to treat had been accompanied by a claim form, to be returned within 21 days. The form, headed “Particulars of Claim (Subsoil)”, was completed and sent in. It is dated 19 August 1994. Under “description of property” there appear the words “subsoil beneath 24 Southwark Street”, and the building is then described briefly. In response to the printed words “specify amount claimed for value of interest, showing how the amount has been calculated”, the answer “to be negotiated” is given. It seems that there was then some further correspondence before a letter dated 14 December 1994 was written on behalf of the LUL to Peer Group plc. It is this letter which is really the foundation stone of Bridgestart’s argument and for that reason it is necessary to quote it in full:

“I refer to the above matter and the copy of the Land Certificate which you kindly forwarded for my attention.

As you are aware my client, London Underground Limited, have served notice on you for the subsoil beneath the Hop Exchange and in respect of the cellar and vaults at 2 Southwark Street.

You are entitled to claim compensation for the open market value of the strata of subsoil and the cellar and vaults which are subject to the notice to treat and in addition compensation in respect of the reduction in value of any of your retained land. There are effectively two heads of claim which can be dealt with separately.

1.

Land Taken

In the absence of the Jubilee Line Extension scheme there will be no other purchaser in the market for the subsoil and for the cellar and vaults and therefore will attract a nominal value. With regard to any claim for injurious affection I would comment as follows.

(a)

Although strictly speaking any claim for damage attributable to the tunnelling works could only form part of a claim for injurious affection (except in the case of negligence) London Underground is prepared to pay compensation in respect of this item based upon reasonable costs of rectifying proven structural damage attributable to the tunnelling activities. However no claims for settlement damage will be considered if received later than two years from the opening of the Jubilee Line Extension to the public.

No remedial works should be undertaken without first contacting London Underground Limited and agreement being reached in writing as to the extent of LUL’s liability, and specification and price of the remedial works. This is on the condition that the transfer in the interest in the subsoil and cellars and vaults is dealt with expeditiously. Given that this is acceptable I would ask that claims for settlement damage be made to Mr Su Gulati, JLE London Bridge Office, Unit 5a, 39/65 London Bridge Road, London SE1 9HH.

(b)

Given that claims for settlement damage will be met separately I would not envisage your client suffering from any reduction in value of his interest due to either the construction or the subsequent use of the Jubilee Line works.

In the event that you do perceive that there is a reduction in value of your client’s property then I would be grateful if you could set out full details. In the event that you agree your client’s land has not been injuriously affected other than in respect of any settlement damage then I would be grateful if you could also confirm this by return.

I would advise that surveyors fees in respect of settling this claim for compensation will be paid in accordance with Rydes Scale 1991. Although it would be our intention to settle the land transfer separately from any claim for injurious affection, the Rydes Scale fee will therefore not be calculated on this separate amount.

If you have any queries on any of the above points then please do not hesitate to contact me.”

It seems that, early on, a scheme for monitoring settlement was agreed and readings were taken, these having begun on 4 July 1994 (see exhibit DS2). These continued during and after completion of the tunnelling works. Correspondence about cracks appearing in Bridgestart’s building was exchanged between March and July 1995. On 17 August 1995 the loss adjusters acting for LUL wrote stating:

“… there should not be any difficulty in establishing the nature and extent of damage which has occurred since the condition schedule was carried out. Clearly, the extent of any further damage should be a matter of fact.

On balance, any further damage which may be apparent may well be associated with the Jubilee Line Extension Works although I would ask you to understand that no admission is made in this regard…”

There was further correspondence in November 1995 about this and in particular about whether any cracking was caused by LUL’s works. On 15 November 1995 LUL’s Senior Supervising Engineer wrote, denying liability but adding these words:

“On completion of the Project another Defect/Condition Survey will be carried out and only then will the extent of repair or liability be identified.”

It will be remembered that at this date the Jubilee Line extension was not open and did not open until 1999.

There seems then to have been something of a gap. Discussions resumed in July 1997. On 2 October 1997 LUL’s loss adjusters wrote to say:

“As discussed, I shall leave you to present an initial claim statement for our consideration. Please ensure that, as far as possible, the costs are allocated to specific areas of damage that you believe were caused by the works. Please also provide copies of any technical reports prepared for you by Bowden Sillett.

Thereafter, as discussed, I would wish to liaise closely with Mike Spencer to focus on those particular areas of building where Bowden Sillett believe that there has been structural damage caused by the Jubilee Line Extension works. If it is felt necessary to widen the areas of inspection, then this can be discussed at the time.”

Bowden Sillett were the civil and structural engineers acting for Bridgestart.

Correspondence about the cracking and the need for continued monitoring continued in 1997 and early 1998. After the first passengers passed beneath Bridgestart’s premises in September 1999, there was a further meeting and then a letter from Bridgestart to LUL, in which reference was made to collating a number of reports. Bridgestart said that, once the reports were in hand, an outline claim would be sent to the loss adjusters. Then on 4 July 2000 Bridgestart sent LUL an outline cost estimate for repair work at their premises. LUL regarded this as insufficiently detailed, especially in respect of the cause of the building defects and said so in a letter dated 26 July 2000. This was shortly before the six year period from the date of entry onto the land expired. There was further correspondence, but LUL remained of the view that they had not seen technical reports demonstrating that it was their works which had caused the damage. On 11 May 2001, LUL wrote as follows:

“In summary, we do not believe that the evidence supports the view of yourselves and Bowden Sillett that the further deterioration in the building since the original defect schedules were produced has arisen due to the Jubilee Line Extension works. We will be pleased to consider any technical evidence that you Bowden Sillett can produce which might demonstrate that there has been damage to the building due to the Jubilee Line extension works.”

A new report from Bowden Sillett was sent to LUL’s loss adjusters on 16 October 2001, but was not favourably received by them. LUL wrote on 4 January 2002, saying that a further meeting would not take matters forward but adding:

“We remain prepared to further consider any properly presented claim.”

There was further correspondence, but without progress being made, and on 21 October 2002 notice of reference to the Land Tribunal was given on behalf of the Peer Group. The following day LUL wrote denying liability and raising the point that the claim was now statute-barred.

Although I have summarised the events since 1994, there is no doubt that the central plank to the appellant’s case is the letter dated 14 December 1994. It is submitted by Mr Glover that that letter made it clear that LUL would consider claims for injurious affection so long as they were made within two years of the opening of the Jubilee Line extension, a period which (at its earliest) expired on 24 September 2001. That is later than the date on which the six year period from entry expired, which was 30 July 2000. It is therefore inconsistent with maintaining a potential limitation defence based on that six year period, since a claim could be submitted after it had expired.

Mr Glover points out that the letter was proposing that claims for settlement damage would be dealt with separately both from any compensation for the land (subsoil) taken and from any other aspect of injurious affection. Such settlement damage is properly to be seen as forming part of a claim for injurious affection and thus compensation for it would normally be based on an assessment of the diminution in value of the retained land. But here LUL were proposing a particular method of assessing the diminution in value, namely by reference to the costs of repairing settlement damage, and this was a method consistent with the normal statutory approach. LUL are to be seen as saying that such claims would be treated as made timeously, so long as they were submitted within two years of opening of the Jubilee Line extension. Since the parties dealt with each other on that basis, it would now be unjust to allow LUL to depart from that assumption.

It is accepted on behalf of Bridgestart that, at the time when the letter of 14 December 1994 was written, it was assumed by that company, and probably by LUL, that there was no limitation period applicable to references to the Lands Tribunal when compensation for compulsory acquisition could not be agreed. Hillingdon No.1 had not been decided. So it seems that neither party had the limitation period in mind. But it is contended that that does not prevent there from being an estoppel or waiver. Reliance is placed on part of the judgment of Lord Denning MR in Amalgamated Investment and Property Company Limited –v- Texas Commerce International Bank Limited [1982] QB 84, where at paragraph 122 he said:

“When the parties to a transaction proceed on the basis of an underlying assumption – either of fact or of law – whether due to misrepresentation or mistake makes no difference – on which they have conducted the dealings between them – neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it, the courts will give the other such remedy as the equity of the case demands.”

Mr Glover also refers us to a passage from Troop –v- Gibson [1986] 1 EGLR 1, at 5, where Purchas LJ cited with approval the following passage taken from the judgment of Shaw LJ in Brewer Handelsgesellschaft mbH –v- C Mackprang Jr. [1979] 1 Lloyds Rep. 221 at 230:

“Accordingly, so it seems to me, whether the conduct of a contracting party may amount to a waiver must be determined by reference to all the prevailing circumstances. It need not be such as to amount virtually to an express declaration that this or that right is waived or surrendered. If in the prevailing conditions affecting the position of the parties to a contract the conduct of one of them affords a reasonable foundation for the inference that he is prepared to forgo any right or rights he may have in a certain regard and the other contracting party does draw that inference and persists in the residual contractual relationship upon that basis, then whether it be regarded as waiver or estoppel the foregoing of those rights cannot thereafter be gainsaid … Their counsel sought to reinforce his argument against the implication of waiver by laying emphasis on the buyers’ ignorance as to whether, on the facts if and when they became known, the sellers could claim to be exonerated from liability for failing to deliver as required by their contract. I see no reason, however, to limit the effect of waiver to rights known to exist. It may be embracing enough, and so intended, as to forgo rights which might exist in regard to a particular contract or in a particular context.”

On behalf of LUL, Mr Cameron emphasises that a party is not prevented from relying on a limitation defence merely because he has continued to negotiate with the other party. There is substantial authority to that effect: Hillingdon L.B.C. –v- ARC Limited (No.2) [2000] RVR 283; Llanelec Precision Engineering Company Limited –v- Neath Port Talbot CBC [2001] RVR 36.

So far as the letter dated 14 December 1994 is concerned, LUL’s case is that that letter did not deal with the statutory limitation period and indeed made no reference to it. It dealt with something quite different, namely the period during which LUL would consider claims based on the cost of repairs, which is not the normal statutory basis for section 63 compensation. Mr Cameron accepts the point that the measure of compensation in injurious affection cases where the claim is based on section 63 of the 1845 Act or section 7 of the 1965 Act is the diminution in the value of the retained land. That was what the writer of the letter meant when she referred to “strictly speaking any claim for damages attributable to the tunnelling works could only form part of a claim for injurious affection”. The letter indicates that claims for settlement damage would be considered on the basis of the cost of rectifying proven damage. In so doing, LUL was making a concession. But that had nothing to do with any limitation period for references to the Lands Tribunal. Neither party had limitation periods in mind when the letter of 14 December 1994 was written. Consequently LUL cannot be taken to have made any representation, far less a clear and equivocal one, that it would not rely on a limitation defence.

As for estoppel by convention, it is submitted by LUL that the recent decision in Hillingdon No.2 makes it clear that such an estoppel requires evidence of a shared assumption that the acquiring authority will not take a defence based on the Limitation Act and that that shared assumption was communicated between the parties. Mr Cameron contends that no such evidence exists in the present case. Nor does the letter or the subsequent conduct of the parties establish any waiver by LUL of its right to rely on a limitation defence.

I am in no doubt that the mere fact that considerable negotiations took place between the parties about a claim for settlement damage both before and after the limitation period expired does not of itself create any estoppel preventing LUL from relying on such a defence. That was the very situation which obtained in Hillingdon No.2, where at a date some four years after the claim had (unbeknown to the parties) become statute-barred, the acquiring authority had written to the landowner requesting further particulars of its claim. Yet no estoppel was found to have arisen. It may often be that an authority is prepared to continue negotiations in the hope of reaching an amicable settlement on the amount of compensation but without abandoning a limitation defence if negotiations break down. Like the parties, I too see this appeal as turning crucially on the letter of 14 December 1994, because it was that which led to the subsequent conduct of the parties.

As to the meaning of that letter, it is right that the normal measure of compensation for injurious affection under section 63, as under section 7 of the 1965 Act, is the diminution in value of the retained land. That was put very clearly by a judge with great experience in this branch of the law, Glidewell LJ in Vine (RA) Engineering Limited –v- Havant Borough Council [1989] E.G.L.R. 15, at 17 L-M. That is the reason why one does not have to wait until the injury actually occurs before assessing compensation: the diminution in the value of the land is something which can be ascertained by skilled valuers in advance of the injury: see the Rockingham Sisters of Charity case. It can therefore be seen that LUL in the letter of 14 December 1994 were proposing a different method for arriving at the effect of settlement damage, namely by using the reasonable cost of repair. In that context they made the statement that “no claims for settlement damage will be considered if received later than two years from the opening of the Jubilee Line extension to the public”. It is also clear from the letter as a whole that they were proposing to meet such claims separately from the claim for the value of the land taken, a value which was said to be merely nominal. So a “wait and see” approach was understandable, once one had opted for a cost of repairs method for claims for settlement damage.

It is right that, as LUL point out, the letter contains no express reference to limitation periods. Part of Bridgestart’s case, however, is that the letter by implication represents that the limitation period will not be relied on, because the reference to two years after the opening of the underground extension was inconsistent with such reliance. I do not find that persuasive. The representation in question must be construed as it would have been seen in 1994 and not with the benefit of hindsight. The only evidence about the anticipated opening of the extension to which we have been referred deals with a particular four-year contract for construction as from November 1993. That would have meant completion in about November 1997, well before the six year limitation period expired in the present case (that being late July 2000). But there is no evidence that that four year contract was representative of the whole project. The point remains that nothing indicates that the two year limit on claims would in 1994 have seemed inconsistent with the statutory six year limit on a reference to the Lands Tribunal – had anybody been aware of the latter.

I cannot see that any estoppel by representation, such as an equitable estoppel, can arise in this case. The letter does not address the topic of references to the Lands Tribunal: it is concerned with the filing of claims by Bridgestart with LUL, and while a claim will normally precede a reference, for the reasons already set out there was no implication that any statutory time limit on a reference was being waived or abandoned. All that LUL was doing was seeking to protect itself in respect of the new method of assessment it was proposing, by ensuring that claims for settlement damage could not be made more than two years after opening of the extension.

It is, of course, true that both parties seem to have been unaware of the statutory limitation period until well after it had expired. In that sense there is a plausible argument that one can find here an estoppel by convention, on the ground that there was here a shared assumption, albeit one of law. I entirely accept that one can have an estoppel by convention arising from a shared assumption of law in appropriate circumstances. But here the shared assumption took the form simply of a mutual unawareness of the applicability of the Limitation Act. In that respect the case is similar to Hillingdon No.2, where this court gave careful consideration to the principles of estoppel by convention in such circumstances, and where it emphasised the need for the assumption to have been communicated between the parties: see paragraph 50. At paragraph 60, Arden J, giving the judgment of the court, stated:

“The evidence simply does not establish a shared assumption communicated one to the other that limitation was not a defence to be relied on as a basis on which negotiations proceeded post April 1988… Where parties are acting on the basis of some generally assumed view of the law, which turns out to be wrong, more is needed than simply an assumption as to the legal position if a party is to be estopped from taking a defence which he then discovers is available to him.”

One of the things identified as lacking was communication

“that the council would not take any defence that might be open to it on the basis of a statutory limitation period.”

That seems to me to be the factual position in the present case. It is why Bridgestart has to seek to construe the reference to the two year period for a claim in this letter of 14 December 1994 as a communication of a non-reliance on the statutory limitation period. But for the reasons given earlier, I cannot accept that the letter amounted to any such communication. I therefore reject any argument based on an estoppel by convention.

There was a stage in the argument when Mr Glover came close to suggesting that there was a non-statutory basis for the claim, because the method of assessing compensation proposed in the letter was not the normal approach to such an assessment . Thus the six year time limit would not apply. That is not an argument with any merit. The claim has always been presented as a statutory one, made under section 63. No contractual basis for a claim has ever been advanced, and estoppel is not capable of providing the basis for a cause of action – it is a shield, not a sword. What LUL was doing in the letter was setting out a different method of assessing compensation for the statutory claim. It remained a claim under the statutory provisions.

It is rarely attractive to find an acquiring authority relying on a limitation defence to a claim when that authority has been prepared to negotiate up to and beyond the statutory time-limit without making any reference to the defence. But in the present case there is no dispute that the authority, like the appellant, was unaware of that statutory time limit for most of the mentioned time. What is to be observed is that the existence of such a time-limit, under section 9 of the Limitation Act 1980, on references to the Lands Tribunal was established in June 1997 at High Court level and in April 1998 by this court in Hillingdon No.1. At those times there were still over two or three years remaining before the limitation period in this present case expired. It would have been a normal and sensible precaution for Bridgestart to have taken steps to have made a protective reference to the Lands Tribunal, to ensure that its cause of action was not statue-barred. It did not do so.

For my part, I conclude that the President of the Lands Tribunal was right in his decision on this preliminary issue. No estoppel by convention or equitable estoppel or waiver has been established. I would dismiss this appeal.

I agree

I also agree.