Lands Tribunal for Scotland

OPINION

Alan McKechnie
v
South Lanarkshire Council

Introduction and Summary

In this application for compensation for compulsory purchase, the respondents take a preliminary point based on the settlement of a previous application to the Tribunal. It is agreed that the previous application, which related to the same subjects, included, in addition to a claim in respect of the loss of the applicant’s interest in the subjects, claims which are the same as those brought in this application. The applicant contended that these claims had not been the subject of the previous settlement agreement. The respondents contended that that settlement agreement had been in respect of all the claims included in the previous application, so that the claims now brought had in fact been settled and were no longer due.

Upon consideration of the evidence and submissions on this matter, the Tribunal is of the opinion that the previous settlement was indeed in respect of all the claims then included in that application to the Tribunal, and accordingly that the respondents’ contentions are to be preferred and the present application must be dismissed.

Procedure

This is an application lodged on 9 August 2005 by D. Alan McKechnie for the determination by the Tribunal of disputed questions arising out of the compulsory purchase of subjects comprising business land and buildings at 65 Farmeloan Road, Rutherglen, Glasgow (“the subjects”). This was a ‘deemed’ compulsory purchase following service and acceptance of a ‘Blight Notice’ after the issue of a Compulsory Purchase Order in 1995.

The two grounds on which compensation is claimed are stated to be:-

“Payment for total extinguishment of business in Farmeloan road, Rutherglen 1972-2000” (under Section 43 of the Land Compensation (Scotland) Act 1973); and

“Increase in value of land due to planning decision opposite and possible requirement for access to retail site (C.A.A.D. C.K.D. Ltd)”

The second ground is a reference to an application by GKN Group Services Ltd for a Certificate of Appropriate Alternative Development in relation to subjects at 40 Farmeloan Road.

The applicant had referred a claim to the Tribunal in June 1999. A hearing of that claim had been assigned to take place on 25 April 2000. The claim made in these previous proceedings, both at the time of the application and in a Record which had been prepared in readiness for the hearing in April 2000, was stated as follows:-

“Compensation, property and business blighted by proposed motorway extension M74 –M8. Amount £360,000, claim form in file, page seven. Claim representing total extinguishment of interest in business. Any disturbance payment, income, loss and any future increase in value caused by any planning decisions. This would include control of five tenants and any income derived from them in the future. The Acquiring Authority would inherit business as a going concern.”

In April 2000, in advance of that hearing, parties entered into a settlement agreement. The hearing was discharged and that application initially sisted and thereafter, on implementation of that agreement, allowed, of consent, to be withdrawn.

Parties are agreed that the claims made in the present application were included in the claims made in the previous proceedings. The applicants, however, contend that the Tribunal could consider these claims again. The respondents contend that this is precluded by the April 2000 agreement.

In the present proceedings, the respondents initially submitted that the application should be sisted pending determination by the courts of the exact terms of the previous settlement agreement. However, prior to a hearing on this issue, parties agreed that the Tribunal could determine this matter. The Tribunal was prepared to proceed on this basis. No other issue as to the competency of making a second application in respect of the same claims was raised.

At the oral hearing before us, the applicant was represented by Miss Gillian Buchanan, Solicitor, of Messrs Thorntons, Dundee, who called the applicant as a witness. The respondents were represented by Ms Isobell Griffiths, Solicitor, of Messrs Biggart Baillie, Glasgow, who called Michael Hagan, ARICS, an estates surveyor with the respondents, as a witness. Certain productions were lodged.

Authorities referred to

McBryde, The Law of Contract in Scotland, 2nd Ed’n
Gatty v Maclaine 1921 1 S.L.T. 51
Capital Land Holdings Ltd v Secretary of State for Environment 1996 S.L.T. 1379 (Inner House)
Felix v Department of Social Security QB/2000/APP/0172 (Mr Justice Hunt)
Investors Compensation Schemes Limited v West Bromwich Building Society [1998] 1 W.L.R. 896 (House of Lords)
Ballast Plc v Laurieston Properties Limited (in Liquidation) and Others [2005] CSOH 16 (Lady Paton)

The Facts

The Tribunal has reached its decision on the basis of the following basic facts, which were not in dispute.

In April 2000, there were discussions and correspondence involving the applicant, the applicant’s then solicitor, Mr Hagan representing the respondents’ Estates Department, and the respondents’ legal office, regarding possible settlement of the Tribunal application which was due to be heard on its merits on 25 April 2000. The applicant’s claims were then stated in the Tribunal proceedings at £360,000. The respondents’ position was that the amount of compensation which should be awarded was £165,000.

On 14 April 2000, the applicant’s solicitor wrote to the respondent’s solicitor, under the heading, ‘Alan McKechnie v South Lanarkshire Council – Lands Tribunal Application’. The first paragraph of this letter was in the following terms:-

“We refer to the above and to your recent conversation with our Mr Sheridan. We write to confirm the terms of the agreement and would be obliged if you could confirm your acceptance of this in writing to us as soon as possible.”

The following four paragraphs set out the settlement terms, primarily that the respondents were to acquire the subjects for £225,000 and to make certain further payments of fees and expenses. The final paragraph was in the following terms:-

“With reference to the Tribunal we confirm that this has been sisted pending the implementation of the above settlement and we look forward to receiving your written confirmation of the above agreement as soon as possible in order that the conveyancing formalities may be commenced.”

On 18 April 2000 the respondents’ solicitor replied as follows:-

Alan McKechnie v South Lanarkshire Council

“I refer to your letter of 14 April 2000 concerning the above matter.

“I can confirm that Michael Hagan of the Council’s Estates Department has instructed me to confirm agreement for settlement of the Lands Tribunal case on the following basis…

“I shall now instruct my Conveyancing colleagues to contact yourselves in connection with the formalities involved therein.”

Conventional missives for the purchase of the subjects by the respondents from the applicant at a purchase price of £225,000 were exchanged in August 2000. Clause 19 of the respondents’ letter of offer dated 4 August 2000 provided for the further payments by the respondents which had been agreed in the April settlement. The transaction was duly implemented. Stamp duty was paid on the basis of a purchase price of £225,000.

The Tribunal application, having been initially sisted, was subsequently withdrawn by the applicant. There was no formal discharge of claims. The Tribunal was not asked to pronounce any formal order of dismissal or absolvitor. There was no reservation of any claims.

Submissions

For the respondents, Ms Griffiths submitted that the settlement agreement was contractual and to be found in the letters of 14 and 18 April 2000. This was in full and final settlement of the applicant’s claim before the Tribunal at the date when the agreement was reached. The settled claims had therefore been extinguished.

It was, Ms Griffiths submitted, trite that in determining the meaning and effect of the agreement, the whole terms together with the admissible surrounding circumstances had to be considered. On consideration of the whole terms, there could be no doubt that this was a settlement of the Lands Tribunal proceedings at the time. It was the objective intention which mattered. The agreement was clear and unambiguous. It was not open to the applicant to complain that it was unreasonable or operated harshly if it was not as he thought. Reference was made to McBryde at paras. 8-03, 04, 06, at pages 176-8; and to Capital Land Holdings Ltd v Secretary of State for the Environment.

As to the extent of admissible surrounding circumstances, these could include the events leading up to the agreement, except prior negotiations, and the circumstances known to the parties. Here, these included the applicant’s original claim and the respondents’ position in defence. The respondents had assessed compensation at £165,000, so the figure of £225,000 could be seen as not simply compensation for the value of the land. Parties’ knowledge as to what was being settled was admissible. Another admissible factor was the fact that an earlier hearing had been postponed for settlement discussions to take place. Reference was made to McBryde at 8-08, page 179; Investors Compensation Schemes Limited v West Bromwich Building Society, per, Lord Hoffmann at page 912H; and Ballast Plc v Laurieston Properties Limited, Etc. at para. 142. The plain meaning was that, in settlement of the Lands Tribunal application, the respondents would purchase the subjects. Subsequent events were inadmissible – Ballast at para. 158. Thus the terms of the subsequent missives were irrelevant. Even if this was wrong, however, they were entirely consistent with the respondents’ construction of the letters of 14 and 18 April, and were simply implementing that agreement. There was also the fact that the applicant withdrew the previous application. If matters contained in it remained outstanding, he would have proceeded with it.

For the applicant, Miss Buchanan accepted that the agreement was constituted by the exchange of letters and that the letters were critical. All that the letters contained was an agreement to sell and purchase the subjects. Miss Buchanan took issue with the suggestion that the letters could not have been clearer: they did not include any discharge of the claims. It would have been in the interests of the respondents, if the claims were to be extinguished, to provide for that. Reference was made to Felix v Department of Social Security. All negotiations (of which the evidence had only covered a small proportion) were irrelevant in construing the agreement. The contents of the application were only relevant to show how the claim had commenced, not how it had been concluded. The council had offered to purchase the subjects, and that was what the contract amounted to.

Tribunal’s Consideration

The respondents’ contention that this application must be dismissed is based solely on their argument as to the construction of the previous settlement agreement, which they maintained was an agreement which amounted to a discharge of the present claims. Parties are agreed this is a question of construction of the two letters dated 14 and 18 April 2000. They appear also to be in agreement as to the correct legal approach to such issues of construction. The principles were conveniently summarised by Lady Paton in Ballast Plc v Laurieston Properties Limited. We have to ascertain the meaning which the letters would convey to a reasonable person having all the reasonably available background knowledge, excluding prior negotiations; our enquiry is into what the words used meant, not what the parties meant by the words they used or, of course, what they wished; the inquiry will start and usually finish by asking what the ordinary meaning of the words used is; and the relevant factual context is only what was known or ought reasonably to have been known to both parties at the time.

In the Tribunal’s opinion, both as a matter of construction of the two letters which both sides are agreed contain the agreement, and construing with the benefit of admissible surrounding circumstances, this was an agreement that the respondents would purchase the applicant’s property at a particular price in exchange for the applicant’s giving up the claims which he had made to the Tribunal.

Looking simply to the terms of the letters themselves, we agree that they do not spell out discharge of all the claims or that the agreement is in full and final settlement of these. However, it is clear from the references to the Tribunal proceedings that this cannot be seen simply as an agreement by the respondents to purchase the applicant’s property. The applicant was giving up not just his property but the claims he had been advancing to the Tribunal. Nor can we accept the applicant’s position that this was merely, as it were, a withdrawal of the claims at the time, leaving them open to be pursued on another occasion. We do not consider such a construction to be objectively sustainable. The absence, not only of any reservation of the claims, but of any suggestion at all in the letters as to how they were to be dealt with if the payment of £225,000 was not in settlement of these claims as well as for the loss of the property itself, combined with the parties’ clear understanding that the settlement would bring the Tribunal litigation of these claims to an end, seems to us to admit of only one sensible construction, viz. that these claims were being discharged.

In so far as we have required to refer to circumstances surrounding the making of the agreement, it seems to us that all we really need to look at is the content of the claims which the applicant agreed to withdraw. This is perhaps necessary in order to identify the subject matter of the agreement. From the agreement itself, we can identify that it involved the claims contained in the Tribunal application at the time of the agreement (rather than in the original application, although in fact there had not apparently been any change in these). Extraneous evidence is required in order to see what these were, although there may, for the purpose of resolving the present dispute, be sufficient agreement between the parties to the effect that, whatever they were, they included the same claims as it is now attempted to pursue. Miss Buchanan suggested that the contents of the application were only relevant to show how the claim commenced, not how it concluded, but the agreement itself tells us how the claim was concluded: all that is being done in looking outside the agreement is identifying what the claim was which was being concluded, not how it was concluded.

Ms Griffiths relied on the fact that the respondents had, in answer to the application, placed a figure of £165,000 on the claim. The applicant, however, would say that he had put it at £360,000, and it seems to us to be of little assistance to know at what figures the parties had pitched their positions. The valuation behind the figure of £165,000 was not an agreed valuation, so does not assist in showing what claim or claims the parties agreed to settle.

What we find more interesting is that the parties had each identified only one figure. The argument before us did not touch at all on the nature of the claims, but it does seem to us that the applicant’s present claims may in any event simply be elements of his entitlement to compensation for the loss of his interest in his property. The particular provision in Section 43 of the 1973 Act on which the applicant seeks to base the first of the present two claims is a special provision where persons over the age of 60 are required to give up possession of land on which they have carried on a trade or business. That section provides that if certain conditions are satisfied:-

“…the compensation payable to that person in respect of the compulsory acquisition of his interest in the land … shall, so far as attributable to disturbance, be assessed on the assumption that it is not reasonably practicable for that person to carry on the trade or business … elsewhere than on that land.”

In other words, the disturbance payment, which may be seen as an element in the compensation for loss of the interest in the property, is, if the particular conditions are satisfied, to be based on total extinguishment of the business. In the case of a property owning business, it must at the very least be doubtful whether there is any excess value to be compensated, i.e. whether anyone would pay anything in excess of the market value to acquire the land which would put him in possession of the business whose income consists of the rents. It is not at all surprising to find this claim being treated simply as a part of the claim for loss of the heritable property. In a case in which the blight notice procedure had been followed, it would then be reflected, if at all, in the purchase price in a transaction which in such a case is a convenient way of finalising the claim for compensation.

Again, the possibility of future development of nearby subjects increasing the value of the subject land, either by demonstrating an alternative use or by creating some form of ransom situation, could only have the effect of increasing the value of the subject land the loss of which was to be compensated. So again one would expect to find such claims considered as part of the claim for loss of the interest. Incidentally, the provisions introduced by Schedule 14 of the Planning and Compensation Act 1991, on which the applicant appears to rely, relate to some subsequent different and more valuable development of the subjects themselves following compulsory acquisition. These provisions do indeed create a new and additional element of compensation, recoverable in certain circumstances after a normal compensation claim has been settled, but the applicant accepts that this second element of the present application is one which was included in the previous one.

We heard quite a lot of evidence, led without objection, from the applicant and Mr Hagan, about the negotiations which led to the settlement in 2000. We have not made findings about this, and would simply note that we did not find in this evidence any further information about the background which we could properly use to assist us in construing the agreement. One matter to which Ms Griffiths did draw attention was the fact that prior to the agreement there had been an earlier hearing diet which had been discharged to allow parties to endeavour to reach a settlement. No doubt this could be admissible but we did not consider that it pointed in either direction.

We agree with Ms Griffiths that the subsequent missives are inadmissible but also that they are in any event entirely consistent: the fact that the agreement involved a sale of the subjects does not mean that that was all that was involved. Payment of stamp duty on the whole price would also be consistent, as it would be difficult to establish that there was any severable item of the settlement which had any value.

We would add that this Tribunal would not be happy with a situation in which parties could, prior to a hearing on the merits of an application, agree a partial settlement but advise the Tribunal that a settlement of the case had been reached. There may be cases in which there is procedural agreement or direction to deal with claims contained in an application separately, but that was not the situation here. In this case, if the agreement had related to only one separable part of the claim, the hearing should have proceeded in relation to the remaining parts. We are clear that there was no such agreement.

We agree that it is unfortunate that the settlement agreement reached in 2000 did not narrate that it was in full and final settlement of all the applicant’s claims arising out of this compulsory purchase. Equally, the applicant did not reserve the claims now being pursued again. In Felix, Mr Justice Hunt said:-

“It does behove those drafting such settlements as this … to take care that where it is intended to resolve all claims between an employer and employee that exist, or may exist, it would be better to spell out within such agreements whether it is intended to include all personal injury claims which the employee has or may have, so that such litigation as this may be avoided.”

We agree, but having examined the agreement in issue in this case in its context, we think it at least as pertinent to comment on the lack of reservation of claims which (unlike those in Felix) were included in the litigation which was being settled. In any event, these observations came after the learned judge had construed the settlement agreement there in issue and decided the matter. We have had to construe the agreement in this case, and having done so consider that it did not leave these claims open.

Decision

For these reasons, we prefer the respondents’ submissions and we dismiss the application. As regards expenses, parties were agreed that in the event of dismissal of the application, the respondents would be entitled to expenses. The Tribunal has so ordered.