Compensation – Compulsory Purchase – Claims included in previous reference to Tribunal, settled by agreement – Whether extinguished by previous agreement – Exchange of letters, followed by sist (then withdrawal) of Tribunal application and by purchase of subjects by authority at a price – No discharge, or reference to full and final settlement, or reservation of claims

McKechnie v South Lanarkshire Council
9 June 2006

Certain business land and buildings were admittedly the subject of a deemed compulsory purchase following service and acceptance of a Blight Notice after a compulsory purchase order to facilitate a motorway extension had been made. In 2005, a reference was made to the Tribunal of claims for ‘total extinguishment of the business’ and ‘increase in value due to planning decision opposite’, this latter being based on a successful application by neighbouring proprietors for a Certificate of Appropriate Alternative Development. However, there had been a previous reference to the Tribunal in 1999. This had been the subject of a settlement agreement prior to a hearing. The applicants’ claim had been stated in that previous application at £350,000; the respondents had contended for £165,000; and the agreement involved the respondents purchasing the subjects for £225,000, discharging the hearing, sisting and subsequently withdrawing that reference and proceeding with the transaction for sale of the subjects. The settlement correspondence had not expressed either any discharge or any reservation of the claims. The applicants agreed that the claims included in the present reference had been included in the previous reference.

No issue was raised as to the competency, as such, of making a second reference, but the respondents contended that the claims included in the present reference had been extinguished by agreement. Parties were agreed that the Tribunal could decide this issue as a preliminary matter in the present reference, and the Tribunal was prepared to do so. The applicants’ position was that there had never been any discharge of the claims now brought and the previous agreement had simply been an agreement for the respondents to purchase the subjects.

Held, dismissing the reference, the issue was one of construction of the two letters in which the agreement in 2000 was embodied by ascertaining the meaning which the letters would convey to a reasonable person having the background knowledge reasonably available at the time, excluding the prior negotiations. Both as a matter of construction of the two letters, and also with the benefit of the admissible surrounding circumstances, the agreement was for the respondents to purchase the property at a price, in exchange for the applicants giving up their claims. Although the letters did not spell out discharge, they could not be read as simply an agreement for the purchase of the property. This was not simply a withdrawal of claims at the time: there was no reservation of them. The Tribunal made no findings on the negotiations. The admissible surrounding circumstances included the content of the claims included in the reference at the time, in order to identify the subject matter of the agreement. The actual figures, and the fact that the agreed figure exceeded that previously identified by the respondents, did not assist, but it was interesting that there had only been one figure involved. It appeared that the present claims were simply elements of compensation for the loss of the interest in the property. Looking at their nature, it was not at all surprising to find them simply being treated as parts of the claim for loss of the heritable property. The claim said to arise out of a planning permission granted to another property was not to be confused with the type of separate, later claim, introduced by Schedule 14 of the Planning and Compensation Act 1991, where the subjects’ value was subsequently increased by a new grant of planning permission. The Tribunal would not have been happy if the parties had agreed a partial settlement but advised the Tribunal that a full settlement had been reached, which was the basis on which the hearing had been discharged in 2000 and the reference sisted for implementation of the agreement. It was unfortunate that there was no narration of a discharge or of full and final settlement, but in the circumstances it was at least as pertinent that there had been no reservation of claims: the Tribunal had to construe the agreement as it found it.

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)

See full decision:  LTS/COMP/2005/05