Sealed offers and the assessment of CPO Costs in the Upper Tribunal
The Upper Tribunal (Lands Chamber) has a general discretion to award costs when considering a claim for compensation for the compulsory purchase of land. Where a claimant is awarded compensation, the Tribunal will normally order the acquiring authority to pay the claimant’s costs. This is because those costs are part of the expense imposed on the claimant by the compulsory acquisition. The costs that may be awarded include legal costs and those of expert witnesses.
There are some exceptions to this rule, however. For example, the Tribunal has the power to make a wasted costs order against either parties’ legal representatives, or against either party or their legal representatives where they have acted unreasonably in bringing, defending or conducting the proceedings. The most commonly encountered exception is where the acquiring authority has made an offer to settle which is not beaten by the claimant.
Section 4 of the Land Compensation Act 1961 limits the Tribunal’s power to award costs to the claimant in two specific circumstances:
- where the acquiring authority has made an unconditional offer in writing as compensation to the claimant and the compensation awarded by the Tribunal doesn’t exceed that sum; and
- where a claimant does not give the acquiring authority sufficient particulars of its claim to enable the acquiring authority to make an offer to settle. This includes the exact nature of the claimant’s interest in the relevant land and details of the separate heads of claim, together with an explanation as to how each has been calculated.
In either of the above cases, unless there are special reasons why it should not, the Tribunal is required to order the claimant to bear their own costs and to pay the acquiring authority’s costs from either the date that the offer was made or the date that particulars of its claim should have been provided. Section 4 overrides the Tribunal’s general discretion as to the award of costs in these circumstances.
This means that it is in the claimant’s interests to define their claim as precisely and in as much detail as possible from the outset. If it does not, it is at risk of not being able to recover its costs for the period until sufficient particulars have been provided. It is also very much in an acquiring authority’s interests to make a realistic offer to settle the claim at the earliest possible stage in the proceedings. These are commonly called sealed offers. This will give the authority the best chance of securing costs protection for the maximum possible period, as well as encouraging the claimant to settle to avoid the risk of paying the authority’s costs in addition to its own.
As well as being unconditional and in writing, the Upper Tribunal’s Practice Directions also recommend that offers to settle should state how long they are open to acceptance, whether or not they include interest, atwhat rate and for what period, and whether or not they include agreement to pay the other party’s costs.
Unsurprisingly, the Tribunal and courts frequently hear arguments about the validity of sealed offers and the question of whether Section 4 is engaged. One such case is
In that case, London Borough of Hounslow has made an offer to settle Pro Investment’s claim on 10 March 2021. This was not accepted and was later withdrawn by the acquiring authority upon commencement of the final hearing on 12 April 2021. Although it stated that it was to settle Pro Investment’s claim, the offer excluded certain heads of compensation. This meant that, even if it had been accepted, the amount of compensation for the excluded heads of claim would still need to have been determined by the Tribunal.
Following the determination of the claim, the Tribunal had to consider the question of costs. London Borough of Hounslow sought the payment of its costs from 10 March 2021 on the basis that Section 4 applied to its offer. Pro Investments argued that Section 4 was not engaged, because the acquiring authority had not offered to settle the whole of the claim. The claimant submitted that this meant there was no “unconditional offer in writing of any sum as compensation” as required by Section 4. In response, the acquiring authority
contended that there was no requirement that an offer extend to all matters in dispute, and that its letter of 10 March was a perfectly good offer to settle under Section 4.
The Tribunal agreed with the acquiring authority that Section 4 was engaged. It considered that an acquiring authority is able to make an offer to settle in relation to only part of a claim and to rely on Section 4 in relation to the costs of that part. Further, it held that the reason that the acquiring authority had not been able to make an offer in relation to the remaining heads of claim was that they were insufficiently particularised and thus fell foul of the second limb of Section 4.
London Borough of Hounslow was therefore awarded its costs for the period from 11 March 2021 to the withdrawal of the offer on 12 April 2021. After that date, the Tribunal held that the fact that the offer was withdrawn constituted a “special reason” why Pro Investments should not have to pay the acquiring authority’s costs. Nevertheless, the Tribunal did not award Pro Investments its costs for this period, since it considered that the claimant could have avoided these by accepting the acquiring authority’s offer before 12 April.
This case illustrates the benefits to acquiring authorities of making sealed offers, as well as the dangers to claimants in not accepting them. However, it also shows the complexity that can arise around the application of Section 4. It is advisable for acquiring authorities to make sealed offers wherever possible and at an early stage in order to gain the greatest costs protection possible. Equally, claimants should consider any offer made very carefully to avoid their ability to recover costs from being limited by Section 4.
