Compulsory purchase compensation

Vendor agreeing to sell property to claimant - property to be paid for in instalments - council making compulsory purchase order - claimant mortgaging property to bank - whether claimant having 'interest' in property and thereby entitled to compensation - lands tribunal finding against claimant - appeal allowedFarrell v First National Bank plc:Court of Appeal: Lords Justice Walker, Longmore, Carnwath:26 June 2001By a written agreement of 12 July 1985, S, agreed to sell a property to the claimant (F) for 10,000, to be paid with a deposit of 1,000 and by quarterly instalments of 550 over a period of four years, with a final payment of 750.In November 1988, the property was registered at the Land Registry in F's name, having been transferred by S in July 1988 for 9,500.

In July 1989, under section 290 of the Housing Act 1985, Sandwell Council made the Sandwell (Old Park Lane, Oldbury) (Clearances Areas) Compulsory Purchase Order 1988 (CPO) to which the property was subject.In April 1990, F made a legal charge over the property in favour of the appellant bank, in return for a loan.

In November 1990 the CPO was confirmed by the secretary of state.

Notice to treat was served upon F in February 1991 and he submitted a claim for compensation.

The council took possession of the property in July 1991.Although the provisions of the Housing Act 1985 had been repealed, they continued to apply to the property.

Under schedule 24 where, on the date when the clearance area was wholly or partly occupied as a private dwellinghouse and the person so occupying it was entitled to an interest in the house, a payment was to be made in respect of that interest.

This was to consist of its full compulsory purchase value, less the amount payable as site-value compensation.

It was agreed that the site value was 750 and that the full compulsory purchase value was 30,000.

It was also agreed that F was in occupation of the property throughout the two-year period ending in October 1988.

The issue was whether F had been entitled to an interest in the house.

The bank submitted that the agreement of July 1985, under which F was to purchase the house, had created an equitable interest that satisfied para 2(1)(b) of schedule 24.

It was submitted that there was no evidence that the agreement had been terminated at any stage prior to the transfer of the legal interest in 1988.The Lands Tribunal concluded that, although there was no evidence that F had defaulted on his payments, it seemed likely he might have defaulted in view of his almost total failure to make any repayments to the bank.

The tribunal concluded that the contract of July 1985 was invalid, as it had not been established that F had the necessary interest throughout the qualifying period to satisfy para 2(1)(b) of schedule 24.

The bank appealed.Held: The appeal was allowed.

The tribunal had erred both in acknowledging that F had defaulted on his payments to S and in then reaching its conclusion on the supposition that F might have defaulted in view of his almost total failure to make any loan repayments to the bank.The evidence relating to the mortgage payments occurred mostly during and after 1990.

The tribunal had attached too much weight to two letters that had been written in unexplained circumstances and had attached too little importance to: the fact that the claimant had been employed for six years; the agreement made in 1985; the 1989 transfer; and the fact that the property had been occupied, by F, throughout the period.

The appeal was allowed and remitted in order for the compensation award to be made.Julia Smith (instructed by Davis & Co, of High Wycombe) for the appellant; David Fletcher (instructed by the solicitor to Sandwell Metropolitan Council) for the defendants.