Indemnity costs should follow council's compulsory purchase defeat, rules tribunal

A local authority whose offer was well beaten in a compensation dispute over a compulsory purchase order has been ordered to pay indemnity costs.

The claimants in Samra & Anor v Sandwell Metropolitan Borough Council applied for the indemnity costs order after securing compensation of £547,000 for land compulsorily acquired in 2014. The landowners had made an offer to settle for £425,000 compensation and costs of £100,000. The council made a counteroffer of £250,000 plus £21,242 costs.

The Upper Tribunal (Lands Chamber) ruled that indemnity costs were payable without having to consider the council’s litigation behaviour.

The issue was contested on the basis that the tribunal’s practice direction says that in general terms costs are assessed only exceptionally on the indemnity basis. But that wording is not included in the part of the practice directions that deals with costs in compulsory purchase cases. The council said that if the tribunal had intended for indemnity costs to be included, the practice direction would have said so.

The claimants argued that in a case where property had been forcibly expropriated by the state, and litigation has been required to secure adequate compensation, the indemnity basis was appropriate. They said the indemnity approach existed in ‘all but name’ and was part of the principle of equivalence, which states that landowners should be put as closely as possible in the same position as if their land had not been acquired. This approach was established in National Roads Authority v Bodden, a Cayman Islands case heard in the Court of Appeal where judges ruled that all costs should be allowed, unless there was a special reason to the contrary.

There was a further argument over the council’s approach, which the claimants said was 'unreasonably obstructive’ and impeded the possibility of settlement. The council denied acting unreasonably and submitted it was rare that a refusal of an offer to settle led to indemnity costs.

Upper Tribunal member Mr Mark Higgin said the acquiring authority had not provided any reason, special or otherwise, to disapply the Court of Appeal’s rationale in Bodden and it had not identified any conduct by the claimant that caused an ‘obvious and substantial escalation’.

The costs of £293,284 will be subject to detailed assessment. The council was ordered to pay £150,000 on account within 28 days.