McCarthy v Electricity Supply Board (Approved)

Factual and Procedural Background

The case concerns a claim for compensation by Plaintiff against Company A pursuant to statutory powers allowing Company A to place electric lines across private land under the Electricity (Supply) Act 1927 as amended by the Electricity (Supply) (Amendment) Act 1985. The Plaintiff submitted a claim for compensation following a wayleave notice served by Company A. The dispute proceeded to arbitration before a Property Arbitrator, who was nominated to assess compensation and associated costs. Company A made two written unconditional offers to the Plaintiff pursuant to Section 5(1) of the Acquisition of Land (Assessment of Compensation) Act 1919, which the Plaintiff did not accept. The Property Arbitrator referred a special case to the High Court on the legal question of whether the second letter of offer constituted a valid unconditional offer under the 1919 Act. The High Court judgment was delivered by Judge O’Moore on 16 July 2021.

Legal Issues Presented

1. Whether the letter dated 21 June 2017 from Company A constitutes a valid unconditional offer for the purposes of Section 5(1) of the Acquisition of Land (Assessment of Compensation) Act 1919.

Arguments of the Parties

Appellant's Arguments (Plaintiff)

• Only one unconditional offer can be valid under Section 5(1); thus, two offers made by Company A cannot both be unconditional.
• The letter of 21 June 2017 improperly separates compensation from pre-reference costs, creating ambiguity as to whether these costs are included in the offer.
• The letter does not provide for the taxation or assessment of pre-reference costs or the costs of the hearing, raising concerns about the Property Arbitrator's jurisdiction post-settlement.
• The term “reasonable costs” in relation to legal advice on the offer is vague and lacks a mechanism for dispute resolution.
• The letter’s wording excludes costs associated with the submission of the claim, suggesting Company A attempts to avoid paying these costs.
• Concerns were raised about the lack of certainty regarding the timing and acceptance of the offer, and the potential for the Plaintiff to incur costs after the offer was made without clear limits.

Respondent's Arguments (Company A)

• Section 5(1) does not preclude multiple unconditional offers; more than one offer can be made and remain open for acceptance.
• The offer letter complies with the statutory requirement by specifying a certain sum as compensation unconditionally and also includes unconditional offers to pay pre-reference costs, costs of reference, and reasonable costs for advice.
• The practice of assessing pre-reference costs after the award is consistent with statutory provisions and does not invalidate the unconditional offer.
• The Property Arbitrator retains jurisdiction to assess costs even after settlement of the main compensation claim.
• The term “reasonable costs” is well understood in legal cost adjudication, supported by the Legal Services Regulation Act 2015, and any disputes can be resolved by courts if necessary.
• The letter’s wording offers to pay all pre-reference costs as directed by the Property Arbitrator, including costs incidental to the claim’s preparation and submission.
• There is no statutory requirement for acceptance within a fixed time, and the offer does not impose ongoing obligations on Company A to pay costs incurred after receipt of the offer.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court began by reviewing the statutory framework governing compulsory acquisition of land and compensation, focusing on Section 5(1) of the Acquisition of Land (Assessment of Compensation) Act 1919. The Court noted that the provision allows the acquiring authority to make an unconditional written offer of compensation to the claimant, which, if not beaten at arbitration, may result in adverse cost consequences for the claimant.

The Court considered the Plaintiff’s argument that only one unconditional offer can be valid and found no statutory or logical basis to limit the acquiring authority to a single unconditional offer. The Court reasoned that multiple offers can be made, reflecting changing circumstances and valuations, and that the claimant can choose which offer to accept.

Regarding the inclusion of pre-reference costs and costs of reference in the offer, the Court noted that although these costs are often not quantified at the time of the offer and assessed later by the Property Arbitrator, the letter of 21 June 2017 clearly made unconditional offers to pay these costs “in addition” to the compensation sum. The Court rejected the Plaintiff’s interpretation that this created ambiguity, finding it clear that pre-reference costs were not a subset of the compensation sum but additional.

The Court addressed concerns about the Property Arbitrator’s jurisdiction to tax costs post-settlement, concluding that the Arbitrator’s jurisdiction remained intact to assess pre-reference and reference costs, which were included in the unconditional offer.

On the issue of “reasonable costs” for advice on the offer, the Court found that the concept of reasonableness is well-established in legal cost adjudication under the Legal Services Regulation Act 2015. Any disputes over the reasonableness of such costs could be resolved through the courts, and the statutory provisions did not require all cost matters to be conclusively settled in the offer letter.

The Court rejected the Plaintiff’s submission that the offer was conditional or ambiguous due to timing or the absence of a specified acceptance period. It emphasized that the statute does not prescribe a time limit for acceptance and that the acquiring authority is not obliged to pay ongoing costs incurred after the offer is received.

Ultimately, the Court found that the letter of 21 June 2017 satisfied the statutory requirements of an unconditional offer under Section 5(1) of the 1919 Act.

Holding and Implications

The Court answered the special case question in the affirmative, holding that the letter dated 21 June 2017 from Company A was a valid unconditional offer pursuant to Section 5(1) of the Acquisition of Land (Assessment of Compensation) Act 1919.

HOLDING: The letter constitutes a valid unconditional offer under the statute.

Implications of this decision are primarily procedural and affect the parties directly. The ruling confirms that multiple unconditional offers can be made by the acquiring authority and clarifies that offers including compensation sums plus costs can be valid. The decision does not establish new precedent beyond this interpretation but provides guidance on the construction of Section 5(1) offers and the treatment of related costs in compulsory acquisition compensation claims.