UK Construction and Law

Equivalence carries costs as well as compensation: claimants in a Smethwick compulsory purchase reference get their costs on the indemnity basis

By Staff Writer  |  26 August 2026

The acquiring authority accepted it had to pay the claimants' costs but argued for the standard basis. The Upper Tribunal held that the principle of equivalence applies, that no special reason had been shown, and ordered 150,000 pounds on account within 28 days.

The land at Barclay Road in Smethwick was compulsorily acquired in 2014. In a decision handed down on 27 February 2026 the Tribunal assessed the compensation due to the claimants at 547,039 pounds. On 13 March 2026 they applied for their costs on the indemnity basis. The authority did not resist paying; it said the assessment should be on the standard basis, which would leave the claimants bearing whatever a costs judge treated as disproportionate even where it had been reasonably incurred.

What the argument was actually about

The dispute was whether the principle of equivalence, which is the rule that a claimant should be no worse off in money terms after a compulsory acquisition than before it, reaches the cost of establishing the compensation as well as the compensation itself. The authority pointed to the absence of any such statement in the current Practice Directions, and to a Court of Appeal decision in which indemnity costs were not awarded, to argue that there is no norm entitling a claimant to a full recovery. It also relied on an appeal about compensation claims where no land was taken, in which the Tribunal was reminded that an award on the indemnity basis is discretionary and generally requires something exceptional.

The Tribunal took a different route through the authorities. Adopting the reasoning approved in earlier Lands Chamber decisions, it held that the answer lies in the proposition that all items of a claimant's costs should be allowed in the absence of some special reason to the contrary, a special reason being an item unreasonable in amount or unreasonably incurred, with the burden of showing that resting on the acquiring authority. That approach was treated as aligned with the Court of Appeal's own analysis, which describes the expense of determining disputed compensation as part of the reasonable and necessary expense attributable to the taking of the land.

In my judgement the principle of equivalence should apply in this case, and the claimant should have his costs on the indemnity basis

Mark Higgin FRICS FIRRV, Upper Tribunal Member in the Lands Chamber

The distinction drawn with the no-land-taken appeal matters. Where nothing is acquired, equivalence is not engaged and the ordinary discretionary approach applies. Where land is taken, the starting point moves. The authority had identified no conduct by the claimants that led to an obvious and substantial escalation in costs, and offered no other special reason, so there was nothing to displace it. Having decided the point of principle, the Tribunal did not need to consider the second limb of the application, which was that the authority's own conduct of the litigation justified the same order.

The money, and the timetable

The costs are agreed to be the subject of a detailed assessment in the Senior Courts Costs Office. They are said to amount to 293,284 pounds inclusive of value added tax, against compensation of 547,039 pounds, which is itself worth pausing on: the cost of proving the claim ran to more than half the sum recovered.

On the interim payment the gap between the parties was wide. The claimants asked for a figure in the range 100,000 to 150,000 pounds. The authority proposed 30,000 pounds. The Tribunal awarded 150,000 pounds, payable within 28 days of the accompanying order, which is the top of the range sought and five times what was offered. That is a natural consequence of the basis of assessment: once every item is allowed unless the paying party can show it was unreasonable, the risk on a detailed assessment shifts, and an interim payment can safely be set much closer to the sum claimed.

For claimants and their advisers the reading is that a reference where land is taken should be costed on the footing that reasonable expenditure is recoverable in full, and that a payment on account should be sought at a level that reflects it. For acquiring authorities, resisting the basis of assessment without pointing to identified conduct or identified items is unlikely to be worth the attempt.