EWLands ACQ_156_2002 (8 October 2004)
LANDS TRIBUNAL ACT 1949
COMPENSATION – compulsory purchase – termination of short lease – Compulsory Purchase Act 1965 s.20(1) – disturbance – business dismantling old cars and storage and supply of spare parts – compensation awarded £26,520
IN THE MATTER of a NOTICE OF REFERENCE
FRED DAVID MYERS
SOUTH LAKELAND DISTRICT COUNCIL Acquiring
Re: Unit 35, Low Mill Tannery,
Before: P R Francis FRICS
Sitting at: Procession House, 55 Ludgate Hill, London, EC4M 7JW
on 19 and 20 May 2004
The following cases are referred to in this decision:
Bishopsgate Space Management Ltd and Teamworks Karting Ltd v London Underground Ltd  RVR 89
Director of Buildings and Lands v Shun Fung Ironworks Ltd  2 AC 111
Alan Evans, instructed by C M Brand, solicitor of Heswall, Cheshire, appeared for the claimant
Jonathan Powell, instructed by the solicitor to South Lakeland District Council, appeared for the acquiring authority
|i. Value of interest in subject premises||£5,000.00 (agreed)|
|ii. Just allowance to incoming tenant||£7,060.00|
|iii. Proprietor's time seeking alternative accommodation and supervising removals||£11,250.00|
|iv. Double overheads||£10,800.00|
|v. Loss on forced sale of 34 cars||£57,800.00|
|vi. Partial cost of adaptation at alternative premises||£8,750.00 (agreed)|
|vii. Removal costs (inc VAT)||£8,768.43 (agreed)|
|viii. Cost of re-cataloguing parts||£20,000.00|
A claim of £7,060 is also made for the cost of additional works to the alternative premises, if the claim under (ii) above is rejected.
7.1 Low Mill Tannery comprised a group of single and two storey industrial and workshop buildings, predominantly of brick and stone construction and of Victorian or earlier origin, on the site of a former cotton mill. It was a working tannery from 1887 until its closure in 1978, following which some of the buildings were demolished and others were let by the freeholder to motor repairers. The site lies about 2 miles to the south east of Ulverston town centre in otherwise predominantly agricultural surroundings.
7.2 The claimant occupied a two-storey building at the southern end of the old tannery. It was of brick construction with a reinforced concrete first floor and an asphalt covered flat roof. Mains water and drainage were connected as was electricity, which had been upgraded by Mr Myers to a 3-phase supply. The building, which was wind and watertight at the date of possession, had a gross internal area of 1,893 sq ft together with an immediately adjacent secure, fenced yard of about 540 sq yds.
7.3 Although Mr Myers had been in occupation of LM1 since the 1970s, he formally entered into a full repairing lease dated 17 March 1981which was for 5 years from 1 July 1980, thereafter from year-to-year determinable at the end of any year by 3 months notice in writing. At the valuation date, therefore, the lease could have been determined on 30 June 1996. The initial rent was £300 pa, and at the date of possession was £600 pa. It is agreed that the claimant is entitled to claim compensation under section 20(1) of the 1965 Act and the value of his unexpired term or interest is agreed at twice the rateable value - £5,000.
7.4 Low Mill Tannery and adjoining land was allocated for employment use in the Cartmel and Furness Local Plan, and its successor, the South Lakeland Local Plan 2006. The CPO, which was confirmed by the Secretary of State for the Environment on 8 May 1992, "provides for the purchase for the purpose of securing the development, redevelopment and improvement for industrial and other employment purposes" of approximately 5.6ha (13.83 acres). Notice to Treat was dated 1 May 1995 and Notice of Entry was served on 1 December 1995. Possession was taken on 30 January 1996, that being the valuation date for the purposes of assessing compensation and interest.
7.5 The claimant's stock, equipment and effects were removed by the council to Unit 5, Lightburn Industrial Estate, Ulverston, a modern light industrial 'starter' unit. 34 of the cars that had been located within the yard at LM1 were transported to a secure, locked compound at Old Station Yard, Ulverston (close, but not adjacent to Unit 5) pending suitable alternative premises from which Mr Myers could continue his business, being found.
7.6 Mr Myers acquired the freehold of LM2 in September 1996, and, in 1998, an additional area of land to the side. LM2 is a detached stone built two-storey building not dissimilar in size to LM1, but it was in need of substantial repair to make it wind, weathertight and secure. In addition to the value of the claimant's interest in LM1, a number of items of disturbance have been agreed including the cost of some of the works required to LM2, a valuation fee and the cost of removals from Unit 5, Lightburn Road to LM2.
(a) Causation: the loss must have been caused by the compulsory acquisition
(b) Remoteness: the loss must not be too remote
(c) Duty to mitigate: the claimant must act reasonably in seeking to mitigate his loss
Acquiring Authority's Case
"My proposal of the compound [Old Station Yard], which we subsequently visited at Lightburn Trading Estate is in an area out of view of the general public, and self-contained. There are no children in the vicinity, and the compound is adjacent to Unit 1, with its security system, and occupied by my full-time employer, System Technologies. It is very close to your tentatively proposed Unit 5 temporary relocation for my dry storage. If these can be progressed, and suitable terms offered, arrangements can be made to initiate removals."
However, by the time of the dispossession from LM1, negotiations appeared to have become more difficult. It was evident from the video transcript that Mr Myers was keen to oversee the removal of the stock from LM1, being aware of the potential difficulties in keeping it identifiable, but he made no efforts to control how it was being catalogued or bagged-up. It was also of note that, despite the alleged high value and rarity of the parts, there was no inventory or stock-list in place prior to the removal. The shelving and racks were also not labelled. By Mr Myers' own admission, he did not know how many parts he had, and in the council's submission, such a haphazard approach could only be construed as an unorthodox business practice. The council had prepared an inventory at its own expense, and should not now be criticised if the claimant found re-stocking at his new premises difficult. It was therefore unrealistic to expect the council to pay for re-organisation which the claimant, belatedly, assessed at £20,000, and once the re-organisation and new stock list had been prepared, the claimant would, of course, be in a better position than he was prior to dispossession.
"20(1) If any of the land subject to compulsory purchase is in the possession of a person having no greater interest in the land than as a tenant for a year or from year to year, and if that person is required to give up possession of any land so occupied by him before the expiration of his term or interest in the land, he shall be entitled to compensation for the value of his unexpired term or interest in the land, and for any just allowance which ought to be made to him by an incoming tenant, and for any loss or injury he may sustain."
"77. The effect of Rugby Joint Water Board and Minister of Transport v Pettitt is, in our judgment as follows. In valuing an interest in land that has been compulsorily acquired, where there is a tenancy of such land, the interest is to be valued on the basis that the tenancy could have been terminated on the earliest date possible under the tenancy, and any prospect that there might have been in the no-scheme world of the tenancy continuing is to be disregarded. This rule applies equally to the valuation of the landlord's interest and to the valuation of the tenant's interest, and it applies also where possession has been taken under section 20. In our judgment there is no reason in principle, when applying the rule, to distinguish between a periodic tenancy and a tenancy for a term of years subject to a break clause. As Lord Hodson put it in Rugby Joint Water Board in a passage we have quoted, the ability on the part of the landlord to give an effective notice to quit is an element in the value of the land and cannot be disregarded. That consideration applies both to the landlord's interest and to the tenant's interest."
"78. Since in our view these two authorities are so conclusive of the matter, it is strictly unnecessary for us to consider the other authorities that were relied on by counsel. We need, however, to consider whether, although no account may be taken of the prospect of the tenancy continuing in the no-scheme world, when determining the value of the unexpired term, some different rule may not be applicable when determining compensation for disturbance, whether under rule (6) or as "any loss or injury" under section 20. It is disturbance compensation, for the loss of profits that the claimants say they would have made if Bishopsgate Goods Yard had not been required for the East London Line Extension, that forms the principal subject of dispute in the present cases; and the claimants seek to rely on the basic principle that the entitlement to compensation consists in the right of a claimant "to be put, so far as money can do, in the same position as if his land had not been taken from him" (per Scott LJ in Horn v Sunderland Corporation  2 KB 26 at 41) or "to be compensated fairly and fully for …. losses fairly attributable to the taking of his land" (per Lord Nicholls of Birkenhead in Shun Fung  2 AC 111 at 125C).
"79. In Greenwoods Tyre Services Ltd v Manchester Corporation, on which, as we have said, Mr Barnes relied, this Tribunal (R C Walmsley FRICS) held that, where the assumption had to be made for the purpose of assessing the value of the unexpired term or interest under section 20 that the tenancy could be terminated within less than a year, the prospect of its continuation beyond that time could not be taken into account for the purpose of assessing "any loss or injury." In that case, at the time when the acquiring authority took possession, notice to quit served on that date would have expired ten and a half months later, and the Member held that this was the unexpired term that had to be valued. Counsel for the claimants, Mr Iain Glidewell QC, submitted that this determination of the length of the unexpired term did not limit the period to which regard could be had for the purpose of assessing compensation for loss or injury. He based his argument on the conclusion that the court in Pettitt had reached on the part of the claim that related to severance and injurious affection. His submissions are recorded in the decision as follows (at pp 250 to 251):
"Here was a company, said counsel, which was likely to continue in business indefinitely had the corporation not snuffed it out. The tribunal was entitled to look at the facts of the case; that the tenant company was the means by which the freeholder derived his livelihood, and of which the freeholder had complete control; that the only event likely to sever this relationship was a sale, by Mr Greenwood, of the company and all its assets; that the company had de facto sustained the same loss, and should therefore be entitled to the same compensation, as if they had been freeholders. A distinction was drawn in section 20, submitted Mr Glidewell, between the assessment of compensation for 'the 'unexpired term' on the one hand (where it was agreed the tribunal could do no more than look at the actual legal term to which the company was entitled), and compensation for 'any loss or injury' on the other hand (which was not restricted at all, and in respect of which the actualities of the case could be looked at). The case of Minister of Transport v Pettitt was authority for the proposition that an assumption underlying one part of a claim under section 20 or section 121 may be different from the assumption underlying another part."
80. The Member rejected these submissions. He said (at 255) that "A claim must be consistent within itself", and, having referred to Pettitt, he went on (at 256):
"What was decided in Pettitt's case, as I understand it, was that the assumptions underlying the assessment of compensation in respect of Lands Not Taken need not correspond with the assumptions underlying the assessment of compensation in respect of Lands Taken. In the present case however the whole of the compensation is in respect of Lands Taken, and the assumption which underlies the claim for 'any loss or injury' must in my opinion be the same assumption as underlies the claim for the 'unexpired term or interest,' namely (in the present case) the assumption of an unexpired term of ten-and-a-half months."
81. In our view, this decision was correct, and the Member was right in holding that Pettitt was no authority for the contention advanced in that case by the claimant. It is established on the highest authority that disturbance compensation is properly to be seen as part of the value of the land to the claimant, and it is in respect of this total value that he is entitled to compensation. In Hughes v Doncaster Metropolitan Borough Council  AC 382 Lord Bridge of Harwich said (at 392):
"Thus, although compensation in respect of the market value of land acquired and compensation for disturbance must in practice be separately assessed, the courts have consistently adhered to the principle, both before and after the present rules were first introduced by the Act of 1919, that the two elements are inseparable parts of a single whole in that together they make up 'the value of the land' to the owner, which, unless he retains other land depreciated by severance or injurious affection, was the only compensation which the 1845 code awarded to him."
82. Thus there is justification in principle for applying the same assumption as to the termination of the claimant's interest when assessing the market value of that interest and when assessing the additional value that the interest has for the claimant and for which is compensatable as disturbance or "any loss or injury". Pearl v London County Council, which was applied in Pettitt, is also authority on this point. That case concerned a claim for compensation under section 90 of the Metropolitan Paving Act 1817 where the claimant's kiosk in Charring Cross Station yard had been taken for widening the Strand. The section provided that a tenant at will or from year to year who was compelled under the provision "to quit before the expiration of his or her term" should receive compensation "for the loss or damage which he or she shall or may sustain thereby." The Court of Appeal held that the claim failed because the acquiring authority had not in fact exercised their powers under section 90. The case had been argued, however, on the basis that section 90 applied, and the court (Lord Evershed MR, Harman and Donovan LJJ) therefore went on in a reserved judgment to deal with the contentions advanced by the claimants on this basis. Lord Evershed MR, giving the judgment of the court said that the language of section 90 was strictly analogous to that of the Southampton Railway Act considered in R v London and Southampton Railway Co. That case was thus authority for the view that –
"…'expiration of his term' must be construed as referring to the earliest point of time at which the landlord could validly, according to the terms of the contract of tenancy, have terminated the tenancy from year to year."
83. The claimants had placed reliance on their prospect of obtaining a new tenancy under the Landlord and Tenant Act 1954. On this the court said (at 302):
"The effect of the relevant provisions of this Act is to give to a business tenant (such as are the appellants) the right, or at least the opportunity, if his existing tenancy were determined, to obtain by order of the court a new tenancy. But in our view the compensation for which section 90 of the Act of 1817 made provision is for the premature determination of an existing tenancy, and cannot extend fairly to cover injury suffered through the loss of a new tenancy or the opportunity of obtaining it."
84. The compensation provided for by section 90 was in respect of "the loss or damage" that the tenant might sustain from being required to give up possession before the expiration of his term. It was thus in terms that encompassed disturbance compensation, and it is indeed likely that the claim for compensation would have consisted principally of disturbance compensation. Whether or not that is the case, however, the judgment is authority for the proposition that compensation for "loss or damage" from the termination of a tenancy cannot reflect the possibility of the tenancy continuing, or a new tenancy being granted, after the earliest date on which, under its terms, the tenancy could have been terminated.
85. Under Teamworks' sub-tenancy agreement, their tenancy could have been determined on five months and two weeks notice, and on the date when, it is agreed, possession was taken, that period was the unexpired term for the purpose of assessing compensation under section 20, both for the value of the unexpired term and for any loss or damage. The BSM tenancy was terminable on six months notice, and it is in relation to this period, from 1 July 2002 when it is agreed possession is to be assumed to have been taken, that compensation is to be assessed. We think that Mr Barnes is right in saying that the power to terminate on six months notice makes this a section 20 claim, but in our view, as we have said, in practice compensation is to be assessed on the same basis whether the claim lies under section 20 or is in respect of the acquisition of the interest. Both the value of the interest and the claim for loss of profits are limited to the period ending with the date of termination."
"I am rather surprised to receive your fax basically setting out the terms of the offer you made by telephone to my secretary yesterday. I thought I had made it clear that things have now moved on from that situation.
You may recall our first conversation on this matter when your initial comments were "I think we are talking about total extinguishment". As you know David Myers and ourselves have been working very hard to find a suitable alternative property from which to operate his business but unfortunately we have run out of time. This is your time scale, not ours and your compulsory purchase, not ours.
It is therefore with great reluctance that we must accept your initial, and obviously wise, appraisal of the situation. We must accept total extinguishment.
I know that you now appreciate both the value and the extent of my client's stock in trade. Although we have an indication of the total value we will clearly need to work closely with you and your valuers to establish the total correct value….."
"We wish to place on record that our client has not refused to give up possession of the premises….he is prepared to hand over the keys to the property to SLDC on an agreed date.
….our client is therefore faced with no alternative but to hand over possession of the premises (and contents) to SLDC and accept full extinguishment of his business, subject to receipt from SLDC of satisfactory compensation."
That was followed, on 29 January, by a more comprehensive letter from Mrs Evans re-confirming the total extinguishment claim and that the keys would be handed over on an agreed date and setting out in detail specific comments on proposed heads of claim.
1. That the council has authority to take physical possession of these goods until such time as they receive instructions from your client.
2. That the council can obtain the keys at an agreed time on 30 January 1996.
3. Please provide details of any storage conditions required.
4. What access arrangements will be required by your client or his agents.
5. Does your client wish to be present when an inventory is taken.
6. What would your client like to be done with the goods.
7. As ownership of the goods will be retained by your client, will he continue to have insurance cover for the goods and what is the present value of his cover.
8. Please confirm that your client has rejected the premises at Lightburn Road as unsuitable.
"We understand that SLDC has now obtained the key to [LM1] from our client. Ownership and risk in the items stored at [LM1] have therefore passed to SLDC. Ownership has passed to SLDC on a permanent basis, and not as suggested in the penultimate paragraph of your fax on any sort of temporary basis."
"the only property which has been identified as being available and having adequate physical capacity to store our client's stock is Unit 5, Lightburn Road together with the Lightburn Road compound. However, the rents and rates payable…are so substantially in excess of the [LM1] rent/rates that our client cannot possibly afford to take on a lease of this property.
Your fax of 31 January sets out the proposed terms which constitute a temporary measure. These cannot be accepted by Mr Myers. If he were to accept your offer he would face the same problem in 12 months time as he does now – no alternative suitable premises – your offer does not therefore amount to relocation, merely deferral of the total extinguishment of his business.
….Please confirm that it is accepted that our client's compensation claim is for total extinguishment…"
"1. As you will be aware, the CPO for this land was confirmed on 30 April 1992….your client has therefore been on notice that this land was due for redevelopment for over 3 years and has therefore had a lengthy period of time in which to try to find alternative premises.
3. In the period between the notice being served and possession being required, Andrew Piell identified premises which were eminently suitable for Mr Myers at Unit 5 and an outside storage area, and Mr Myers himself accepted that these were appropriate. To assist Mr Myers, the council then offered to pay rent on both of these premises for a period of 9 months [subsequently corrected to 12 months].
4. Mr Myers rejected this very reasonable offer and would also not consider any other premises identified by Piell & Co….
12. In summary
(b) The premises at Lightburn Road are suitable alternative premises for Mr Myers and the council does not believe your client is justified in rejecting this offer.
(c) Your last minute request for extinguishment is being considered. However, it is Andrew Piell's understanding that Mr Myers does not actually trade, which is why [on that date] he has been unable to produce any accounts for the last 3 years. In these circumstances, if extinguishment is agreed, it will be on the basis that there will be no compensation for loss of profits or goodwill. Further, the council will not accept that it has forced Mr Myers to sell goods and equipment at short notice. Due to Mr Myers' unwillingness to leave the site the council has been forced to arrange his removal to Lightburn Trading Estate at considerable expense and it would therefore be the council's intention to leave all the stock and equipment at these premises for a period of one year. Your client would have the opportunity of selling these items privately during this period.
The council's offer to pay rent on Unit 5 and the outside storage area for a period of one year and to pay further removal expenses will remain open for a further period of 21 days to enable you to assess the offer….."
"5. In order to remove any uncertainty, SLDC do not consider that they have taken ownership of his stock. They are merely facilitating a move from one location to another to allow the demolition work to get under way and have had to be rather robust in approaching this particular problem, as your client was making no meaningful attempts to relocate, despite the CPO being confirmed on 30 April 1992. Mr clients will meet his reasonable costs in supervising that move and, indeed, have already indicated that in addition they will:
(i) Pay for the first removal to Lightburn Road
(ii) Allow him to trade from the Lightburn Road premises and site rent free for one year.
(iii) Pay for a subsequent move to his new premises.
I would suggest that this is not an unreasonable approach, but it does involve some co-operation from your client in order to show that he is trying to mitigate his loss."
|(i) Agreed value of interest in subject premises||£ 5,000.00|
|(ii) Just allowance to incoming tenant||£ 2,000.00|
|(iii) Proprietor's time in seeking alternative accommodation etc||£ 2,000.00|
|(iv) Double overheads||£ Nil|
|(v) Loss on sale of 28 cars||£ Nil|
|(vi) Cost of adaptation to alternative premises||£ 8,750.00|
|(vii) Agreed removal costs||£ 8,768.43|
|(viii) Re-cataloguing and sorting parts||£ Nil|
|Additional adaptation costs at LM2||£ Nil|
DATED 14 July 2004
(Signed) P R Francis FRICS
"47.-1 Where in pursuance of any enactment providing for the acquisition or taking possession of land compulsorily an acquiring authority-
(a) acquire the interest of the landlord in any land subject to a tenancy to which Part II of the Landlord and Tenant Act 1954 (security of tenure for business tenants) applies; or
(b) acquire the interest of the tenant in, or take possession of, any such land,
the right of the tenant to apply under the said Part II for the grant of a new tenancy shall be taken into account in assessing the compensation payable by the acquiring authority (whether to the landlord or to the tenant) in connection with the acquisition of the interest or the taking of possession of the land; and in assessing that compensation it shall be assumed that neither the acquiring authority nor any other authority possessing compulsory purchase powers have acquired or propose to acquire any interest in the land."
"(1) Where either –
(a) the acquiring authority have made an unconditional offer in writing of any sum as compensation to any claimant and the sum awarded by the Lands Tribunal to that claimant does not exceed the sum offered; or
(b) the Lands Tribunal is satisfied that a claimant has failed to deliver to the acquiring authority, in time to enable them to make a proper offer, a notice in writing of the amount claimed by him, containing the particulars mentioned in subsection (2) of this section;
the Lands Tribunal shall, unless for special reasons it thinks proper not to do so, order the claimant to bear his own costs and to pay the costs of the acquiring authority so far as they were incurred after the offer was made or, as the case may be, after the time when in the opinion of the Lands Tribunal the notice should have been delivered."
" As Lord Nicholls pointed out, in the passage from Director of Buildings v Shun Fung Limited to which Potter LJ has referred, a claimant whose land has been taken from him under compulsory powers is entitled to 'compensation for losses fairly attributable to the taking of his land'. In a case where the acquiring authority have made an unconditional offer of an amount of compensation which exceeds the amount subsequently awarded on a reference to the Lands Tribunal, it can be seen that (at least prima facie) the costs incurred by the claimant in pursuing the reference after the offer has been made are not fairly attributable to the taking of his land; those costs are attributable to the claimant's attempt to obtain more than the amount of the loss in respect of which he is entitled to compensation. That is the premise which underlies the provision in section 4(1)(a) of the Land Compensation Act 1961 which requires that, in such a case, the tribunal shall (in the absence of special reason) leave the claimant to bear his own costs of pursuing the reference after the offer has been made. But, where there has been no offer or where the amount of the award exceeds the amount of the offer, then (again, prima facie) 'the expenses of determining the amount of disputed compensation may be seen to be part of the reasonable and necessary expense which is attributable to the taking of the lands compulsorily by the acquiring authority', as the Lord President observed in Emslie & Simpson Limited v Aberdeen District Council  RVR 159, at p 164. In such a case the refusal to allow the claimant some part of his costs of the reference must be justified by a finding that the costs to be disallowed have not been incurred as part of the reasonable and necessary expense of pursuing the reference. As Potter LJ has put it, the tribunal must be able to identify circumstances 'in which the claimant's conduct of, or in relation to, the proceedings has led to an obvious and substantial escalation in the costs over and above those costs which it was reasonable for the claimant to incur in vindication of his right to compensation'. Costs attributable to conduct of that nature can form no part of 'the losses fairly attributed to the taking of his land' in respect of which the claimant is entitled to compensation.
43. It follows that the fact that a claimant has not been awarded as much as he was seeking by way of compensation – or that the award is nearer (even much nearer) to the amount that the acquiring authority had offered than to the amount sought – cannot, of itself, be a reason for depriving the claimant of his costs of the reference. But that does not lead to the conclusion that the claimant's conduct in exaggerating the claim can be of no relevance. The tribunal may be satisfied, in the particular case before it, that the fact that the claimant has exaggerated his claim has led to costs which were not reasonable for the claimant to incur in pursuit of the compensation to which he was entitled; or that it has been the pursuit of issues which it was not reasonable for the claimant to pursue that has led to the exaggeration of the claim. Where the tribunal makes an award of compensation which is well below the amount claimed, it is appropriate for it to consider, in the context of an award of costs, both whether the fact that the claim was exaggerated has led the claimant to incur costs which (given a more realistic evaluation of his claim) he would not have incurred and whether the explanation for the difference between the award and the amount claimed is that issues were pursued on which the claimant had no real chance of success."
Earlier, at para 36, Potter LJ had expressed himself in similar terms.
DATED 8 October 2004
(Signed) P R Francis FRICS