England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
Mr N.J. Rose FRICS
[2011] UKUT 437 (LC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		11/07/2013

Lord Justice Rimer :

Introduction

1. This appeal, by Lancaster City Council ('the Council'), is against a decision of the Upper Tribunal (Lands Chamber, Mr N.J. Rose FRICS) dated 4 September 2012. The decision was on a reference made on 16 September 2008 (originally to the Lands Tribunal) by Thomas Newall Limited ('TNL', the respondent) as to the compensation payable by the Council, the acquiring authority, for the Council's compulsory acquisition of TNL's freehold interest in a former mill known as St George's Works, St George's Quay, Lancaster. The land was part of an area known as Luneside East which the Council intended to be the subject of a comprehensive redevelopment project.
2. The compensation due was that identified by clause 15 of an agreement dated 16 February 2006, which entitled TNL to:

'any compensation which would be payable to TNL as a result of any acquisition pursuant to the CPO including but not limited to any payments under the Compulsory Purchase Act 1965, the Land Compensation Acts 1961 and 1973 and the Planning and Compulsory Purchase Act 2004.'

The agreed valuation date was 1 August 2006, which was taken as the date when the acquired interest vested in the Council.

3. The tribunal valued TNL's freehold interest at £1,752,000, as to which there is no issue. What remain in controversy are two elements of the tribunal's award to TNL of compensation for its disturbance loss suffered in consequence of the acquisition, which brought the total award to £2,045,043.93. One element is an award of £17,985 in respect of 'management time'; the other, an award of £72,620 in respect of 'loss of rent', which the Council asserts was, in three respects, unjustifiably excessive. The total amount in dispute represents a tiny percentage of the total award and one might ask why the Council regarded a battle over them in the Court of Appeal as a game worth the potentially expensive costs candle. Part of the answer is that if the Council is successful to a material extent, it will be entitled to ask the court to remit to the tribunal for re-determination its decision that the Council should pay TNL's costs of the reference, which Mr Roots QC, for the Council, accepted was a significant consideration. He also told us, however, that it was not the Council's sole motivation for the appeal, the public money at stake being regarded as anyway sufficient to justify it. Permission to appeal on both points was given by the tribunal.

St George's Works

4. The land has an area of some 1.73 acres. There are several buildings on it, and the tribunal described buildings 1, 4, 5, 6, 7 and 12 as at the valuation date. Building 1 was constructed in about the 1870s and was derelict. Building 4, constructed in about the 1840s, had four floors, with about half the ground floor containing cellular office accommodation, with mezzanine offices above. Buildings 5 and 6, constructed in the 1840s and 1850s respectively, were also composed of four floors. The ground floor was made up of a variety of types of accommodation, including offices, studios, a trade counter, workshops, showroom and storage. On the first floor, there was office and showroom accommodation, with some storage; on the second floor, there were open plan offices, a gymnasium and artists' studios; and on the third floor, workshop and storage accommodation. These two buildings accounted for about two-thirds of the total floor area of all the buildings. Building 7 was a single storey building constructed in the 1850s. Building 12, divided into two units 12 and 12A, was also a single storey building, constructed in about the 1950s. Unit 12 had a toilet and kitchen with mezzanine offices above, and unit 12A had an office and a toilet with mezzanine storage above.
5. The tribunal found that at the valuation date 31,105 sq ft of the buildings' total net internal area of 67,378 sq ft were occupied, all such occupation being in buildings 5, 6 and 12. TNL occupied 916 sq ft in building 6; and 4,973 sq ft in building 5 was occupied by a relative of Stephen Loxam, TNL's managing director. The tribunal said in paragraph 26:

'Very little formal lease documentation has been produced. Some units were occupied on informal agreements, others on formal leases which had expired, the tenants holding over. Most tenants were protected by the provisions of Part II of the Landlord and Tenant Act 1954. In general tenants were responsible for rates and internal repairs, and [TNL] was responsible for repairs to the exterior and common parts. Some tenancy agreements entitled the landlord to demand a service charge for certain services including heating, water, electricity, security alarm, insurance and decoration of common areas'.

A. The 'management time' award

6. This is the first issue. The tribunal dealt with it in paragraphs 136 to 140. It recorded that TNL's business consisted almost entirely of managing St George's Works, which had been sub-divided into many units; and Mr Loxam's evidence, in paragraph 26.1 of his witness statement of 13 May 2011, was that TNL derived 99% of its income from the Works.
7. TNL's amended claim under this head was for compensation of £21,281 for time spent on dealing with the consequences of the Council's proposal to acquire the land compulsorily. That figure represented 327.4 hours, at £65 an hour, of the time spent by five TNL directors (all members of the Loxam family), between 21 June 2006 (when TNL was notified of the confirmation of the compulsory purchase) and 20 June 2008, the date of the reference to the Lands Tribunal. Stephen Loxam accounted for the majority of the hours so spent.
8. The tribunal related, in paragraph 138, that the Council's case in opposition to the claim was that a claim for management time must be supported by evidence not simply of time spent by particular individuals, but of how that time translated into something that could be reasonably be regarded as loss suffered by the claimant, in this case TNL, a company. There was no dispute that Mr Loxam and his co-directors had spent the time claimed but it was said that there was no evidence of expenditure by TNL on management time generally; and no evidence that any overtime or other unusual amounts had been paid to any of the directors in respect of such time. The Council accepted that in order to show loss, it is not necessary to show financial expenditure, but it asserted that it is likely in most cases to be difficult to prove loss without showing how the time spent had manifested itself in the claimant company's accounts. It was said that there was no evidence that the totality of time spent over the relevant period was significantly more than the time the directors would have spent carrying out management tasks in the absence of the CPO.
9. The counter-argument before the tribunal, advanced by Mr Denyer Green, was that as the Council had accepted that the claimed loss need not be measured by reference to actual expenditure and had not disputed that the time claimed was spent by the Loxam directors on events caused by the proposed acquisition, the relevant 'loss' was the loss of such time to TNL. TNL was a family company, which could only act through its human agents, and the relevant agent was Mr Loxam, the active director. The reported cases showed that if the claimant is an individual who spends time dealing with the acquisition, he will be compensated for his time so spent and, therefore, lost. It was said that there was no difference in a case in which the claimant is a company that acts through an individual who spends like time dealing with the acquisition.
10. The tribunal accepted TNL's arguments. It said, in paragraph 140:

'… TNL's business consisted almost entirely of managing St George's works, which had been sub-divided into many units and was clearly a management intensive investment. In my judgment, if Mr Loxam had not spent over 300 hours dealing with the consequences of the CPO, the profitability of TNL's investment would have been higher and it would be unjust to deprive it of compensation for the profit foregone in this way. Mr Asher [TNL's valuer] said that the suggested hourly rate of £65 was significantly below the rates charged by all [TNL's] professional advisers. He added that he believed it represented a fair rate "based on similar cases". I was not given information about those cases and Mr Massie [the Council's valuer] did not suggest an hourly rate. In what is necessarily a subjective judgment, I determine compensation for management time based on £55 per hour, namely £17,985.00'.

Discussion

11. There is no dispute that TNL was in principle entitled to recover by way of compensation not just the market value of its land but also compensation for any 'disturbance loss' suffered in consequence of the compulsory acquisition. The latter right was originally established by judicial decision and is now expressly recognised by rule (6) in section 5 of the Land Compensation Act 1961. The function of any such award is to put the claimant, so far as money can do it, in the position it would have been in if there had been no compulsory purchase. The basis of the claim is analogous to a common law claim for loss suffered in consequence of a tort. There must therefore be a causal connection between the acquisition and the claimed loss; the loss must not be too remote; and the compensation will not extend to loss that a reasonable person could, by taking appropriate steps, have eliminated or reduced: see Director of Buildings and Lands v. Shun Fung Ironworks Ltd [1995] 2 AC 111, at 126A, per Lord Nicholls of Birkenhead. Any such claim must be made good by evidence. Mr Roots' submission is that there was no evidence proving that the 'management time' upon which reliance was placed had caused TNL any loss.
12. The state of the evidence was as follows. Its main element was an undisputed schedule of the 'management time' spent by TNL's five directors. The schedule identified the date on which each director did any acquisition-related work; its nature (whether, for example, it was an email, a telephone call, a letter or a meeting); a three or four word description of the work done (many simply read 'Transfer St Georges Works'); and the time spent in minutes. Most of the scheduled time was that of Stephen Loxam, but a small proportion was that of four other Loxam directors.
13. Importantly, there was no evidence as to whether any of such directors had a contract of service with TNL; or how any of them was rewarded by TNL for the services he rendered to it, that is whether by way of salary or fees; or whether any return the directors received from TNL was simply by way of the receipt of dividends payable to them as shareholders. There was no evidence of what, if any, payments were in fact made to them by TNL. If any of the directors had assumed any obligation to TNL to perform what might be regarded as normal duties, there was no evidence of what such duties were, or what amount of time such director was expected to, or did, devote to them. Beyond an assertion to such effect by TNL's expert valuer, there was no evidence that the directors' scheduled time spent on dealing with the acquisition could or would otherwise have been spent on profitable activities for TNL; and TNL put no accounts in evidence. Moreover, since TNL's business was almost entirely concerned with the management of its lettings of St George's Works, with some 99% of its income deriving from such lettings, if any loss was occasioned by the diversion of its directors' efforts to other things, so resulting in a loss of rent, any such loss was in part the subject of TNL's separate, successful claim for disturbance loss in the way of 'lost rent' and TNL's evidence did not attempt to show how the 'management time' claim was not one for at least part of the same loss.
14. Oral evidence relating to the 'management time' claim was given by Mr Asher, TNL's expert valuer, and by Stephen Loxam. We have no transcript of their evidence, but we do have an agreed note of the relevant questions and answers. Mr Roots put to Mr Asher that the mere proof of the spending of management time did not prove loss, to which Mr Asher's response was that such time distracted the directors from their normal activities, namely managing the properties on the land, and so TNL thus suffered a consequential loss. He accepted, however, that there was no evidence of any financial loss, no evidence of how the directors were remunerated, and no evidence that anyone was paid anything by TNL for extra tasks undertaken in consequence of the acquisition. Importantly, the £65 per hour figure at which the directors' time was costed was not TNL's figure, but Mr Asher's, which he said was significantly less than what TNL's professional advisers were charging. He said that such a rate had been awarded in similar cases. When, however, Mr Roots asked him to identify them, he could not. The Tribunal decided that a fair rate was £55 per hour.
15. Mr Loxam said in cross-examination that he had given the original version of his 'management time' schedule to Mr Asher, who decided what part of it could be claimed as loss. That had resulted in the reduction of the original claim based on 585 hours to that set out in a revised schedule. Mr Roots put to Mr Loxam that TNL had proved no loss, to which his reply was that he was not qualified to answer that. Since he was apparently the moving spirit behind TNL, he might have been expected to be able to make a stab at identifying what loss he claimed the 327 hours of management time had caused it, yet he could not. If he could not explain what loss TNL had suffered, one might ask how the Tribunal was supposed to be able to identify it.
16. Turning to the law, we were referred to several reported cases dealing with disturbance loss and like claims. The claimant in Pettitt v. Ministry of Transport (1968) P & CR 112 was the yearly tenant of a farm, who sought compensation for the compulsory purchase of seven acres of his farmland. The land had been acquired for the purpose of building a motorway and the acquisition resulted in the severance of his farm into three parts instead of two as formerly. Whilst the motorway was being built, the claimant, a sole trader, personally worked harder and longer on the farm (an extra hour a day) in order to offset the inconvenience, but he did not employ any additional labour or pay any additional overtime. He claimed compensation for 'loss or injury' (the phrase in section 20(1) of the Compulsory Purchase Act 1965) for such disturbance, and valued his claim by reference to the cost of his own time, which he put at 15 shillings an hour over 23 months. The tribunal regarded the 15 shillings as 'an indication of the extra time and effort required to keep the farm going, and which might have been devoted to other work' (see 120); and although it did not adopt the 15 shilling figure 'as a yardstick', it had regard to it in fixing the compensation for disturbance loss under this head at £250.
17. The Minister appealed to the Court of Appeal against the award, including the £250 element: Minister of Transport v. Pettitt (1969) 20 P & CR 344. Lord Denning MR, at 351, recorded that the tribunal had found that the working of the farm 'was very seriously disrupted' by the motorway works. The Minister's challenge to the £250 award was that only financial loss was recoverable. The farm was a one-man farm and the claimant had admittedly been put to great inconvenience and much extra work. He had not, however, had to employ any additional labour or pay any overtime and the Minister's position was that he had therefore suffered no financial loss. Lord Denning rejected that submission, holding that 'loss or injury' included inconvenience and upset as well as financial loss or injury. Russell LJ agreed, saying (at 355, 356) that the words 'loss and injury' were 'wide enough to cover the injury of having to work overtime in order to maintain the same results on the farm rather than working no harder and thereby allowing the profitability of the farm to decline'. Winn LJ also agreed, saying at 361 that:

'… if payment of extra wages to another man would have entitled the claimant to recover the amount of such wages, he is no less clearly entitled to be paid the value of his own extra time and effort which he could otherwise have devoted to other work; incidentally the item covers extra wear and tear on tractors and other plant.'

18. Pettitt's case provides no assistance to TNL. The claimant in Pettitt was not a company, but an individual carrying on business as a sole trader; and he proved that the disturbance from the acquisition had required him to work extra hours in order to maintain the level of profitability of his farm business. It is obvious that he therefore proved the suffering of loss. As to its quantification, the tribunal regarded his 15 shillings per hour valuation of his time as at least some indication of the cost that the acquisition imposed upon him and had regard to it in arriving at its award of £250.
19. The present case is, however, in no way a parallel one. TNL is a company, not an individual and, without more, proof of the time spent by the five Loxam directors in dealing with the acquisition tells us nothing of the impact of their efforts, if any, upon TNL. If the evidence had been (a) that the 327 hours worked by the directors were by way of overtime over and above the time they were normally expected to and did devote to their duties to TNL, and (b) that TNL paid them for such overtime, with a consequential direct effect on its profit, the case might be said to have a relevant similarity to Pettitt's case. The evidence, however, failed to prove this. If the directors were rendering such additional 327 hours of time gratuitously (as Mr King QC, for TNL, accepted was a possibility, the evidence not proving otherwise), TNL would, on the face of it, have suffered no loss in consequence of their time so spent.
20. Aerospace Publishing Ltd and Another v. Thames Water Utilities Ltd [2007] EWCA Civ 3 was not a 'disturbance loss' case in a compulsory acquisition context but raised a similar question. It was an appeal to this court as to the quantum of damages to be awarded to Aerospace for its loss suffered in consequence of a flood to its premises caused by a burst water pipe, the defendant being strictly liable under the Water Industry Act 1991 for loss and damage so occasioned. Wilson LJ, as he then was, in a judgment with which Longmore and Pill LJJ agreed, dealt with the recoverability by Aerospace of damages in respect of payments paid to staff for salvage work done in relation to and consequent upon the flood. Aerospace's case was not that, but for the flood, it would not anyway have had to pay its employees; it was that the consequence of the flood was that the employees were diverted away from their conventional activities which would have generated revenue for Aerospace. The case for Thames Water was that any such loss of revenue had to be strictly proved, and that such loss could not be inferred merely from the employees' diversion from revenue-generating activities.
21. After reviewing the authorities, Wilson LJ said:

'86. I consider that the authorities establish the following propositions:

(a) The fact and, if so, the extent of the diversion of staff time have to be properly established and, if in that regard evidence which it would have been reasonable for the claimant to adduce is not adduced, he is at risk of a finding that they have not been established.

(b) The claimant also has to establish that the diversion caused significant disruption to its business.

(c) Even though it may well be that strictly the claim should be cast in terms of a loss of revenue attributable to the diversion of staff time, nevertheless in the ordinary case, and unless the defendant can establish the contrary, it is reasonable for the court to infer from the disruption that, had their time not been thus diverted, staff would have applied it to activities which would, directly or indirectly, have generated revenue for the claimant in an amount at least equal to the costs of employing them during that time.

87. In that in the present case the diversion of the time of a significant number of the claimant's employees, particularly their senior employees, was set out in detail and adequately established, and in that there could be no sensible challenge to a conclusion that their business was thereby disrupted, indeed substantially so, I consider that the judge was entitled to draw the inference that the employees had been diverted from revenue-generating activities; and accordingly I see no error in his allowance within the damages for the costs of the employees referable to the diversion.'

22. That shows that in an appropriate case the cost of employing staff to deal with the disruptive consequences of an injury to the operation of a business may be regarded as a proxy for the loss suffered by the business. Such principle, however, also affords no assistance to TNL, since there was no evidence of the cost to TNL of the services rendered to it by the Loxam directors. If, for example, Mr Loxam had been engaged as an employee under a contract for service at a salary, there might have been a basis for an inference that a proportionate part of his salary representing his time devoted to the acquisition could be regarded as a proxy for the loss to TNL's business. There was no such evidence.
23. Willowtech Limited v. Neath Port Talbot County Borough Council [2010] UKUT 44 (LC), a decision of Upper Tribunal Judge Mr A.J. Trott FRICS, was a compulsory acquisition case in which a claim was made for disturbance loss for management time incurred. The only substantive evidence in support was from Mr Thomas, the sole director of the claimant, which he provided in answer to questions from the judge. He said that he and his wife (the company secretary) had spent six hours a week dealing with the notices to treat and entry and the subsequent claim, and he estimated the combined value of their time at £120 an hour, including overheads. There was no estimate of the total number of hours claimed. Paragraph 63 of the judgment recorded that it was argued by the respondent that the evidence was not good enough to support the claim because no timesheets were in evidence, nor were there any details of when the time was spent or on what aspects of the acquisition; but it also recorded the respondent's concession that 'as a matter of law it was permissible to reflect the time taken to formulate the claim but no evidence had been adduced and the claim should be rejected'. The Tribunal concluded:

'There is very little evidence upon which I can base an award under this head and none of it is supported by documents. I am satisfied that Mr and Mrs Thomas did spend time dealing with the claim (before the reference) and that such time should be compensatable. I consider that a minimum award of £750 is justified upon the testimony of Mr Thomas and such detail as I have available.'

24. The evidence in that case was apparently little better than that in this. The report reveals nothing about the terms, if any, upon which Mr and Mrs Thomas were ordinarily remunerated by Willowtech, or whether or not they had contracts of service. It does not reflect any consideration of whether the time they worked in relation to the acquisition had, or could be presumed to have had, any detrimental effect on the company. The inference is that no such point was argued and so the case is of no authoritative assistance.
25. Welford v. Transport for London [2010] UKUT 99 (LC) is a decision of Upper Tribunal Judge Mr P.R. Francis FRICS. It was a compulsory acquisition case in which the claimant was an individual. He claimed £10,000 for his personal time, based on 100 hours at £100 per hour over a period approaching ten years. The Tribunal regarded his time assessment as excessive but said this:

'79. … It is, of course, reasonable to make an allowance for his time spent on matters relating to the reference, but he has produced no record of the hours spent, or the actions he was undertaking, other than the statement referred to above. The acquiring authority has offered an arbitrary £1,000. Although I think that £100 per hour is too much, I do think it would be reasonable to assume that he could have spent up to 50 hours on related matters and at, say, £50 per hour (agreed by the acquiring authority to be an acceptable rate), that amounts to £2,500. I so determine.'

26. It is not clear whether there was an issue as to whether in principle Mr Welford was entitled to be compensated for his time spent dealing with the acquisition or whether the only issue was as to how much time he had spent and what would be a fair compensation for it. I infer that the latter was probably the position. The case is also of no assistance for present purposes. It was another claim by an individual, not by a company. I can well see that if an individual faced with a compulsory acquisition reasonably devotes his own time to dealing with it, he ought in principle to be compensated for his time. He can fairly say that the expenditure of such time represents a loss to him. In this case, the question is whether TNL, a company, has incurred any like loss.
27. Finally, Mr King referred us to Try Build Ltd v. Invicta Leisure Tennis Ltd (1998) 71 Con LR 140. That was a contract claim before the Official Referee, which included a claim for 'management time'. His Honour Judge Peter Bowsher QC considered it at paragraph 109ff and referred to the decision of Forbes J in Tate & Lyle Food and Distribution Ltd v. Greater London Council [1982] 1 WLR 149. That was one of the authorities that Wilson LJ had reviewed in his judgment in the Aerospace case. There is nothing in Judge Bowsher's judgment that lends any assistance to TNL's management time claim in the present case.
28. Mr Roots repeated to us his submission to the tribunal that there was no evidence entitling the tribunal to infer, or find, that TNL had suffered any loss by reason of the time devoted by the Loxam family members to dealing with the compulsory acquisition. I have explained the deficiencies in TNL's evidence: and even the £65 figure advanced by TNL was Mr Asher's figure, not TNL's. Mr Roots pointed out that TNL had been expressly warned that the Council expected it to prove this head of claim strictly. No management time claim had been included in TNL's original statement of case, but such a claim (for 585.08 hours, at £65 an hour, totalling £38,030.42) was included in its re-amended statement of case, to which the Council's pleaded response was that it made no admission that time spent by anyone in a 'management' capacity amounted to loss by TNL and that there was no evidence that TNL had incurred any expenditure in relation to the time of any of the persons pleaded as having spent such time. By the time of the hearing, neither Mr Loxam's witness statement nor Mr Asher's expert report had, in the Council's view, repaired the apparent deficiencies in TNL's case, and the Council pointed this out in paragraph 183 of its own skeleton argument. In short, the Council had put TNL squarely – and, it can be said, very fairly -- on express notice that it required TNL to prove any claimed 'management time' loss strictly. TNL's responsive attempt to prove any such loss could not have been feebler. One inference is that it did not have the evidence with which to do so.
29. Mr King sought to defend the tribunal's decision. He said that the tribunal had Mr Asher's evidence that the lost time dealing with the acquisition could have been spent dealing with management issues and securing new tenants, and that TNL's directors were in consequence distracted from their normal activities. He recognised that there was little evidence before the tribunal supporting the management time claim, but he said there was enough. He said that the tribunal was an expert tribunal, its expertise informed it that the devotion of the time of its principal director, Mr Loxam, to the acquisition would have had an effect on TNL's profitability and that this court should be cautious about reviewing such a decision by an expert tribunal.
30. The question for the tribunal was whether the 'management time' admittedly devoted to dealing with the acquisition by the TNL directors resulted in the suffering by TNL of disturbance loss and, if so, what its quantum was. The answer to the question required a consideration by the tribunal of the principles by reference to which such loss may be recovered (the Shun Fung principles), which it is reasonable to assume the tribunal had in mind, although it did not refer to them. The application of those principles to the case before it required the tribunal then to decide whether TNL had suffered any loss by reason of the devotion of its directors to the scheduled 'management time'. That was essentially an inquiry into matters of fact, which the tribunal could only decide on the basis of the evidence before it.
31. TNL's problem is that there was, however, no evidence before the tribunal on which it could find that TNL had suffered the claimed, or any, loss. That was because, for the reasons explained, there was no evidence entitling the tribunal to link the time devoted by the Loxam directors on acquisition matters to consequential loss suffered by TNL. It is not enough merely to prove that a director of a company has devoted time to dealing with such matters. It is necessary also to prove how his devotion of such time impacted upon the company and caused it loss. If the director is paid a salary for his time so devoted, and it is shown that the diversion of his time has caused significant disruption to the company's business, it may be reasonable to infer that the company will have suffered a loss at least equal to the salary cost to it of his diversion (see the Aerospace case). Similarly, if in order to avoid disruption to the company's business, a director is required to work additional hours in order simply to deal with the problems of the acquisition, and the company pays him for such additional hours, it may be reasonable to regard such payment as a proxy for the loss suffered by the company (compare, by analogy, the Pettit case). In this case, however, TNL adduced no evidence of any such nature, and so there was no basis upon which the tribunal could find that it had suffered any 'management time' loss. Mr Asher's evidence on the topic was irrelevant and ought not to have been admitted, let alone relied upon. He was no doubt an expert in matters of valuation but the 'management time' disturbance loss, if any, suffered by TNL did not fall within the province of his expertise: that head of claim was exclusively dependent upon factual evidence that only TNL could adduce. In the event, TNL adduced no relevant evidence. Its claim under this head should therefore have been rejected. The tribunal's holding that it did in fact suffer loss was an error of law, because there was no evidence justifying it.
32. I have mentioned that we were, as is nowadays common in appeals from specialist tribunals, taxed by Mr King with reminders about how cautious an appellate court should be before holding that a specialist tribunal has gone wrong. I fully recognise the deference that an appellate court should pay to decisions of an expert tribunal in relation to decisions falling within its area of particular expertise. The 'management time' issue was not, however, one falling within the specialist expertise of this tribunal. It was, in substance, a straightforward common law claim for compensation that had to be made good on the evidence; and if there was no evidence sufficient to make it good, the tribunal's duty was to reject it. The tribunal's error was to make an award of compensation when there was no evidence proving loss. That was unquestionably an error of law (see Railtrack Plc (in railway administration) v. Guinness Limited [2003] EWCA Civ 188; [2003] RVR 280, per Carnwath LJ, as he then was, at paragraphs 50 and 51), against which an appeal lies to this court; and it was an error of law that this court has a duty to correct.
33. I would allow the Council's appeal against the tribunal's award of £17,985 compensation for 'management time' disturbance loss and set aside that award. There can be no question of remitting this issue to the tribunal: there is nothing for it to re-consider. I would re-make the tribunal's decision by refusing this head of TNL's claim (see section 14(2) of the Tribunals, Courts and Enforcement Act 2007).

B. Loss of rent

34. As a necessary introduction to the questions arising under this issue, I must set out some more background. The tribunal dealt with certain preliminary issues (not the subject of this appeal) by a decision dated 8 February 2010. There followed a hearing between 3 and 7 October 2011 devoted, inter alia, to (a) the value of the land and buildings, and (b) TNL's disturbance loss claims. The tribunal gave its decision on 15 December 2011, such decision being explained in paragraphs 1 to 160 and Appendix 1 ('the original decision').
35. Both parties then made representations to the tribunal as to the existence of alleged errors in its decision and asked the tribunal to review it, as it agreed to do, and there was a further hearing. That resulted in an addendum to the original decision, of which paragraphs 161 and 162 explained how the tribunal had received further evidence from Mr Asher and Mr Massie 'limited to the implications on (a) the value of the freehold interest and (b) the loss of rent of my finding that Mr Massie's 2005 valuation was the best evidence of value'. The tribunal also added paragraphs 163 to 182, and Appendix 2, the net effect of which was to record the tribunal's (a) reduction in the compensation for the value of the land, and (b) increase in the compensation for loss of rent disturbance. No point arises as to (a), but there is an issue as to (b).
36. Section 9 of the Land Compensation Act 1961, headed 'Disregard of depreciation due to prospect of acquisition by authority possessing compulsory purchase powers', provides:

'No account shall be taken of any depreciation of the value of the relevant interest which is attributable to the fact that (whether by way of allocation of other particulars contained in the current development plan, or by any other means) an indication has been given that the relevant land is, or is likely, to be acquired by an authority possessing compulsory purchase powers'.

37. Appendix 1 to the original decision was the tribunal's valuation of the land at the valuation date. The valuation correctly ignored the fact of the compulsory purchase, as was required by section 9. In making its valuation, the tribunal attributed an estimated rental value ('ERV') to each unit at St George's Works, which it totalled at £225,371 and capitalised at £2,503,872 by applying a 9% yield. This was the open market value of the land on the basis of full occupation. However, the tribunal also had regard to the extent to which the buildings would have been vacant on the valuation date apart from the effect of the compulsory purchase; and, in paragraph 97, it had concluded that the assumption of a long term vacancy rate of 15% was appropriate. Appendix 1 showed how, applying that percentage deduction (and certain other immaterial deductions) to £2,503,872 resulted in an open market value of the land at the valuation date of £1,771,000. That figure was subsequently adjusted downwards by the revised decision, but the detail of that does not matter.
38. As for TNL's 'loss of rent' claim, paragraph 133 of the original decision recorded that Mr Asher had presented it on two bases: (a) units in which an occupier was present in 2004 but subsequently vacated because of concerns about the compulsory purchase, and was not replaced; and (b) units which continued to be occupied after 2004, but where the rent remained significantly below what its market value would have been but for the proposed acquisition. In the event, the tribunal found that head (b) was unproved.
39. As regards head (a), the tribunal had found in paragraph 97 that the vacancy rate at the valuation date exceeded the 15% vacancy rate that it had there found was, or would have been, the norm at St George's Works in the absence of any compulsory purchase. It also found that the excess in the vacancy rate at the valuation date was a consequence of the Council's letter of 16 February 2004 to TNL giving notice of its intention to acquire the land. The tribunal held that TNL was in principle therefore entitled under Mr Asher's head (a) to compensation for its loss of 'the market rent from the units which fell vacant between 16 February 2004 and the valuation date' and it was there referring to units that so fell vacant because of the proposed compulsory acquisition. As regards head (a), the tribunal then said this in paragraph 135:

'It is, however, not possible to identify the rental value attributed to individual units in Mr Massie's 2005 valuation, which I have found provides the most reliable evidence of the freehold value. This is because the reference letters and numerals given to the units in that valuation do not accord with the unit numbers adopted by the valuers before me. Consequently, the claim for loss of rent has not been made out, with two exceptions. I have found that the rental value of building 12 was £3.50 per sq ft on the ground floor and £1 per sq ft on the mezzanine. Building 12 was divided into two units [Units 12 and 12A], both of which were let at rents below those levels. The loss of rent from these two units was therefore £9,967 (£2,2333 + £7,734), calculated as follows [which he then set out].'

40. In the original decision, that was the limit of the loss of rent claim that the tribunal allowed. Its calculation of the lost rent in respect of each of Units 12 and 12A proceeded by (i) identifying the annual ERV for each unit, (ii) making a deduction of 25% 'for outgoings and voids', and (iii) treating the loss as measured by the application of the consequential yearly rate to the periods from which the units were respectively vacated until July 2006. It is important to note that the tribunal's 25% deduction included the same 15% deduction it had used in its valuation of the freehold (described in Appendix 1 as a 'running void'; see paragraph 37 above). That deduction had reflected its assessment of the average vacancy rate in St George's Works apart from the effect of the compulsory acquisition.
41. TNL's challenge to this conclusion in the original decision was that, contrary to the tribunal's conclusion in paragraph 135, the areas valued by Mr Massie in his 2005 valuation could be reconciled with the units identified by the valuers before the tribunal. Further evidence as to this was submitted, and the outcome at the renewed hearing was that there was no dispute as to how to apply Mr Massie's values per square foot in his 2005 valuation to each part of the building, save in relation to the mezzanines, the issue as to which the tribunal resolved in favour of the Council.
42. By its revised decision, the tribunal determined in paragraph 180, by reference to Appendix 2, that £62,653 by way of loss of rent should be awarded to TNL in addition to the £9,967 figure awarded by paragraph 135 of the original decision. The revised figure included compensation not just under Mr Asher's head (a), but also under his head (b).
43. With that introduction, I come to the three heads of challenge to the tribunal's revised calculation that the Council advanced. I deal with them in the order that Mr Roots argued them.

(i) AM Support Services

44. Appendix 2 set out the tribunal's findings as to those units which were vacated by tenants as a result of their notification of the proposed compulsory purchase. The Council does not dispute that TNL is entitled to be compensated for rent lost by reason of the vacation of any units on such ground. In Appendix 2, the tribunal identified four such tenants: Cane of Kendal, AM Support Services ('AMS'), Davies, and Graeme Casson.
45. The issue is as to AMS, which vacated in December 2005. The Council asserts that there was no evidence that AMS vacated its unit because of the proposed compulsory purchase; it also complains that the tribunal anyway gave no reasons for its contrary finding in relation to AMS. The relevant period of vacancy was from December 2005 to June 2006, a period of seven months, the lost rent for such period being determined by the tribunal at £680. Mr Roots submitted that such a sum should not have been allowed as lost rent.
46. The evidence relating to AMS appears to have been modest. Mr Massie's evidence in chief to the tribunal was that he had interviewed AMS prior to their departure, who had informed him that they had been actively looking for other accommodation which they wished to buy. The agreed note of his evidence was as follows:

'[AMS] occupied about 550 sq ft of the mill and were running a contract cleaning business. I met them in mid-2004. They explained that their objective was to acquire premises and potentially to combine their two operations elsewhere. Their real objective was to buy a property of their own. They had been looking for premises. I kept in touch with them over the next 12 months. Mr Loxam suggested that I had offered them compensation and changed their minds. That is not true. They moved. They had an agent looking for an alternative property. Once they had moved, the agent contacted me and asked if I was willing to pay compensation and I said not in circumstances where a tenant is moving in any event. He was satisfied and I heard nothing further'.

47. Mr Roots relied on that evidence in his closing written submissions to the tribunal, which he said proved that AMS's decision to move was not because of the proposed compulsory purchase. In arriving at its unreasoned decision for its finding in relation to AMS, the tribunal made no reference either to Mr Massie's evidence or to anything else relating to AMS.
48. Mr King, for TNL, did not represent it before the tribunal. In his responsive written argument, he referred us to a certain amount of documentation, although in his oral submissions he ultimately relied in defence of the tribunal's decision on a single letter, one dated 27 January 2005. He accepted that if that letter did not justify the tribunal's finding, there was nothing else to which he could point that did so.
49. Mr Loxam's evidence had proved that all the tenants at St George's Works had received a copy of the Council's letter to Mr Loxam of 16 February 2004. That was a letter in which Mr Inman, the project manager, confirmed that the Council had secured the funding it needed to take the development project forward, and that the Council wished to negotiate with TNL to acquire the whole of its freehold interests at the site. Mr Inman wrote in that letter:

'I am aware that businesses at Luneside East need as much certainty as possible regarding our plans. The Council will endeavour to acquire the whole site in as expeditious manner as possible. The successful implementation of this redevelopment project requires that all existing businesses remove from the site and all existing business operations at the site cease prior to the commencement of the site works. For your information the Council at this point in time has programmed to commence site works early in 2005.

The Council will provide as much advice and support as possible to existing businesses at the site as it seeks to take this project forward. The Council can advise on the availability of alternative sites and premises and the availability of financial support, if any. Your contacts for this at the Council are …

I would be grateful if you could inform any leasehold or tenant business interests of the contents of this letter ….' (Emphases as in the original).

50. Correspondence before the tribunal reflected that the Council provided information to the tenants about alternative sites and premises. In particular, Mr Massie's firm (Keppie Massie) wrote to AMS on 27 January 2005. The letter referred to a meeting of 20 October 2004 and correspondence of 22 November 2004, and confirmed that 'the scheme is progressing as discussed'. The letter asked if AMS had made any progress towards sourcing alternative accommodation and whether it had given any consideration to the properties available in the property register produced by the Council. The letter invited AMS to a further meeting.
51. Keppie Massie also wrote to tenants in the terms of a letter of 26 August 2005, to the effect that 'the scheme is progressing, and I would like to have the opportunity to discuss the proposals further with you. …'. TNL was well aware of such communications with its tenants: Ian Tyson, a land and property consultant acting for TNL, wrote to Keppie Massie on 6 September 2005, stating that:

'We note that you continue to write to [TNL's] tenants encouraging them to seek alternative accommodation and tenants continue to vacate.

You are well aware of the effects this proposed regeneration has had and continues to have on my client's business in particular since a CPO was first mooted in November 2000.'

52. Mr Asher's expert report, in paragraph 5.27, offered his view that many of the tenants would have continued to occupy St George's Works were it not for the Council's correspondence, and he gave as what he said was a good example Sunterra Limited, who vacated in October 2005. He said they had spent a significant amount of money upgrading their premises and were paying a low rent to reflect it. The example was not in fact a good one, since paragraph 171 of the decision reflected Mr Asher's acceptance at the hearing that Sunterra had in fact vacated for reasons other than the compulsory purchase. Mr Loxam, in paragraphs 8.9 to 8.15 of his witness statement, listed the eleven tenants who had given notice to vacate between 31 March 2004 and 30 June 2006, including seven who did so down to 17 November 2005, when AMS gave its notice.
53. The tribunal's failure to give reasons for its decision in relation to AMS was an error of a basic nature. A tribunal should always give reasons for its decisions, however briefly. If it does not, the parties do not know why they have respectively won and lost, and the losing party is at a disadvantage in that he cannot know whether such reasoning, if any, as did result in the tribunal's decision might properly be the subject of challenge on an appeal. The articulation of reasons for a decision is anyway an essential part of the intellectual discipline that every tribunal and court should always go through, since such articulation is the best possible check as to the correctness of the decision. There can be few judges or tribunals who have not arrived at a conclusion that the answer to a particular question is X, only to realise that their attempt to provide a reasoned explanation of such answer reveals to them its obvious error.
54. Given the absence of any reasons for the tribunal's decision in relation to AMS, I consider that the first task for this court is to inquire whether the evidence before the tribunal on the AMS issue was such that it was properly open to the tribunal to find on the balance of probabilities that AMS vacated because of the proposed compulsory purchase.
55. Mr King's submission is that the tribunal was entitled to infer from the letter of 27 January 2005 that AMS must have decided to move in consequence of the proposed compulsory acquisition. Why else, he asked, would AMS have been in communication with Keppie Massie about sourcing alternative accommodation? Mr Roots' submission was that the sense of Mr Massie's oral evidence to the tribunal was that AMS's decision to move was unrelated to the proposed compulsory purchase, and that AMS had decided to move anyway.
56. For my part, I do not regard Mr Massie's evidence, as reflected in the note we have, as showing conclusively that the AMS decision to move was unrelated to the proposed compulsory purchase. Nor, however, does it appear to me to provide any positive support the other way. As for the letter of 17 January 2005, I regard it as giving rise to an inference that it is at least possible that AMS's decision to move was caused by the proposed compulsory purchase. I do not, however, regard it, without more, as justifying a conclusion that it was probable that AMS's decision was so caused.
57. All that being so, I am not satisfied that the evidence before the tribunal was sufficient to justify the finding it made in relation to AMS. If the sum at stake were significantly more than £680, it is likely that I would be disposed to remit the issue to the tribunal for it to re-consider the matter, this time with reasons. Mr King indicated, however, that if we were against TNL on this issue, and in light of the modest amount at stake, TNL would not wish there to be any remission to the tribunal. That appears to me to be good sense.
58. The outcome is that I would allow the Council's appeal in relation to this issue too, set aside its award of the £680 in respect of AMS and re-make the tribunal's decision by refusing TNL's claim in respect of AMS.

(ii) The 15% vacancy deduction

59. I have summarised how, in its decision of 15 December 2011 as to the value of TNL's land, the tribunal assumed a long term vacancy rate of 15%. It referred to this in paragraph 97 and such vacancy rate was applied in its Appendix 1 calculation. Mr Roots does not question that that was an appropriate course for the tribunal to adopt in making its valuation of the land.
60. I have also summarised how, when the tribunal came to the 'lost rent' assessment in its original decision, it concluded that TNL had made out its claim in relation only to Units 12 and 12A and that in calculating the rent lost in respect of those units, the tribunal attributed an ERV to them which it then reduced by a percentage of 25% for 'outgoings and voids', a deduction including the 15% vacancy rate that, in arriving at the freehold value, the tribunal had assumed ordinarily applied to St George's Works.
61. When the 'lost rent' issue was argued further, Mr Asher's evidence was that so to include a 15% deduction in relation to specific properties identified as vacated because of the compulsory purchase amounted in substance to 'double counting'. I am not sure that I fully understand the 'double counting' assertion, which the tribunal does not explain, but I infer that the essence of Mr Asher's point was that the 15% per cent deduction in the open market valuation exercise was a deduction that applied to the ERV of St George's Works if fully let, and therefore it applied also to the ERV of the particular lettings the subject of the 'lost rent' claim. As, therefore, TNL's compensation for the acquisition of the freehold reflected a 15% rent deduction to reflect 'voids' in respect of all units, it was in principle wrong to include the same 15% deduction when computing the rent lost from units vacated because of the compulsory purchase proposal.
62. Whether or not that is a correct understanding of the 'double counting' point, the tribunal, in paragraph 177, expressed its own view that it was difficult to see why Mr Asher was wrong in his submission, given that, quite apart from the units in respect of which 'lost rent' claims were being made, more than 15% of the accommodation had been vacant on the valuation date. Moreover, although in its closing written submissions the Council had argued against the soundness of Mr Asher's suggestion in relation to the 15% deduction, the tribunal also recorded in paragraph 177 how, whilst giving evidence, Mr Massie had admitted that 'he could not explain what was wrong with Mr Asher's approach, although he felt that it was an extremely difficult matter to think through'. The tribunal's conclusion was that the 15% deduction for voids 'does represent double counting and should not be made when assessing compensation for loss of rent'. Its final decision on the lost rent calculation therefore proceeded on the basis that it should not include such a deduction.
63. Mr Roots submitted that in this respect the tribunal fell into error. His position was that the tribunal got it right first time in relation to units 12 and 12A. There was no reason to assume that, if no compulsory purchase had been proposed, the units in respect of which the 'lost rent' claim was made would have been immune from the risk of becoming vacant in the ordinary course of events, or therefore that any such vacancies would only arise in other parts of St George's Works. The tribunal's error was, he said, to proceed on the basis that the 15% vacancy deduction was exclusively referable to units at the works other than those in respect of which the 'lost rent' claims were made.
64. In my judgment, there was no error of law in the tribunal's revised decision to exclude a 15% deduction for voids when determining the rent lost to TNL in consequence of units becoming vacant by reason of the proposed compulsory purchase. When valuing the freehold in the way it did in Appendix 1, the tribunal was correct to take into account that, in the absence of any proposed compulsory purchase, St George's Works was anyway normally less than fully let. A purchaser would take account of this when buying the freehold and so it was a factor that had to be built into the calculation of the open market value. Having found that the normal vacancy rate was 15%, the way the tribunal did so was by reducing the ERV for all the units by 15%. The substance of what it was doing was, however, notionally to attribute that 15% to the units that would have been unlet on the valuation date had there been no compulsory purchase. It had in fact found that considerably more than 15% of the units were unlet on that day, but that was a consequence of the compulsory purchase order and the tribunal correctly left that out of account when valuing the freehold.
65. The tribunal's approach to the valuation of freehold was, I consider, in principle unimpeachable and no one has suggested otherwise. The exercise with which it was concerned when dealing with TNL's 'lost rent' claim was, however, a different one. The essence of that claim was that, as a consequence of the proposed compulsory purchase, there were tenants who had left who otherwise would not have left, and TNL had, as a result suffered a loss of the rent that such tenants would otherwise have paid. The examination of that claim required a factual inquiry as to which, if any, tenants did leave because of the proposed compulsory purchase, and as to what in consequence TNL suffered by way of lost rent.
66. In carrying out that exercise, I cannot see how an automatic inclusion of a 15% deduction for voids when calculating the rent lost in respect of any particular unit can be justified. The relevant period is from 16 February 2004, when the Council gave notice of its intention to acquire St George's Works, to 1 August 2006, the valuation date. A tenant who, say, vacates on 1 June 2006 because of the compulsory purchase will, on the face of it, cause TNL to lose two months rent that, on the probabilities, it would otherwise have received. I find it difficult to see why, in principle, TNL's recovery for such loss should automatically be reduced by a factor of 15%. It can of course be said that the purpose of the claimed compensation is to put TNL into the position it would have been had there been no compulsory purchase, and it may be that the computation of compensation for lost rent ought therefore to take into account the possibility that the tenant vacating on 1 June 2006 might, in a 'no compulsory purchase world', anyway have vacated on, say, 1 July 2006. The existence of that possibility might justify the tribunal in applying some discount to the rent claimed to be lost, and therefore in the compensation claimed, although in my example it would seem unlikely that any discount would be justified. In the case of a tenant who, by reason of the compulsory purchase, vacates rather earlier, there might be more justification for the application of some such discount. But in any case, the application of any such discount would be a fact specific exercise. There could be no justification for an automatic application of the same 15% deduction that was applied when valuing the freehold.
67. In the present case, the tribunal found that five tenants vacated units at St George's Works by reason of the compulsory purchase and that they were not replaced. The resulting void periods down to the valuation date were respectively 7, 7, 9, 10 and 22 months. The tribunal applied neither a 15%, nor any like, discount to the calculation of the rent lost by TNL in any of the five cases (it did apply certain other discounts that are not in dispute). Its decision reflects that it considered it to be wrong in principle to apply a general 15% deduction in each case. It did not consider whether any different discount might be appropriate in any of the five cases so as to take account of the point to which I have referred in paragraph 66 above, nor is it suggested that it should have done. In my judgment the tribunal was correct to conclude that the application of an automatic 15% discount was wrong and I do not accept Mr Roots's submission that it was in this respect in error. I would dismiss the Council's appeal on this issue.

(iii) The date from which rent could have been increased

68. The last issue is this. Section (b) of Appendix 2 reflected the tribunal's calculation of the loss suffered by TNL from its 'inability to raise passing rents to market levels due to shadow of CPO – 6 months notice of termination required before increase obtained'. The loss relates to six units, in respect of which the total 'lost rent' compensation totalled £36,464. The tribunal dealt with this head of TNL's claim in paragraph 176, where it said:

'… In his evidence at the main hearing Mr Loxam said, and I accept, that he had done his best at a difficult time to retain and attract tenants, keeping rents as low as necessary in order to do so. … I am satisfied that, in the absence of any CPO proposals, TNL would have taken steps to increase rents paid for the occupied units to market level whenever it was reasonable to do so. A summary of tenancies was produced during Mr Asher's re-examination. … This stated, in respect of units 5GA and 5F, that "As with all tenants the agreement was subject to a three year renewal with six months notice of termination by either party." The accuracy of that statement was not challenged. Accordingly, I consider it reasonable to award compensation for all units within category (b) on the basis that the rent payable would have increased to market value six months after the date of Mr Inman's letter of 16 February 2004 to Mr Loxam – that is by 16 August 2004. In doing so, I have not overlooked the possibility that, in the absence of the background of compulsory acquisition, the full rental value might have been achieved at an earlier date, or that some tenants might have vacated early.'

69. As the tribunal noted in paragraph 26 (see paragraph 5 above), there was 'very little formal lease documentation' in evidence. We were referred by Mr Roots to the evidence in relation to the units that was before the tribunal, and before coming to the arguments I shall summarise it.

(a) Westgate House

70. Westgate House occupied two units. According to a TNL schedule, Westgate House was 'holding over' under leases that had commenced in 1984. It appears to have been common ground that the leases provided for three-yearly rent reviews and that the first review date that would have arisen after 16 February 2004 was 1 July 2005. TNL asserted in relation to Westgate House that 'as with all tenants the agreement was subject to a three year renewal with six months notice of termination by either party' (the tribunal quoted that in paragraph 176).
71. I do not understand, and the tribunal does not explain, what the 'three year renewal' point meant in the context of a case in which TNL recognised that Westgate House was 'holding over', although it may perhaps be that TNL was there referring inaccurately to the fact that there were three-yearly rent reviews. As to the latter part of the quoted statement, the tribunal had noted in paragraph 26 that most of the tenants were protected under Part II of the Landlord and Tenant Act 1954, and so the claim that the tenancies were terminable on six months' notice is understandable (see section 25 of the 1954 Act); and the grant of any new tenancy under the Act would have been at a market rent (see section 34). Mr Roots also asserted, however, that the evidence was that 'there was an agreement for two years commencing in October 2003'. I do not know upon what that is based, and it is not reflected in TNL's explanation of the terms of Westgate House's occupation. Finally, TNL's position in relation to Westgate House in its schedule of information relating to its tenants was that 'The last agreement review date was 1 July 2005 when we were unable to increase the rent because of the impending development'.

(b) Watersculptures

72. TNL's evidence about the Watersculptures units was to the like effect as that relating to Westgate House: namely, that Watersculptures were holding over under a lease that had been granted in about 1990, which also provided for three-yearly rent reviews, of which the first review date after 16 February 2004 was 1 July 2005. The tenancy was likewise terminable on six months' notice. In relation to this tenancy, TNL also said that 'The last agreement review date was 1 July 2005 when we were unable to increase the rent because of the impending development'.

(c) Cane of Kendal

73. Cane of Kendal had two leases. According to TNL, one was for a two-year term from 1 August 2003 to 31 July 2005; and the other was for term commencing on 1 October 2003 that was said by TNL to be terminable on three months' notice. Mr Roots, however, asserted that the evidence at the hearing showed that the second lease was also for a two-year fixed term, and Mr Loxam's letter of 16 September 2003 offering such tenancy referred to it as being for a two-year term which was to be contracted out of Part II of the 1954 Act. There is nothing in the documentation to suggest that either lease was terminable on six months' notice, although that is what the tribunal found in paragraph 176.

(d) Alan's Removals

74. TNL's evidence about Alan's Removals was again to the like effect as that relating to Westgate House: namely, that they were holding over under a lease that had been granted in about 1999, which also provided for three-yearly rent reviews, of which the first review date after 16 February 2004 was 1 June 2005. The tenancy was likewise terminable on six months' notice. In relation to this tenancy, TNL also said that 'The last agreement review date was 1 June 2005 when we were unable to increase the rent because of the impending development'.

(e) Cox

75. Cox was said to be holding under a 'verbal agreement', being again 'subject to a three year renewal with six months notice of termination by either party'. TNL again likewise asserted that 'the last agreement review date was 1 January 2005 when we were unable to increase the rent because of the impending development'.

Discussion

76. The economy of the tribunal's fact finding exercise in relation to these tenancies when combined with the economy of its reasoning for its decision makes this a difficult issue. Mr Roots asserted that the tribunal was wrong in saying, as it did in paragraph 176, that the Council did not challenge the statement that all the tenancies were terminable on six months' notice: he says the Council did challenge it; and whilst the tribunal was no doubt entitled to find that most of the relevant tenancies were terminable on such notice, I do not understand how the tribunal squared its finding to that effect with the evidence relating to the two Cane of Kendal leases, which apparently pointed away from either lease being terminable on six months' notice.
77. Mr Roots also criticised what he says the tribunal further held in paragraph 176, namely, that but for the compulsory acquisition, TNL could and would have achieved an increase of rent by giving six months' notice on 16 February 2004, the date of the Council's notice of its intention to acquire the land (I infer that the tribunal was finding that, but for the impending compulsory purchase, new tenancies would have been negotiated as from 16 August 2004 at a market rent). Mr Roots' point was that there was no basis for a finding that TNL would have terminated any tenancies by a notice given on 16 February 2004. That was the date of the Council's letter to TNL of its intention to acquire St George's Works, and the submission was that, in the absence of a compulsory acquisition, such letter would not have been written. Moreover, Mr Roots said that TNL's case, with which Mr Asher agreed in cross-examination, was that the first date from which, but for the compulsory acquisition, TNL could and would have increased the rents, at least in the case of the Westgate and Watersculptures leases, was 1 July 2005.
78. Mr King defended the tribunal's decision on the basis that paragraph 176 reflected the findings of fact that the tribunal was entitled to and did make. He also said that it was a misunderstanding of the paragraph to read it as reflecting a finding that TNL would in fact have given six-month notices on 16 February 2004 terminating all the tenancies. He submitted that all that the tribunal was there saying was that, in the absence of a compulsory acquisition, it would be reasonable to regard the rents as being capable of being increased by 16 August 2004 and that such date would therefore be a reasonable date from which to calculate the loss suffered by TNL by reason of its practical inability to increase the rent.
79. With respect to the tribunal, I regard paragraph 176 as an inadequate disposition of the issues that arose in relation to this aspect of TNL's case. As regards Cane of Kendal, at least one of its tenancies was apparently for a fixed two-year term expiring on 31 July 2005 and so it was not terminable on six months' notice. The other tenancy was said to be terminable on three months' notice, so that it may be that six months' notice could equally have been given, but the tribunal ought to have dealt specifically with both the Cane of Kendal tenancies. More importantly, I regard the tribunal's conclusion that it was appropriate to assess the lost rent 'on the basis that the rent payable would have increased to market value six months after [the letter of 16 February 2004] … -- that is by 16 August 2004' as insufficiently explained and apparently irrational.
80. The relevant inquiry was not as to the earliest date after 16 February 2004 by which TNL could, but for the impending compulsory acquisition, have terminated the tenancies and negotiated a market rent. It was as to what loss TNL had suffered in consequence of the proposed compulsory acquisition by reason of its inability to increase the rents to the market rents. That required the tribunal (i) to decide what steps TNL would have taken in a 'no compulsory acquisition world' to increase the relevant rents, and (ii) to assess what loss TNL had suffered, in consequence of the compulsory acquisition, by being unable to take those steps. As to (i), TNL's own case, in relation to all tenants other than Cane of Kendal, was apparently that it was unable to increase any of their rents on, respectively, 1 January 2005 (Cox), 1 June 2005 (Alan's Removals) and 1 July 2005 (Westgate House and Watersculptures); and the inference that I draw from the evidence we were shown is that, but for the compulsory acquisition, TNL would have taken steps to review the rents on those days. Whilst all these tenancies were terminable on six months' notice, we were told of no evidence supporting the view that TNL ever have had it in mind to terminate the tenancies earlier than the review dates and so endeavour to increase the rents that way; and the proof that it did not have it in mind is that it had served no such notices by 16 February 2004.
81. In these circumstances, I do not understand, and the tribunal does not explain, how on the basis of the evidence, the tribunal could rationally assess TNL's loss by reference to the giving of notional notices of termination that TNL never had it in mind to serve and which, absent any compulsory acquisition, it would not have served. In short, it appears to me that the tribunal's method of assessment was not justified by the evidence. That was an error of law.
82. I would therefore allow the Council's appeal in relation to this issue as well and would set aside the tribunal's award of the compensation for lost rent as identified in section (b) of Appendix 2. It may be that the parties will be able to agree a revised figure for the lost rent under this head. Otherwise, subject to counsel's submissions, I would consider it appropriate to remit this head of TNL's claim to the tribunal for a re-hearing.

Disposition

83. I would therefore (i) allow the Council's appeal in relation to 'management time' in the terms outlined in paragraph 33 above, (ii) allow its appeal in relation to AM Support Services in the terms outlined in paragraph 58 above; (iii) dismiss its appeal in relation to the 15% vacancy deduction issue, and (iv) allow its appeal in relation to the dates from which the rents for the various units in issue could have been increased, in the terms outlined in paragraph 82 above.

Lord Justice Underhill :

84. I agree.

Lord Justice Mummery :

85. I also agree.