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England and Wales Lands Tribunal
You are here: BAILII >> Databases >> England and Wales Lands Tribunal >> Myers v South Lakeland District Council [2004] EWLands ACQ_156_2002 (8 October 2004)
URL: http://www.bailii.org/ew/cases/EWLands/2004/ACQ_156_2002.html
Cite as: [2004] EWLands ACQ_156_2002
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- This is a decision to determine the compensation payable to Fred David Myers ("the claimant") by South Lakeland District Council ("the acquiring authority" or "the council") pursuant to the South Lakeland District Council (Ulverston Redevelopment Scheme) Compulsory Purchase Order 1990 ("the CPO"). The claimant had occupied, under the terms of a lease dated 17 March 1981, Unit 35, Low Mill Tannery, Ulverston, Cumbria ("the subject premises") from which he undertook, on a part-time basis, a business which included the dismantling of old Peugeot motor vehicles, the storage and supply of new and used parts and some car repairs. The terms of the lease at the valuation date (see para 7.3 below) were such that possession could have been obtained by the landlord on 30 June 1996 at the earliest.
- Mr Myers' original claim had been constructed on the basis that, as a result of the CPO, his business came to an end, having been unable to continue trading following possession being taken of the subject premises on 30 January 1996. It included, in respect of the alleged total extinguishment of the business, a claim for £40,000 alleged loss of profits. However, the revised claim, arising under section 20(1) of the Compulsory Purchase Act 1965 ("the 1965 Act"), and argued for at the substantive hearing is, in addition to the agreed value of his interest in the subject premises, for costs and losses incurred in connection with his enforced relocation to nearby alternative premises at the former Tannery Office, West End Lane, Low Mill, Ulverston. The loss of profits element of the original claim has thus been withdrawn, but it is replaced by a claim for £20,000 being the sum that the claimant has estimated would need to be expended in properly identifying, sorting and re-cataloguing the stock of over 50,000 parts to enable him to resume trading.
- The claim can be summarised as:
- The council's case is that the claimant is entitled to compensation in the sum of £23,900 (of which 90% has already been paid). Such compensation is in addition to items of expenditure totalling £28,900 incurred, and paid directly, by the council.
- The premises to which the claimant moved are located just outside the area covered by the CPO, and are within a few hundred yards of the original premises. Due to the similarity in names, and potential for confusion between them, I refer henceforth to the acquired premises as LM1, and the premises to which Mr Myers relocated as LM2.
- Alan Evans appeared for the claimant and called Mr Myers who gave evidence of fact. He also called David Lyons FRICS as expert valuer and John Fox who gave expert evidence relating to the value of the claimant's stock of parts and of cars awaiting dismantling. Jonathan Powell, who appeared for the acquiring authority, called Andrew Piell FRICS and Richard Greenwood BA (Hons) MRTPI who respectively gave expert valuation and planning evidence.
- The parties produced an agreed statement of facts from which, together with the evidence and my inspection of LM2 and the surrounding area which I undertook on 17 June 2003 in connection with a pre-trial review, I find the following facts:
- The outstanding heads of claim upon which this Tribunal's determination is required are items (ii), (iii), (iv), (v), and (viii) set out in para 3 above, all of which fall to be decided in terms of the 3 conditions of disturbance compensation as defined in the judgment of Nicholls LJ in Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111 at 126. These are:
- Mr Myers said that he started motor repairs in 1970, predominantly on a part time basis, and having identified a market for the supply of parts for certain models of Peugeot cars (especially to Africa and other third-world countries where Peugeots were used in large numbers), he set about purchasing new and used parts in about 1977. His supplies came from various sources, including from whole cars that he purchased for the purposes of either restoring, or dismantling for spares. He said that by the date of possession he had built up a stock of over 50,000 spare parts which were stored in LM1 on Dexion shelving and racks. He also had 40 cars stored in the yard awaiting dismantling or repair. As the various models were discontinued, and spares became scarce, he anticipated the value of and demand for his stocks would increase. Mr Myers said that by 1980 he had become well known for his stocks in the U.K. and abroad, maintained the register of 504 and 505 models for the Peugeot Owners Club, and also had a valuable 'Master Book' from which parts for specific models could be identified. He said that he viewed the accumulation of his collection as a prospective pension fund, and intended to work full time in the business when circumstances permitted.
- The premises at LM1 were ideal for his purposes, and with a yard immediately adjacent, he said he had easy access to his stock of cars as and when he needed them. Mr Myers said that he undertook a number of improvements to the premises, including the installation of a 3-phase electricity supply, the provision of a circuit of high-pressure air lines and a series of 'pulling eyes' in the ground floor concrete ceiling, walls and floor to which he could attach his specialist equipment for straightening damaged body parts.
- Following confirmation of the CPO, Mr Myers said that he realised he would have to relocate and started to look for alternative premises. This search accelerated when he received Notice of Entry in December 1995, but he was unable to find anything suitable in the vicinity that he could afford. He arranged for his stock of parts and vehicles to be valued by John Fox, the proprietor of a classic and sports car company who also specialised in Peugeot spares. The council, being anxious to obtain possession by the end of January 1996, and knowing that Mr Myers had no alternative accommodation to which he could move, arranged for accommodation to be made available at Unit 5, Lightburn Trading Estate, Ulverston, rent free, for one year. The privately owned storage compound at Old Station Yard to which the cars could be removed was also made available on a similar rent-free basis.
- Mr Myers included within his witness statement the transcript, together with a copy of the video recording which he took when the council's principal solicitor, Mrs Mayo, arrived on 30 January 1996 to take possession. From this, it was evident that he was unwilling to relinquish possession prior to compensation being agreed. He said that he "was looking for extinguishment" [of the business] and if that could be agreed, the council could remove the spares and cars and do with them as they wished. Mrs Mayo acknowledged that she understood what it was that Mr Myers' wanted, but was not in a position to agree terms or bases of compensation. She required possession the next day, and agreed to arrange for the council's Direct Services department to prepare a written and photographic inventory of all Mr Myers' stock as it was taken off the premises. She also agreed that nothing would be removed unless Mr Myers was present. Mrs Mayo explained to Mr Myers that "all your goods and cars will be left secure, looked after in an alternative place, and then we can talk about whether you want to go for extinguishment or to relocate…"
- The council's employees, Mr Myers explained, duly compiled the inventory (but no photographic record was made) and the spares were gathered up and placed into 285 clear plastic bags, each of which was given a numbered label – several of which subsequently fell off. They were then removed to Unit 5, Lightburn Road and the cars were taken to the compound at Old Station Yard. No keys of either the premises or the yard were provided to him. As to the equipment within LM1, Mr Myers said that many items were left behind and were lost in the demolition process.
- Mr Myers said that whilst he had been aware of where all the spares were when they were stored in LM1 (although he admitted shelves and racks and individual items were not labelled), the bagging up had been carried out at random. The inventory therefore, with a one line entry for each bag, was deficient to such an extent that the task of restoring the stock to some semblance of order would take two people a total of 4 months, the cost of which he estimated at £20,000. He accepted that although he initially thought that if his business was being extinguished he would be losing ownership of the stock (and that was why he did not query the method of bagging-up, or the adequacy of the inventory), and would be compensated for it, he eventually realised that the ownership would remain his if suitable alternative premises could be found.
- Such premises became available during the course of 1996 - LM2. He had initially been offered a lease of them at £4,000 pa which he said he could not afford, but the freeholder (who was the same person as his former landlord at LM1) eventually offered the premises for sale. He explained that they were in appalling condition and needed substantial repair. The roof leaked, most of the window glazing was missing, there was no electricity supply available and the premises were generally run down and insecure. However, bearing in mind the fact that the council were only going to pay for the storage of his stock for a limited time, and in the knowledge that he was duty bound to mitigate his losses, Mr Myers said he decided that LM2 offered potential, and he thought he would be able to bring the building up to an acceptable standard if the council compensated him for the expenses which he would incur. He thus completed the purchase in September 1996 at a price of £35,000.
- Mr Myers said he then set about carrying out essential repairs, some of which the council have agreed to compensate him for, including door enlargement, security grilles and new doors, locks, the provision of a rear access and the construction of a security wall in front of an area of additional land he acquired in 1998. That wall has yet to be built, but with an agreed valuation fee, the total value of these items is agreed at £8,750. However, whilst the council also arranged for the provision of a 3-phase electricity supply to the building, and paid the £13,000 cost of that direct, Mr Myers said they should also pay for the wiring within the building, for which he had received an estimate, in November 1997, of £5,459.76. This, he accepted, was only payable by the council if claim for the electricity supply at LM1 was rejected, as would be the cost of installing air lines and pulling eyes in the new premises.
- Having undertaken basic works to make the building weathertight and secure, the stock from Lightburn Road was transferred to LM2 in January 1997, this being the first time that a key for Unit 5 had been obtained. Mr Myers also had the 6 best cars moved from Old Station Yard to LM2, as that was all the vehicles that there was room to store inside. He said he had been advised in no uncertain terms by Mr Greenwood of the council's planning department, that the storage of cars outside LM2 would not be permitted. The 34 remaining cars thus stayed in the temporary compound, and after the initial rent-free period had expired Mr Myers took over the rental liability at £150 per month until he gave the cars away in January 2003 at a loss which he calculated at £1,700 per vehicle, net of an estimated dismantling cost – a total of £57,800. He was thus claiming the rent paid on the compound for the period March 1997 to January 2003 as a double-overhead in the sum of £10,800.
- Mr Myers said that because he did not have access to either the Lightburn Road premises or the compound at Old Station Yard which were in any event physically divorced (by some 50 yards), he had been unable to continue his business. Even now, some 8 years after he was dispossessed, the new premises had no proper internal electricity circuit, and there was no provision for the external storage of vehicles. He said he had spent over 2,000 hours on compensation related matters, including searching for suitable alternative premises, supervising the cataloguing of his stock, and the removal to Lightburn Road. Accepting that not all time could be realistically charged, he accepted his surveyor's assessment of 750 hours at £15 per hour - £11,250.
- Asked in cross-examination why he had not sought keys for either Lightburn Road or the car compound after he came to realise ownership of the cars and spares remained his, Mr Myers said that not only was unit 5 unsuitable for the type of business he was conducting (it was not as large as LM1), he would have had to install 3 phase electricity, and the other specialist equipment required. This would be an unnecessary expense as the premises were only temporary, and in any event he thought use for car dismantling and repairs was forbidden in planning terms. He would also have had to sort all the parts and rack them up for use, and this was, as he had said in evidence, a mammoth task. Mr Myers admitted that in his letter to Mr Piell of 17 January 1996 he indicated that, subject to agreeable terms, the Old Station Yard compound was suitable, and was in close proximity to the proposed storage facility at Lightburn Road. He also accepted that Mr Piell had confirmed, in a letter to his former surveyor, Mr Milton, dated 5 February 1996 that the council did not consider it had taken ownership of his stock, that they would pay for the removal to Lightburn Road and the compound and a subsequent move to new premises, and that he would be allowed to trade from Unit 5, rent free, for one year. Mr Myers acknowledged that at no time did he seek the council's clarification as to whether or not he could trade, and also made no planning enquiries. He said that he had been suffering from clinical depression following the dispossession from LM1.
- As to why he neither catalogued nor packed the parts himself, prior to his dispossession from LM1, Mr Myers said that, right up until the last minute he thought there was a chance his building would not be required as part of the redevelopment – this being indicated to him as a possibility in a letter from Mr Piell dated 22 December 1995. In any event, there was such a short time between the Notice of Entry and the actual date of possession that he did not have time to do what was necessary.
- On the subject of the cars, Mr Myers said he had no alternative but to get someone to come and take them away. He was not in a position, due to other pressures, to try to sell them through, for instance, the Peugeot Owners Club, and as he had been given notice to quit on the Old Station Yard site, and could not store them outside at LM2, there was nothing else he could do. The council, he said, should pay for the cars as it was they who had put him in that position.
- Mr Fox is the proprietor of J Fox Classic and Sports Cars, a Peugeot cabriolet and coupe centre in Settle, N Yorks, and specialises in the repair and restoration of Peugeot cars. He had been asked by Mr Myers to value his complete stock in late 1995. His figure was £103,013 of which £16,400 related the cars awaiting dismantling (£400 each). As to the suggestion by the claimant that they were, in fact worth £2,000 each less a nominal £300 dismantling cost, Mr Fox said that in his initial appraisal he had not allowed for the additional value created by having the vehicle dismantled. The value of individual parts was rising rapidly due to their increasing rarity and £1,700 per vehicle was not, now, inappropriate.
- Asked about whether the claimant could have achieved value rather than giving the cars away, Mr Fox said that there were a large number to be sold all at once, but through the right contacts a disposal at value should have been possible, and £400 per car in its un-dismantled state, was an appropriate figure.
- Mr Lyons is a chartered surveyor and a former partner in Gerald Eve, Chartered Surveyors, now practising as an independent consultant. He was instructed by the claimant in January 2004. He said that under the provisions of section 20(1) of the 1965 Act, the claimant is entitled to be compensated for the value of improvements and works undertaken to LM1 that represent special adaptations to the premises to facilitate his business being conducted, but which did not add value to the premises. Alternatively, he is entitled to compensation for the cost of any special adaptations that he needed to make to LM2 to make it suitable for his requirements. The three items being claimed were the 3-phase electricity supply (for which the estimate received in connection with LM2 at £5,460 was good evidence), the cost of installing air lines (estimated at £600) and the pulling eyes (estimated at £1,000).
- As to the costs of seeking alternative accommodation and other matters for which the claimant was entitled to be compensated, Mr Lyons said that the claimant had maintained meticulous records and it was estimated that 750 hours at £15 per hour fairly reflected his entitlement - £11,250. Regarding all other aspects of the claim, he confirmed that in his professional opinion, the figures to which the claimant had spoken in his evidence accurately reflected Mr Myers' entitlement to compensation. In connection with John Fox's valuation of the cars, Mr Lyons pointed out that it was the value to the owner that had to be compensated. If the cars were worth £1,700 each dismantled, but only £400 if sold as a job lot, the loss would be £1,300 per vehicle. So, even if it was determined that Mr Myers did not mitigate his loss by giving the cars away, rather than getting £400 each for them, the loss should be calculated on the basis of the value to him - £1,300 per car, or £44,200 for all 34 cars. Cross-examined on the suitability or otherwise of the Lightburn Road premises, Mr Lyons said car dismantling was sui generis in planning terms, and the premises were therefore wholly unsuitable, having permission for B1, B2 or B8 use. The understanding was that the premises were to be used for short-term storage of the claimant's stock, and any trading from the unit would have been unwelcome.
- Mr Greenwood is a member of the Royal Town Planning Institute and has worked as Principal Planning Officer and Head of Economy for the council since 1986. He was also project manager for the Low Mill Tannery land reclamation and redevelopment scheme, overseeing its transformation from a semi-derelict group of buildings on a heavily contaminated site into a modern business park. He had instructed Mr Piell, who had conduct of the negotiations with the claimant throughout the period in question.
- Negotiations commenced in July 1995, soon after the CPO was confirmed, and the claimant instructed Mr John Milton as surveyor to act on his behalf. However, Mr Milton subsequently withdrew his services and no new agent was instructed until January 2004. On the claimant's reluctant vacation of LM1 in January 1996, Mr Greenwood said that the council moved the parts, some equipment and the cars at its own expense and provided access to him. The council's staff had carefully labelled and transferred the goods to enable Mr Myers to continue in operation from the temporary premises. It was accepted that due to the very nature of the parts, it was not possible to individually label every single item, but Mr Greenwood said there was no good reason why the operation could not have continued and at no point in the discussions with the claimant did the council ever agree to compensate him for total extinguishment of the business. If it had, it would have made its position clear in writing and would have taken steps to sell the stock rather than provide premises and storage areas at the council's expense.
- Furthermore, he said, Mr Myers subsequently acquired the freehold of LM2 and has gone to significant trouble and expense in repairing the premises and adapting them for his use. Such actions were not those of someone whose business had been extinguished. Indeed, the council had provided considerable assistance to the claimant, including laying on a 3-phase electricity supply to the building at a cost of £13,000, and had agreed to pay for certain other works of adaptation. Mr Greenwood said that the building included some garaging but whilst the council welcomed Mr Myers' positive moves to relocate his business, was concerned that LM2 should not become a focus for dismantling cars (bearing in mind the close proximity of the new development). Hence, he wrote to Mr Myers on 17 December 1996 making it clear that the regular external storage of scrap vehicles would not be permitted.
- Having said this, the subsequent discussions relating to the erection of a screen wall were intended to be a compromise to allow a limited number of cars to be kept outside (4 to 6 in total), but shielded from view. However, Mr Greenwood said that the council was adamant that the number of cars that had historically been housed on the Old Station Yard site would not be permitted at LM2.
- Explaining what would and would not be permitted at Unit 5, Mr Greenwood said the claimant's concerns that the dismantling of motor vehicles and the retail sale of parts would not be permitted on the premises were unfounded. He acknowledged that the Schedule to the Town and Country Planning (Use Classes) Order 1987 stated, at 3(1)(6): "No class specified in the Schedule includes use…..(g) as a scrapyard, or a yard for the storage or distribution of minerals or the breaking of motor vehicles." But it was, he said, a matter of degree. The council had a total of 52 workshops operating as small vehicle repairers in the area and Mr Myers' business was no different. He said the council took the view that the small scale dismantling of vehicles over a short term was acceptable, and, bearing in mind the limited retail element, such use would have been lawful. Mr Myers had not made any enquiries as to whether or not the planning permission on the building would permit his business activities and, he pointed out, the council would not have made the unit available for a use that was not permitted.
- Mr Greenwood insisted, in cross-examination, that the use was not sui generis, and the council would have kept the situation regarding the breaking of vehicles under review – it was only ever anticipated that the claimant's occupation of the premises would be short term. He did accept that the costs of fitting out the unit to Mr Myers' requirements, and then doing the same again when he found somewhere more appropriate, would amount to a double expense. He said he could understand that the claimant might have taken some comfort from the knowledge, transmitted by Mr Piell, that the council were vaguely thinking about excluding LM1 from the CPO, but the chances of that happening were not great, and to have read any more into it than that, would have been, he said, clutching at straws.
- Mr Piell is a chartered surveyor, and has been a partner in his own practice of Piell & Co, in Kendal, Cumbria for some 24 years. He has specialised in commercial, industrial and retail property in Cumbria and the Lake District throughout that time. He said he was instructed by the council to act in respect of all the compensation claims arising out of the CPO, there being 4 in total. The other three had been settled by agreement. Following the initial negotiations that he had had with the claimant's former surveyor, Mr Milton, Mr Piell said he had been dealing with Mr Myers direct until Mr Lyons was appointed in January 2004.
- He said that he had assisted the claimant in his search for alternative premises, but none of those that were available at low rents were suitable due to concerns over security, location or condition. Buildings of a similar nature to that which he was vacating were the only ones he could afford, due to the minimal turnover and poor returns revealed by his trading accounts for the period 1993 to 1996. Mr Piell said that, following a suggestion from Mr Milton that the council might like to make one of the vacant Lightburn Road units available for, say, 3 years, he advised, in December 1995, that the council was considering relocating him there on a temporary basis (one year) which would relieve the immediate problems. This is indeed what happened, but, as far as access to the premises and storage yard, and the ability to trade from the premises was concerned, Mr Piell said there was nothing to stop the claimant continuing his business – a prudent businessman would have done so in an effort to mitigate his losses.
- Mr Piell said he had never indicated that the council would be taking ownership of the cars or stock of spares, and had not suggested that the business had been, or was to be, extinguished. Indeed, he said, his letter to Mr Milton of 5 February 1996 clearly set out the council's position.
- He said that, following the claimant's subsequent purchase of LM2, he met with him there in July and November 1998. These meetings were for the purpose of progressing compensation negotiations. The subject of the screen wall was discussed at the first meeting, and it was Mr Piell's understanding that that was not required so much for security as to shield a small number of cars (a maximum of 6) from view. There was, according to his recollection, nothing to suggest that the council would not permit a limited number of cars, awaiting dismantling, to be stored outside but they were, it was accepted, adamant that large numbers would not be countenanced. Indeed his file note of the November meeting indicated that the claimant had said he would accept a planning restriction to 6 externally stored cars. The fact that the wall has still not been built, is, he said, because Mr Myers had wanted that dealt with as a separate issue, but Mr Piell wanted the total compensation package to be agreed first. The wall was to be built by the claimant, and the compensation for the cost of it was agreed at £4,200.
- As to the other heads of claim, Mr Piell said that in his view the claim for a just allowance to an incoming tenant at LM1 was substantially overstated. The equipment was old, and the type of tenant who would contemplate taking such a unit would not agree to pay such a substantial sum for it. As to the claim in the alternative, the key issue was the claim for wiring LM2 internally. That, he said, would amount to betterment and was not therefore allowable. In his view a global allowance of £500 towards 'customising' the new premises (in addition to those sums that had already been paid directly by the council), added to the cost of the proposed wall, was an appropriate figure. The claim for proprietor's time in seeking alternative premises and dealing with compensation matters was also substantially overstated – the other tenants at Low Mill had accepted £1,200 which equated to 80 hours at £15 per hour (the equivalent of 10 full days). That was, he said, a fair figure.
- Mr Piell said the claim for double overheads relating to the long-term storage of cars was illogical. Why leave the cars to rot for 6 years and not do anything about dismantling them or at least disposing of some of them? However, in response to the suggestion put in cross-examination that selling the cars for less than their value for dismantling could lead to an allegation that the claimant had failed to mitigate his ongoing liability for rent on the storage yard, he said it was a question of degree. He said he could not comment on the values being claimed, as he was not an expert.
- The claim for re-cataloguing the parts was not allowable, in Mr Piell's view, as the council had done what it was required to do and it should be borne in mind that prior to the move, nothing was catalogued – the knowledge was all in the claimant's head. If it was allowable, he said he had no challenge to the sum claimed.
- In summary, Mr Piell said that in his opinion the claimant had failed to take reasonable steps to mitigate his losses. He and the council had been at pains to accommodate Mr Myers in his needs, and the provision of short term alternative accommodation, and payment of sums direct to contractors in connection with the fitting out of LM2 showed that the council proved this to be the case.
- Mr Powell, in summing up the acquiring authority's case, said it was clear that many of the losses that Mr Myers was claiming were the result of his own conduct, and had he taken proper steps in mitigation, they would not have been incurred. He said that the claimant had been proactive in his letter to Mr Piell of 17 January 1996 in which he said (in part):
- There could be no logical explanation for Mr Myers failure to obtain keys for the Lightburn Road premises, or the storage yard, throughout the rent-free period that had been offered. Despite an initially expressed belief that ownership of the cars and parts was passing to the council (an idea of which he was very quickly disabused), the claimant continued a passive stance. The reasons given by the claimant for not continuing the business were unsustainable. Firstly, an unwillingness to reconnect the electricity to the unit (which already had 3-phase power). This was a cost for which the council would have been liable. Secondly, that the lease prevented car-breaking and such activity would have been a breach of planning control. Those matters had been explained in evidence, and there had been nothing to prevent Mr Myers from resolving those concerns by a simple telephone call to the council at the outset. Mr Myers had also complained that his tools were left "in a heap" and that he would not have been able to move cars from the storage yard to the unit without them being taken, unlicensed, on a public highway. Both of these complaints would have been easily overcome by a prudent businessman acting to mitigate his losses.
- None of the specific disputed heads of claim were realistic, Mr Powell said. The wiring at LM1 was over 30 years old, the air-lines were also old and pulling eyes were not used in the business at the time of dispossession. They were not therefore required at LM2 due to the fact that the claimant no longer undertook vehicle repairs. No incoming tenant would pay over £7,000 for those items. Rewiring, installation of pulling eyes and new air lines at LM2 as the alternative head of claim, would result in a substantial element of betterment, and Mr Piell's overall allowance of £500 was considered to be realistic. The claims for seeking alternative accommodation and for supervising the move from LM1 to Unit 5 were overstated, there was no sustainable evidence that the forced sale of the cars had been caused by the compulsory acquisition, and the double-overheads could have been avoided if the claimant had continued his business in the premises provided, and dismantled the cars.
- The council submitted that that supported its arguments that any loss in respect of the forced sale of the cars (if indeed it is held that such a loss is compensatable in this case) should be allowed at the open market value of them, rather than including any profit that might be made from them. Any loss of opportunity to achieve a higher value by dismantling the cars that might be included in the claim is not allowable, as selling the cars at open market value would have provided the funds to purchase replacement vehicles for the same purpose.
- Mr Evans said that for the claimant to be accused of being the author of his own misfortune, and for taking a passive approach following the dispossession, was simply not right. Mr Myers had less than 2 months from the Notice of Entry to the date of possession to find alternative premises, and prepare for a move. This included the Christmas period. He spent a considerable amount of time trying to find suitable premises which he could afford and, within a relatively short time after he was dispossessed actually bought nearby premises for the specific purpose of relocating his business. The reason his business was still not up and running was because of the problems that had been caused by the council – the incomplete and inadequate inventory of parts, the failure to agree compensation for essential works to the new premises and the inability, in planning terms, for him to be able to store cars externally at LM2. The claimant had estimated it would cost £20,000 in time and effort to re-establish some order to the parts and that figure was not disputed by the council – it was the principle that was at issue.
- The specific heads of claim were all justified, Mr Evans said. An incoming tenant at LM1 would certainly pay £7,000 for the benefits. In the alternative, a figure of £500 for the requisite upgrading to LM2 was far to low, and the discounts Mr Piell had made for alleged betterment were inappropriate.
- As to the cars, it was submitted that the claim for the loss of opportunity to make future profits from them (made under s.20(1) of the 1965 Act) was valid as the same principles apply as in claims for loss of profits under rules (2) and (6) of s.5. That had been held recently by the Lands Tribunal in Bishopsgate Space Management Ltd and Teamworks Karting Ltd v London Underground Ltd [2004] RVR 89. It was accepted at the hearing that that the cars formed part of the business, and absent the scheme, they would have been turned into parts with a much higher value. Mr Fox's evidence on this point was unchallenged and it is logical therefore for a finding to be made that the claimant had been deprived of the opportunity to achieve the profits that would have been earned from them.
- In determining the outstanding issues/heads of claim, and applying the 3 conditions referred to in Shun Fung, it is important, firstly, for me to consider the extent to which the claimant is entitled to be reimbursed for losses under section 20(1) of the 1965 Act which states:
- The lease under which the claimant occupied LM1 could, at the valuation date, have been determined on 30 June 1996. His interest in the premises is to be valued on the basis that any prospect of renewal is to be discounted, and it has to be assumed, therefore, that the lease will terminate on that date - see Bishopsgate where the President and Mr P H Clarke FRICS, in applying Rugby Joint Water Board v Shaw-Fox [1973] AC 202 and Minister of Transport v Pettitt (1968) 20 P & CR 344, said at para 77:
- Indeed, the agreement of the parties at a figure representing twice the rateable value (£5,000) reflects this assumption. The same applies to disturbance or, under section 20, other losses. In Bishopsgate, the President and Mr Clarke continued, at 78:
- I make no apology for quoting from Bishopsgate at length as, despite an acknowledgment in the claimant's submissions that the same principles apply, the council did not advance any argument on this basis. However, this must, in my judgment, affect the "other losses" items claimed (items iii, iv, v, viii and the 'alternative' claim for the cost of additional works to LM2). The causation aspect therefore is, in my view, crucial to this determination, and with that in mind, I shall shortly turn to the specific heads of claim. But, before doing so, and bearing in mind the convoluted history of this case, I propose to deal at some length with the question of mitigation.
- Prior to the CPO, the claimant undertook the business he described, for the most part, on a part time basis and from the accounts for the 3 years to 30 September 1995 it is evident that he did little trading. In 1993 the accounts showed a net profit of £457 on a turnover of £2,044 of which £1,844 was described as 'sales and work done', and £200 appears to be an adjustment to his opening and closing stock of cars and parts. The following year showed a net loss of £220 and sales and work done of only £920, with the final year producing a loss of £1,228 and only £100 worth of sales. From this it is clear that the business was not operating as a profitable or seriously commercial enterprise during that time. However, the claimant said he saw the creation of a large stock of parts and cars as a "pension scheme" rather than as a viable current income stream, and anticipated that the value of his stock in trade would appreciate over the years. In the Notice of Reference to the Tribunal dated December 2002, the claimant (who by then was representing himself) sought compensation on the basis that a very valuable business had been extinguished, of £544,000. This was subsequently reduced to £233,000 of which £103,000 related to the value of his stock of cars and parts, as estimated by Mr Fox.
- The claim on that basis has now been withdrawn, and is now founded, in accordance with s.20 of the 1965 Act, on loss or injury sustained in relocating to LM2. At circa £130,000 that is a very substantial further reduction, but the claimant alleges that whilst, in terms of the basis of claim for compensation the business has not been extinguished, but has relocated to alternative premises, he is still unable to trade as a result of the council's actions. In my view, as the business was not trading as a viable going concern in the 3 years up to dispossession, but appeared to be a long-term investment, any delay in his ability to 'trade', whether caused by the council or not, must be seen in that context and also in the context of the fact that it has to be assumed he would be dispossessed, in any event, by 30 June 1996.
- It seems to me that the claimant, at the time possession was taken had, for whatever reason, become convinced in his own mind that he was relinquishing ownership of everything and that he would be receiving compensation for the value of the cars, parts and his business. He had been seeking alternative premises from at least July 1995 (when the council provided a substantial list of available premises). By 28 November, when his then appointed agent, John Milton, wrote to Mr Piell seeking agreement to approximately 25 cars remaining on site for a further 6 months and asking if one of the Lightburn Road units was available, it was evident that he had had little success. However, the council (by Mr Piell's letter of 22 December 1995) did offer the compound at Old Station Yard as a temporary alternative (following the claimant's proposal that it would be an appropriate location) and Mr Myers also indicated in his reply of 17 January 1996 (para 41 above) that Unit 5 was something "that could be progressed". But, following this, correspondence passing between the council, Mrs Shirley M Evans (the claimant's then appointed solicitor), Mr Milton and Mr Piell up to, including, and beyond the date of possession indicates to me, quite plainly, that, as suggested by the acquiring authority's counsel, a windfall opportunity had very belatedly been identified and seized upon.
- On 25 January 1996, Mr Milton said, in a without prejudice letter to Mr Piell in response to his offer [regarding the alternative premises and yard]:
- On 26 January, Mrs Evans wrote to the council and said (in part):
- In a reply of the same date, the council sought, on the assumption that the claimant "does not intend to remove any of the stock and equipment" prior to the proposed date of demolition (6 February 1996), confirmation of a number of points including:
- In a further letter to Mrs Evans dated 30 January confirming her intended attendance on-site at 3pm that day, Mrs Mayo of the council also said "can I assume you are relinquishing ownership to the council until the matter of extinguishment or removal of the business is resolved" to which Mrs Evans responded (after possession was taken, but on the same day) with the statement:
- Correspondence continued in similar vein following possession being taken, and in Mrs Evans' letter to the council of 1 February, she said (in part):
- In response, on 5 February, Mrs Mayo sought to place on record the council's understanding of recent events which included:
- Mr Piell then wrote to Mr Milton on 5 February, following a meeting the two had and after summarising a number of points of concern said:
- In my judgment, this last letter effectively summarises the council's position and I am satisfied that its offer (which Mr Myers was initially keen on progressing) demonstrates that it has been more than fair in trying to assist the claimant in relocating. Although, as I have recorded above, the initial claim for total extinguishment has now been withdrawn, the correspondence and discussions that took place leading up to and following the dispossession indicate to me, beyond doubt, that the claimant did not take reasonable steps to mitigate his loss. Furthermore, I am satisfied on the evidence of Mr Greenwood that there was nothing to prevent him continuing his business on a temporary basis from Unit 5 and the Old Station Yard. I find it totally inexplicable that, even when he realised ownership of his stock and equipment had not passed to the council, and that his total extinguishment claim was being strongly resisted he took no steps whatsoever to clarify the situation regarding the planning permission or terms of the lease. I accept Mr Greenwood's entirely logical statement that the council would not have offered to move the claimant to Lightburn Road if he was unable to trade from there. As to his concerns over having to move his cars across an adopted highway to get them to the premises for dismantling, this is not an insurmountable problem. From the nature of the work he undertook, it is in my view likely that he would only be dismantling one car at a time, and that, bearing in mind the part-time nature of his business, moving cars from one site to the other would not be a frequent requirement. In my judgment, it would not be unreasonable for the claimant to accept the slight inconvenience and modest additional cost of arranging a pick-up truck to effect the necessary vehicle movements as and when necessary.
- As to his comments regarding the need to connect up 3 phase electricity, the council has confirmed that it is already laid to the building, and I do not think it unrealistic for him to have been able to negotiate a contribution to some temporary internal arrangement for the air lines. I accept the council's point that the pulling eyes were no longer appropriate for the kind of business that was being undertaken. Finally, on this point, the suggestion by the claimant's former solicitor that the need for a second move was only putting off the need for extinguishment does not bear scrutiny. The council had offered to pay for the second move, and indeed the cost of that is agreed at £8,768.43.
- During the course of 1996, the claimant acquired the freehold of LM2 which I have had the benefit of inspecting, and, subject to the need to complete further works, including the internal wiring of the premises, seem to me to be eminently suitable for his requirements – despite the fact that there is less room for the storage of vehicles externally (which aspect I comment upon below). It appears to me to have been most fortuitous that those premises became available when they did, and they seem to be much more appropriate than one of the main alternatives that he had considered (premises in Barrow in Furness which I also saw).
- Therefore, for the reasons set out in these paragraphs, I am satisfied beyond doubt that there was no reason why the claimant's business should have had to be extinguished (as he has obviously come to realise through the amendment to his basis of claim) but even if it had, there could have been, as the council pointed out in its letter of 5 February, no compensation for loss of the business, profits or goodwill as there was, in my judgment, no market value in it. In terms of the enforced relocation, the claimant's actions and conduct since possession of LM1 was taken have persuaded me that, on the grounds of failure to mitigate alone, most of the losses he alleges in the revised claim could have been avoided. I now turn to the specific heads of claim as summarised in para 3.
- On (ii), I prefer the council's arguments and agree that approximately £7,000 for an ageing 3-phase electricity circuit, some airlines and strategically located 'pulling eyes' does seem excessive. I consider that the claimant would have been lucky to get anything more than a fairly nominal amount (perhaps, in my judgment, £2,000) from an incoming tenant who, it is assumed, is in the same business - motor repairs. I award that sum as Mr Piell's estimate of nil, under that head is, I think, unrealistic. As a result of the award under this head, the claim in the alternative for additional works to LM2 does not fall to be considered.
- I now turn to the other losses, and mindful of the fact that, per Bishopsgate, both the value of the interest and the claim for loss of profits are limited to the period ending with the date of termination, on (iii), I am of the view that, as argued by the council, the claim for proprietor's time in seeking alternative premises and supervising removals, is substantially overstated, even at the 'reduced' hours estimated as reasonable by Mr Lyons. However, whilst I accept Mr Piell's statement that the agreements he reached with the other Low Mill tenants were more realistic, I do accept that the removal of Mr Myers' business would, with the need for additional yard space, be more difficult. Doing the best that I can, therefore, I determine that the compensation under this head shall be £2,000.
- As to (iv), the claim for double overheads, I find Mr Piell's evidence on this point persuasive. The claimant has argued that the cars were valuable assets, and accepted (as recorded in Mr Piell's file note of the November 1998 meeting) that up to 6 cars could be stored outside LM2. However, the only cars that were removed to LM2 were the 6 that there was room for inside the building. Therefore, as of late 1998 (if not sooner), there was certainly the opportunity to move another 6 cars from the yard to LM2, leaving 28. But, the fact that the claimant made no efforts to use Unit 5 during the rent free period (during which time he could have dismantled at least some of the cars), and then, as Mr Piell said, "left them to rot" at Old Station Yard for a further 6 years cannot be put down to the council. Mr Myers admitted that he made no attempts to sell the cars, either through the Peugeot Owners Club, or otherwise, and there was no evidence that he had tried to find another site for them. He did not, therefore, in my judgment, mitigate that claimed loss, and I do not allow it.
- I now turn to the alleged loss on forced sale of the cars (v). Mr Piell has made no allowance under this head of claim. The acquiring authority's case is that any loss has not been demonstrated as being caused by the compulsory purchase, but rather by the claimant's own inaction. The claimant seeks £57,800 (which allows for the added value created by dismantling) or, in the alternative, according to Mr Lyons' calculation on the basis of value to owner, at least £44,200 (the difference between Mr Fox's 'market value' of £400 per vehicle and the enhanced, dismantled value of £1,700 = £1,300 x 34 cars). It is Mr Myers' case that he would not have had to get rid of the cars if it had not been for the CPO.
- As I have said, in dealing with the claim for double overheads, it is evident that the claimant failed to do anything about the cars for a considerable period of time despite having had the opportunity to do so. He said that he had not made any attempts to sell any or all of them due to "other pressures", and he has also, through his failure to continue his business either at the temporary premises, or since moving into LM2, done nothing (over a period that is now in excess of 8 years) to extract the claimed additional value by dismantling them. Indeed, Mr Fox admitted in cross-examination that the cars could, in his opinion, have been sold at around £400 each, even though there were a large number of them. The fact that the claimant eventually gave the cars away rather than selling those that he could not accommodate elsewhere must, in my judgment, be his loss. Mr Myers accepted, at a meeting with Mr Piell in November 1996, that outside storage of 6 cars at LM2 would be acceptable to him, so any argument that he had to dispose of the remainder, at a loss, due to the council's actions is unsustainable. As giving the cars away was not caused by the council, and the claimant failed to mitigate his losses under this head, the question of whether compensation should reflect loss of potential profit from dismantling them does not need to be considered here.
- The remaining issue relates to the estimated cost of re-cataloguing and sorting the parts. I find I am unable to attach any weight to this element of the claim which was only introduced at the last minute, and seems to me to be an attempt to soften the impact of the withdrawal of the extinguishment claim. I accept the council's arguments that the claimant had every opportunity to effect some control over the creation of the inventory that was prepared by the council, and am also mindful of the fact that he has done nothing in the intervening 8 years to attempt to sort the stock out. In the knowledge that his lease could be terminated at relatively short notice, the claimant should, in my view, have had his parts properly catalogued and labelled as a matter of good business practice long before the subject of compulsory acquisition came to a head. Whilst noting that Mr Piell had no challenge to the amount that Mr Myers estimated it would cost, I accept his assertion that such losses have not been mitigated and that the fact that an inventory now exists must put the claimant in a better position than he was.
- Finally, it does seem to me that, overall, bearing in mind the nature of the claimant's former lease, the council has been more than fair in terms of the actions it has taken to assist him in the relocation of his business. In addition to its offers under the various heads of claim, it made alternative premises and storage areas available, rent free, for a period of 1 year, agreed to pay for the second move (to LM2) and provided, at not insubstantial cost, a 3-phase electricity supply to those premises. This, and the voluminous correspondence that passed between the parties (of which I have only referred to a small proportion above), demonstrates that it has more than adequately fulfilled its statutory duties. The claimant's failure to mitigate his losses, and particularly the fact that he made no attempt to gain access to the temporary premises or yard for the whole of the rent free period, is, as I have said, something for which the council cannot be held to account. The fact that this determination only marginally exceeds the offer made by the council reflects that situation.
- I therefore determine that the acquiring authority shall pay compensation to the claimant under the provisions of s.20(1) of the 1965 Act in the sum of £26,520.00, less interim payments already made. The compensation is made up as follows:
- This decision concludes my determination of the substantive issues in this reference and will take effect when the question of costs has been decided. At that point, and not before, the provisions relating to the right of appeal in section 3(4) of the Lands Tribunal Act 1949 and order 61 rule 1(1) of the Civil Procedure Rules will come into operation. A Letter accompanying this decision sets out the procedure for submissions on costs in writing.
- Submissions have been received from the claimant regarding my application of Bishopsgate to this case. In pointing out that the tenants in Bishopsgate had "precarious interests" by virtue of having no protection under the Landlord and Tenant Act 1954, whereas here Mr Myers did have such protection (and thus also the benefit of section 47 of the Land Compensation Act 1973), it was suggested that in not drawing the distinction my determination under various heads might have been affected. In the circumstances, I invited and received submissions on the point from the acquiring authority.
- It was the claimant's case that, for example, my decision on the question of the 'just allowance' payable under s.20 of the 1965 Act might have been different if I had not assumed that the tenancy could have been terminated only 5 months after the valuation date. The price that an incoming tenant would be prepared to pay for the benefit of the use of the premises with its electrical and other fittings could well, it was suggested, be much more if that tenant would be able to exercise his rights under the 1954 Act. It was submitted that my findings under other heads could also be affected and a request was made for me to reconsider the decision in the light of these submissions. Finally, it was also pointed out that the parties had agreed (as set out in the agreed statement of facts and issues) that one of the main areas of disagreement, and one upon which the Tribunal's determination was required, was "whether Mr Myers was entitled to compensation in accordance with section 47 of the 1973 Act in respect of the loss of his interest in Low Mill Tannery, and if so, the quantum of compensation." That issue, the claimant submitted, had not been referred to in my decision.
- On the latter point, the acquiring authority said that as no mention of the issue had appeared within the claimant's skeleton argument, the matter was specifically raised in the note prepared for the council in response, and canvassed on the first day of the hearing. That note said that: "At the outset, 2 issues might be resolved…First, that no issue arises under s.47 of the 1973 Act since compensation has been agreed in respect of [Mr Myers'] interest at 2xRV ie £5,000…." No further submissions were made by either party, and the agreed sum was awarded. For this reason, it was submitted, I should be reluctant to re-open the matter.
- However, in response to the claimant's arguments, the council said that the nature of the claimant's activities cast strong doubt as to whether his occupation of the subject property constituted a business tenancy within the 1954 Act at all. The fact that the activities were largely conducted at a loss with little trading occurring suggested they were more of a hobby than a commercial concern, and use for a hobby is not use for a business. Even if it was a business tenancy, the parlous state of the premises and its surroundings and the fact that the freehold was held by an absent landlord, presumably for investment purposes, suggests that any application for a new tenancy by the claimant under the 1954 Act would probably have been successfully resisted by the freeholder on redevelopment grounds, or that he anticipated a disposal of the whole estate. Thus, the tenancy would be likely to be terminated on those grounds and the reality of the situation was that the tenant's position was just as precarious as that of the tenants in Bishopsgate. An incoming tenant would realise that, and would not therefore attribute any additional value to the items referred to under the first head of claim.
- Furthermore, the council said, it should be remembered that the claimant was holding over under the terms of his original lease which specifically prohibited assignment or underletting. Accordingly any incoming tenant would have had to occupy "under some other arrangement", and would not therefore enjoy the protection of the 1954 Act in any event. Finally, none of the other heads of claim or my determination on them were affected.
- Section 47 of the 1973 Act states:
- The question of whether or not section 47 applies in this case was not specifically dealt with by me as an issue, as the parties had agreed the compensation for the value of the interest in subject premises prior to the commencement of the hearing. However, for the sake of completeness I conclude that it does. I do not accept the council's submission that due to the nature of his activities, whether or not the claimant had a business tenancy must be in doubt. The fact that the claimant only operated on a part time basis, had a very modest turnover and only an occasional profit, is not, in my judgment relevant. Whilst acknowledging the council's comments about what the landlord might do to oppose an application for a new tenancy, there is no evidence to support that view. I have to conclude, therefore, that the tenant enjoyed 1954 Act protection.
- Nevertheless, evidence or not, the long term future of Low Mill Tannery would, I think, be something that a potential assignee (if, indeed, the claimant was permitted to assign, which he was not) would have in mind as, of course, should the existing tenant. The nature of the premises and the surrounding land and buildings was undoubtedly such that that any tenant holding over, or any potential assignee, would anticipate the likelihood of future redevelopment, and the chances of successfully applying for a new lease in these circumstances would be much less than, for instance, such an application on a modern industrial estate.
- Therefore, whilst I am bound to accept that the circumstances in this case are different to Bishopsgate, I do not think that that fact affects my conclusions in terms of quantum. Firstly, the 'just allowance'. In my view, an incoming tenant would not offer any more than a nominal amount, as I said in para 65, for the equipment referred to by the claimant however long he expected to stay in occupation. It was accepted that the installations were old and it could be expected, therefore, that either maintenance costs would be high, or renewals would be required before too long. As to (iii) (see para 66), my conclusion was based principally upon what was realistic in the light of circumstances and in that respect I awarded an arbitrary figure which was more than had been paid under this head to the other tenants. I was not satisfied that the time and cost estimates provided by the claimant and his expert could be supported and, whatever the anticipated potential length of tenure at the subject premises, cannot see that a higher award can be justified.
- As to (iv) double overheads and (v) loss on forced sale of cars, these do not fall to be reconsidered. That leaves (viii) cost of re-cataloguing parts. I said in para 70 that in the knowledge that his lease could be terminated at relatively short notice the claimant should, as a matter of good business practice, have had the parts properly labelled and catalogued. In reality, whether or not the lease could actually be terminated on 30 June 1996, or whether it could be anticipated that it might, the rules of good business practice must, in my view, apply just as strongly. I find, therefore, that an award under this head is unsupportable, despite the marginally different situation that does apply.
- I am grateful to the claimant for bringing the differences applicable to the Bishopsgate case to my attention, and to the council for their response. However, having given the matter due consideration, I am satisfied that the compensation awarded in the above decision fairly represents the claimant's due entitlement.
- I now turn to the question of costs, upon which submissions have also been received. The claimant accepts that the compensation awarded in the sum of £26,520 is below a sealed offer of £30,000 made by the acquiring authority on 16 July 2003. Prima facie therefore, the council is entitled to its costs from that date. However, it was submitted that 'special reasons' exist under the provisions of s4(1)(a) of the 1961 Act which displace that presumption. Firstly, a hearing should not have been necessary. Following his appointment Mr Lyons submitted a report and properly quantified claim to Mr Piell in March 2004. No response was received. Mr Lyons also offered to meet with Mr Piell to discuss the claim with a view to achieving a settlement, and also asked why the council had not reviewed its sealed offer despite an indication having earlier been made that there might be an opportunity for it to be increased. Again, no response was received. Furthermore the council failed to co-operate in respect of the provision of further information that had been sought by Mr Lyons. It was also a fact that the claimant had succeeded under two heads of claim (claimant's time and 'just allowance'). For these reasons, the claimant seeks an order to the effect that either each party should bear its own costs from the date of the sealed offer or, the claimant only be required to pay a modest proportion of the authority's costs.
- Under the provisions of s.3(5) of the Lands Tribunal Act 1949 (costs to be at the discretion of the Tribunal) it was also submitted that the claimant should be awarded his costs from the date of the Notice to Treat (1 May 1995) until the date of the sealed offer. Costs incurred by the claimant during that period were as a direct result of the CPO. A claim in answer to Notice to Treat was submitted promptly on 18 May 1995, but it was not until a without prejudice letter from Mr Piell dated 26 January 1998 that an offer of compensation was made. Also, any award of costs relating to the period prior to the sealed offer should take into account the fact that the council's application to have the case struck out was dismissed at the pre-trial review held on 18 June 2003 and therefore the costs of that hearing should be borne by the council.
- The acquiring authority seeks the whole of its costs from the date of the sealed offer together with a proportion of its costs (including those of the pre-trial review) in responding to the claimant's alleged unreasonable conduct prior to that date in pursuing what it described as a "grossly inflated claim advanced on bases that had since been abandoned or were unfounded in fact". Neither the original claim of £529,000 or the revised claim of £129,000 had ever been considered reasonable (a stance borne out by the decision), and it would be unfair for the authority to have to pay for the work in responding for a claim of that magnitude. The costs awarded in Rank Leisure and Others v Castle Vale Housing Action Trust (2001) (LT) ACQ/168, 172,173 and 175-177/1999 and ACQ/117/2000 (heard together) (unreported) included those of the acquiring authority prior to the date of a sealed offer as a departure from the normal rule on account of the claimants pursuing the claim on a misconceived basis, unsupported by fact. This and an inflated claim precluded settlement by negotiation. It was submitted that the circumstances of this case were the same and, therefore, the council should have its pre-sealed offer costs.
- In response to the claimant's submissions that Mr Piell had failed to respond to Mr Lyons' letter of 10 April 2004, the council pointed out that Mr Lyons had acknowledged in it that Mr Brand (claimant's solicitor) and Mrs Fenwick (of the council) were in dialogue at that time, that Mrs Fenwick had indicated that the sealed offer might be capable of improvement "by a couple of thousand pounds", and that Mr Brand had said such an amount would be totally unacceptable to his client. The parties were so far apart in their opinions as to the value of the claim that further meetings between the experts would have been pointless, but Mr Piell had co-operated fully with Mr Lyons in the protracted discussions relating to the eventually agreed statement of facts and issues. As to the costs of the pre-trial review, the council submitted that they should be the liability of the claimant. Whilst the application to strike out had failed, it had had an element of success in that I advised the claimant "in the clearest possible terms" that his claim in its then present state would fail, that he was in danger of costs if the matter were to proceed to a full hearing on that basis, and that he should seek legal and experts advice to discuss the merits of his claim. The claimant subsequently did this, and the claim was substantially reduced. Although the revised sum (circa £129,000) was still unacceptable to the council, it was clear that the pre trial review had had the effect of causing the claim to be significantly amended.
- The claimant also submitted detailed comment upon the costs schedule submitted by the acquiring authority as a result of which the council suggested that the question of costs should, if not capable of being agreed, be the subject of a detailed assessment by the Registrar. Finally, in respect of Rank Leisure, the claimant said that that case had involved a substantial claim for ransom value (£9 million) and in such cases there was rarely room for compromise. The instant case was principally concerned with disturbance, for which some success had been achieved and, in dismissing the council's application to have the claim struck out I had implicitly confirmed that the case was neither misconceived or without foundation.
- Section 4(1) of the 1961 Act provides as follows:
- It is a fact that my award was less than the sealed offer. I do not think that there are any special reasons under section 4(1) of the 1961 Act why the claimant should not have to bear the acquiring authority's costs from the date of it, and accept the council's submissions to the effect that they co-operated with the claimant's current solicitor and surveyor in an appropriate manner.
- Turning now to the period prior to the date of the sealed offer, the acquiring authority in seeking its costs accuses the claimant of pursuing a grossly inflated claim advanced on bases that have since been abandoned or were unfounded in fact and uses Rank Leisure as authority for the proposition.
- The proper approach in principle for the Tribunal to adopt in circumstances where the acquiring authority assert that the claimant has exaggerated his claim is to be found in Purfleet Farms Ltd v Secretary of State for Transport, Local Government and the Regions [2002] RVR 368. At para 42, Chadwick LJ said:
- In my view, Mr Myers' claim of £233,000 represented his genuine perception of the value of the business at the time it was made. As to the revised claim in the sum of £129,000, made on a different basis and following his most recent professional advice, I do not regard it as grossly exaggerated or unreasonable even though it was substantially more than the sum awarded (which was close to, but below the amount of the sealed offer). Whilst the same cannot be said for the "claim" of £529,000 I have seen no evidence that that amount was seriously pursued, beyond it being set out in the annexure to the notice of reference or that the claimant incurred any significant costs in relation to it. I conclude also that the claimant's conduct has not led to an obvious and substantial escalation in the costs of the acquiring authority relating to its defence of the claim. It does not appear to me that, in the period up to the sealed offer, they incurred costs in resisting the claim that they would not have incurred if it had been pitched at some lower level. It follows that there is no sufficient reason to deprive the claimant of his costs prior to the date of the sealed offer, still less to make an award in the acquiring authority's favour.
- As to the costs of the pre-trial review, that was principally for the purpose of dealing with the council's application to dismiss, and despite their submissions on this point, I conclude that it would be unfair to burden the claimant with the authority's costs relating to it. In my view, it would be more equitable for each party to be responsible for its own costs relating to the PTR.
- For the above reasons, I determine that the claimant shall pay the acquiring authority's costs in the reference from the date of the sealed offer (16 July 2003), but that the claimant shall have his costs prior to that date except in respect of the pre-trial review where there shall be no order for costs. The awarded costs, if not agreed, to be the subject of a detailed assessment by the Registrar.
[2004] EWLands ACQ_156_2002 (8 October 2004)
ACQ/156/2002
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
BETWEEN
FRED DAVID MYERS
Claimant
and
SOUTH LAKELAND DISTRICT COUNCIL Acquiring
Authority
Re: Unit 35, Low Mill Tannery,
Ulverston, Cumbria
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 [2004] RVR 89
Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 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
DECISION
| 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 |
| £129,428.43 |
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.
Facts
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.
Issues
(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
Claimant's case.
Acquiring Authority's Case
Closing submissions
"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.
CONCLUSIONS
"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 [1941] 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 [1995] 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 [1991] 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 |
| TOTAL | £ 26,518.43 |
| Say | £ 26,520.00 |
DATED 14 July 2004
(Signed) P R Francis FRICS
ADDENDUM
"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 [1995] 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