Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
United Kingdom Upper Tribunal (Lands Chamber)
You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> Welford v Transport for London [2010] UKUT 99 (LC) (09 April 2010)
URL: http://www.bailii.org/uk/cases/UKUT/LC/2010/ACQ_26_2007.html
Cite as: [2010] UKUT 99 (LC), [2010] RVR 200
[New search] [Printable RTF version] [Help]
COMPENSATION
Compulsory Purchase
|
TRIBUNAL (LANDS CHAMBER) |
UT Neutral citation number: [2010] UKUT 99 (LC)
ACQ/26/2007
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
COMPENSATION – compulsory purchase of part of forecourt to commercial premises and half road width for highway improvements – loss of rent and rental voids – injurious affection – valuation assumptions – personal time – pre-reference costs - Land Compensation Act 1961 section 5, rule (6) and Compulsory Purchase Act 1965 section 7 – compensation determined at £8,641.50
IN THE MATTER of a NOTICE OF REFERENCE
BETWEEN TERENCE CHARLES GEORGE WELFORD Claimant
and
TRANSPORT for LONDON Acquiring
Authority
Re: Worldwide House, Lanrick Road, London E14 0JF
Before: P R Francis FRICS
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on
14 & 15 December 2009
Christiaan Zwart, instructed by Hughmans, solicitors of London EC4, for the claimant
Richard Honey, instructed by Eversheds, solicitors of London WC2, for the acquiring authority
The following cases are referred to in this decision:
Director of Buildings v Shun Fung [1995] 2 AC 111
Pattle v Secretary of State for Transport [2009] UKUT 141 (LC) LT ref: ACQ/7/2007
Tombstone Ltd v Raja and Another [2008] All ER (D) 180, [2008] EWCA Civ 1444
Midgulf International Ltd v Groupe Chimique Tunisien [2010] EWCA Civ 66
The following cases were also referred to in argument:
Dawkins v Ash Brothers and Heaton Ltd [1969] 2 AC 366
Prasad v Wolverhampton Borough Council [1983] 2 WLR 946
Optical Express (Southern) Ltd v Birmingham City Council [2004] RVR 106
Lindon Print v West Midlands County Council (1987) 283 EG 70
Wildtree Hotels v L B Harrow [2001] 2 AC 1
Simmonds v Kent County Council [1990] 1 EGLR 227
Street v Mountford [1985] 1 AC 809
Crago v Julian [1992] 1 WLR 372
Trustees of St John’s Hospital v Keevil and Anor [2001] EWCA Civ 1730
Rhone v Stevens [1994] 2 AC 310
Slipper v Tottenham and Hampstead Junction Railway Co [LR] 4 Eq 114
Rugby Joint Water Board v Shaw-Fox [1973] AC 202
Banham v Hackney LBC (1971) 22 P & CR 922
Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565
Walsh v Lonsdale [1882] LR 21 Ch D 9
R v Tower Hamlets LBC ex p Van Goetz [1999] QB 1019
DECISION
Introduction
1. This is a decision to determine the compensation payable to Mr Terence Welford (the claimant) for losses alleged to have occurred as a result of the compulsory acquisition of the freehold interest in 20 sq m of forecourt and access yard to the front of office, warehouse and showroom premises at World Wide House, Lanrick Road, London E14 (the subject premises) together with half of the road width of Lanrick Road (about 134 sq m and agreed to have no monetary value). The land, which was identified as Plot 24, was acquired by Transport for London (the acquiring authority or TfL) under the A13 Trunk Road (Ironbridge to Canning Town Improvement) Compulsory Purchase Order (No PS 13) 1998 (the CPO) in connection with improvements to the A13 trunk road. Notice to Treat was served on the claimant on 27 January 1999, Notice of Entry was served on 13 December 1999 and, by a letter of 10 October 2000, the claimant was informed of the acquiring authority’s intention to enter and take possession of the land on 27 November 2000.
2. Notice of reference to this tribunal was sent by the claimant on 22 February 2007 and a dispute arose as to whether the reference was out of time. At a hearing of a preliminary issue on 11 January 2008, at which the claimant contended that it was quite apparent from the deed of surrender [reference to which will be made later] that TfL did not take physical possession until 27 February 2001, the President considered evidence relating to the background and chronology of events leading up to the acquisition. In his decision of 10 April 2008 he found for the claimant, and determined that the date of entry was indeed 27 February 2001, and the claim was not, therefore, statute barred. That date is the valuation date for the purposes of this reference.
3. The claimant sought compensation under 6 heads amounting to £157,416, however it was subsequently agreed that that should be reduced by £21,625 (the surrender premium) leaving a net claim of £135,791. The acquiring authority valued compensation at £1,750. It also accepted the principle of pre-reference costs, but as no sum had been specified by the claimant, the matter was not considered at the hearing. However, that aspect was covered subsequently in closing submissions.
4. Mr Christiaan Zwart of counsel appeared for the claimant, whom he called, together with Mr Richard William Cobb FRICS, chairman of G L Hearn & Partners, Chartered Surveyors of London W1, who gave expert valuation evidence. Mr Richard Honey of counsel appeared for the acquiring authority and called Mr Roger William Moore BSc BA (Hons) MRICS MCPA, a director of the Chelmsford office of Lambert Smith Hampton who gave valuation evidence.
5. Closing submissions in writing were received from the acquiring authority on 15 January 2010, with extensive and detailed closing submissions on the facts, evidence and law received from the claimant on 29 January 2010. In the light of conclusions derived from certain aspects of the law included within the claimant’s submissions, I sought further submissions from counsel for TfL in reply, and allowed the claimant a further, and final right of reply. These were all received by 22 February 2010.
Facts
6. The parties produced a statement of agreed facts and issues remaining to be determined by the Tribunal from which, together with the evidence, I find the following facts. The subject premises comprised a post-war two storey brick and flat roofed showroom/office building together with an adjacent single storey steel framed and metal clad warehouse located on the north west side of Lanrick Road, E14 on the inside of a point where the road performed a 90 degree turn to the left (approaching from the west). The office building comprised ground floor showroom, office and kitchen of 122.9 sq m (1,323 sq ft) with offices and kitchen above of 79.5 sq m (856 sq ft) and further offices of 26.2 sq m (281 sq ft). The front elevation of this building, which included the main staff/customer access faced approximately due north and gave onto a triangular concreted car park which was shared with an adjacent building (referred to as the “City Eggs building”), and accessed off the north-west going section of Lanrick Road. The warehouse building of 289.1 sq m (3,112 sq ft) was attached to the rear, south, elevation of the World Wide House offices, and faced onto a small, separate, yard which had vehicular access off the north–east going part of Lanrick Road. Between the two yards was a further small triangular yard formerly used for storage.
7. The premises were located off the A13 East India Dock Road, from which Lanrick Road was accessed, and in the vicinity were a waste transfer station (opposite), further offices (adjacent to and outside the claimant’s ownership), the City Eggs Building (owned by the claimant), two further warehouses and the Blackwall Trading Estate. The scheme necessitating the purchase by TfL of a small part of the yard serving the World Wide House warehouse building (and the half-road width) encompassed major improvements to the alignment of the A13. This included a minor change to the layout of Lanrick Road, effectively moving the north-east going section (off which the warehouse was accessed) about 20’ to the north, thus reducing the size of the entrance yard by approximately that amount.
8. The entirety of World Wide House was let to World Class Gifts Ltd (WCG) – with which there was a family connection between the claimant and a director – under a lease dated 2 May 1989 for a term of 20 years at an initial rent of £10,400 pa subject to 5 yearly rent reviews. It was agreed that the market rental value at May 1999 was £26,000 and, at the valuation date, £30,000. WCG undertook the import and onward distribution of giftware sourced principally from Europe and received regular deliveries to the warehouse building by particularly large, 15m long, European articulated trucks. On 27 January 1999, Notice to Treat was served on the tenant (the same date as the Notice served upon the claimant). In June 1999, a highways engineer (appointed by the claimant freeholder) concluded that:
“…the proposed re-alignment of Lanrick Road has a significantly detrimental impact on [World Wide House] in that it results in the building no longer being able to be serviced by the commonly used 15m articulated vehicles.”
TfL’s expert technical highways advisor, in a letter of 3 August 1999, accepted that:
“….it is not possible to position a 15m articulated vehicle on or adjacent to the delivery bay without obstructing the footway or carriageway…”
and said
“In conclusion we concur it is not possible to position a 15m articulated vehicle without obstructing the public highway … it would be possible to use a 10m or 12m long unit with the tractor units removed, although the 12m long uncoupled unit might still infringe 1m into the footway.”
9. On 4 November 1999, the claimant agreed a rent concession, requested by the tenant in respect of alleged trading difficulties caused by the scheme, to £13,000 pa “for the forthcoming year”. On 27 April 2000 WCG’s agents submitted a compensation claim based on relocation of the business, but it subsequently transpired that no suitable alternative premises could be found and, on 2 October 2000, TfL agreed to proceed on the basis of total extinguishment. WCG vacated World Wide House on 12 January 2001 and the tenant’s claim was settled by agreement (following a reference to this Tribunal) in September 2003 at £214,324.91 plus costs.
10. The acquiring authority said that it took over the rights and obligations of the WCG lease at the valuation date, but did not occupy the premises. TfL subsequently entered into a Deed of Surrender on 29 June 2001 on payment of a premium to Mr Welford in the sum of £21,625. The premises remained vacant from the date WCG left until it was re-let to Mainport Ltd in September 2002 at £31,200 pa.
11. The adjacent City Eggs building, which lies to the north of World Wide House, was not affected by the CPO in terms of land requirement. It extended to 390 sq m (4,197 sq ft) and was a modern steel framed and clad warehouse which was let by the claimant to City Eggs on a periodic tenancy at a rent of £26,000 pa. That figure was agreed to be the market rental value as at the valuation date. City Eggs gave to the claimant notice of intention to leave on 24 August 2001, said to be due to the inability to operate a food business in the scheme works environment, and vacated the premises on 28 September 2001. They were re-let to Docklands Eggs some 34 weeks later, in June 2002, at the same rental.
The claim
12. The freeholder’s claim was thus:
(1) Reimbursement of the rent concession allowed to the tenant from May 1999 to December 2000: £21,666.
(2) Loss of rent on World Wide House from February 2001 to September 2002: £45,000 (Less the surrender premium of £21,625) leaving £23,375.
(3) Injurious affection – Reduction in freehold value to World Wide House due to access restrictions: £63,750.
(4) Injurious affection – loss of rent on City Eggs unit: £17,000.
(5) Claimant’s personal time: £10,000.
Total £135,791.
(6) Pre reference costs
Issues
13. The issues to be determined by the Tribunal are:
1. Whether the alleged loss of pre-possession rental income from WCG (£21,666) is compensatable, and if so whether any is due.
2. Whether any loss associated with the post-possession letting void of World Wide House (£23,375 net) is compensatable, and if so whether any is due.
3. Injurious affection – loss of value to World Wide House (£63,750).
4. Injurious affection - loss of rent on the City Eggs building (£17,000)
5. Claimant’s personal time in relation to the reference.
6. Pre-reference costs
Claimant’s case
14. Mr Welford said the simple fact was that the reduction in the size of the yard serving the warehouse building had had a devastating affect upon his tenant’s business (as an importer of Italian glass and china), to the extent that it was no longer able to continue trading from World Wide House. Prior to TfL’s acquisition of the small area of courtyard, there was just sufficient room (as confirmed in the report he had commissioned from The Bellamy Roberts Partnership, specialist highways and transport engineers) for the 15m European articulated lorries to unload (both tautliners and tailgate accessed units) at the warehouse without (after the tractor unit was uncoupled) obstructing the highway. Most if not all of the tenant’s deliveries came in these trucks. Once the yard had been reduced in size, not only were 15m trucks unable to deliver, but the smaller 12m units would also encroach onto the footpath. Whilst it would be possible to reposition a 15m unit so that the highway was not obstructed, the sloping nature of the site was such that forklift trucks, which need to operate on a level surface, would not be able to access the trailer unit in that position.
15. As to his relationship with the tenant company, Mr Welford said that his sister, Mrs Savic, was one of the directors. Although it had subsequently been agreed that the rental value as at the review date of May 1999 was £26,000 pa (an increase from the £18,000 pa that had been paid since the 1994 review), he had in response to a request from her agreed, on 4 November 1999 and in reasonable anticipation of the forthcoming road scheme, to what he described as a 50% rent concession to £13,000 pa, “for the forthcoming year.” He said that he was keen for the tenants to stay as long as possible, and had he not agreed to the concession, they “would have gone.” However, he accepted in cross-examination that the location of the premises was ideal for WCG, and it would have been unlikely that they would have moved before they were forced out due to circumstances. The loss of rent was, he said, clearly a direct consequence of the CPO, and whilst he accepted that the reduction had been agreed over a year before the land was taken and the works in Lanrick Road commenced, he insisted that it was the prospective loading difficulties, alongside their general concerns over the scheme impact as a whole, that prompted the request for a rent concession. Whilst he accepted that the tenant’s letter in October 1999 requesting the reduction mentioned only the impending roadworks rather than the loss of part of the forecourt, he said that although it did not mention all the facts, they were well aware that land was also to be taken. Mr Welford said that the letter had alerted him to the fact that the rent had not been reviewed in May in accordance with the terms of the lease, and in cross-examination accepted that the one year concession was intended to be from the date of his letter, and not backdated to the missed rent review. It was in fact applied for 13 months from November 1999 to December 2000. In response to a question from me, Mr Welford said that the 50% referred to in respect of the concession was from the agreed rental value (£26,000), rather than from the rent that was actually being paid.
16. Mr Welford went on to say that, as it transpired, WCG did vacate on the date that the land was taken and although the acquiring authority took over the lease, they surrendered it on 29 June 2001. The premises then remained vacant until a new tenant was found – Mainport Training (Wales) Ltd – who took occupation in September 2002, which he admitted was before the roadworks were finally completed, but said that disturbance to businesses was by then less than previously. That company used the warehouse as a training school for fork lift truck drivers and, apart from the initial delivery of fork lifts, had no ongoing requirement for unloading access. Mr Welford said that it had been extremely difficult to find a new tenant due to the loading constraints caused by the reduction in the yard area, and he had been fortunate to find Mainport.
17. Asked in cross-examination why he had not appointed an agent to re-let the premises, Mr Welford said that although he had approached a local firm, they were not interested due to the “utter chaos” that the ongoing roadworks had caused to Lanrick Road. From August 2001, the area was like a building site, the roadway was partially fenced off and access to the premises was extremely difficult. He said he had not personally attempted to market the premises for a period after October 2001 as there was little point. However, he had his own network of East End contacts through a group of 50 local businessmen who met monthly. Mainport had been introduced through one of those contacts.
18. In respect of TfL’s surrender of their lease obligations in June 2001, Mr Welford acknowledged that he had not been forced into it but said that the “carrot” was that TfL (through Mr Moore) indicated they would release the £60,000 retention that they had been holding against WCG’s compensation in case Mr Welford had pursued them as successors to WCG for arrears of rent and repairs. He agreed that the single paragraph lease did not contain a break clause and, therefore, were it not for the surrender, TfL would have continued to be liable for the rent. He accepted that it was clear from clause 3.1 of the surrender document that TfL was under the impression the rent had been reviewed from £18,000 to £26,000 pa and it was upon this basis that the surrender payment (rent from the valuation date to 24 December 2001 and £305 empty rates liability) had been calculated. He also accepted that had a tenant been found, he had the opportunity to let the premises at the agreed market rent of £30,000 from June 2001 rather than the £26,000 pa TfL would be paying until the next due review in 2004.
19. Mr Welford said that the reason for City Eggs leaving the premises that were adjacent to, but not part of, World Wide House was directly related to the works in Lanrick Road including the laying of a new sewer; that Dockland Eggs was not a company related to either himself or City Eggs, and that by the time they moved in, whilst the majority of the roadworks had been completed, some works were continuing.
20. Regarding his claim for personal time, Mr Welford said that it had been necessary for him to visit the premises two or three times a week throughout the vacant period – that being some 2 hours per week for 18 months, and had also had to remove squatters, secure the premises and undertake repairs and redecoration works. Another of his sisters ran a canteen/café on the small triangular forecourt (former storage area) of World Wide House after it had been vacated and whilst the roadworks were underway, and he said he used to go there for breakfast every day. He said that, in connection with pre-reference costs, he could not recall whether or not he had been billed by Mr Cobb, or whether he had been paid.
21. Finally, Mr Welford confirmed that he had subsequently sold World Wide House and the City Eggs building for residential development in the sum of £1.4 million.
22. Mr Cobb is a chartered surveyor with 40 years experience in the valuation of property throughout the United Kingdom. He said he had been instructed by the claimant to assess the compensation due under the various claim heads, and produced a report dated 18 December 2008 together with a rebuttal, dated 3 March 2009, to Mr Moore’s report. He said that wherever the specific heads of claim fell under the provisions of the 1961 Act, under the principle of equivalence, a claimant is entitled to be compensated fully and fairly for his loss.
23. As to the loss of rent caused by the concession that Mr Welford had given to WCG, Mr Cobb said that he had assessed this at £21,666, being 20 months at £13,000 – the difference in annual rent between the £26,000 agreed rental value and the amount actually paid by the tenant. The rent reduction, he said, had been allowed in anticipation of the adverse impact of the proposed roadworks He said that there had been some disagreement as to when exactly the works in Lanrick Road commenced, and although he could not personally attest to a precise date, he was aware that preliminary works in the area were underway by October 2000, including the removal of occupiers in the areas that were directly affected by the wider scheme.
24. He accepted in cross-examination that, if it were to be determined that any pre-possession loss of rent could be compensated (and that was a matter for legal submissions) the claimant could only recover the amount of concession actually made. If this was a reduction from £18,000 to £13,000 pa, then that was £5,000 pa, and not £13,000 pa as claimed. Mr Cobb also referred, in his rebuttal to Mr Moore’s report, to the fact that the Notice to Treat was extant some time before the tenant asked for an abatement of rent. The duration of the relief granted by the claimant increased as a direct consequence of the delay to the commencement of the scheme until some 2 years after the Notice to Treat. The acquiring authority had, he said, failed to appreciate the damaging affects of the prospect of acquisition, particularly where there was uncertainty as to whether or not the business would be able to continue trading. The principle of reduced value as a consequence of the prospect of compulsory acquisition was, he said, well established – see Dawkins v Ash Brothers and Heaton Ltd [1969] 2 AC 366. Mr Cobb said the principle of a claimant taking action in advance of a Notice to Treat is also well established, see Prasad v Wolverhampton Borough Council [1983] 2 WLR 946 and Optical Express (Southern) Ltd v Birmingham City Council [2004] RVR 106. In Lindon Print v West Midlands County Council (1987) 283 EG 70 it was held that the onus is on the acquiring authority to prove that the claimant has failed reasonably to mitigate his loss, and that he is only required to act reasonably - the standard of reasonableness not being high. There was no doubt that the claimant had acted reasonably in attempting to mitigate losses, by taking steps to help the tenant stay in occupation.
25. Mr Cobb calculated the claim for the loss of rent during the void period after WCG left the premises on 27 February 2001 until Mainport took occupation in September 2002 at £45,000 (20 months @ £26,000 pa) but acknowledged that the surrender premium of £21,625 paid by TfL should be deducted to leave a net figure of £23,375. He had said in his report (para 4.4) that he understood, with there being no break clause in the lease, TfL would be liable for the rent up to the end of the lease in 2009, if a surrender had not been agreed. However, in cross-examination he said he thought he had been wrong in saying the tenancy would subsist, and that the occupation was in fact an annual periodic tenancy that could be terminated on six months notice (as intimated by Mr Moore in his letter of 7 June 2001). Nevertheless he did not resile from his view that TfL had taken over WCG’s obligations as tenant, and that TfL were the effective tenant from 27 February 2001 until the surrender occurred. At this point in the proceedings, Mr Honey, for the acquiring authority, advised that its case was, in fact, that the tenancy would have subsisted if it had not been for the attempt to surrender, until 2009. That was the basis upon which Mr Moore had prepared his valuations, and what he had said in his letter to Mr Cobb of 7 June 2001 was wrong.
26. Mr Cobb went on to say that Mr Welford had been disappointed that TfL wanted to surrender their lease, especially as their reasoning, in part, was linked to the ongoing delays in determining WCG’s compensation claim, but nevertheless he had “accommodated the authority’s requirements to help reduce the overall cost.” The acquiring authority undoubtedly used the release of the retention from WCG’s compensation as a lever to persuade Mr Welford to surrender, and thus his reasoning in accepting the proposal could not, and should not, be regarded as ‘commercial’. However, he was under the impression that any future loss of rent during the inevitable void period would be compensated, as a letter dated 22 June 2001 from the authority’s agent stated:
“In respect of Mr Welford’s potential loss of rent beyond 25 December 2001, I confirm that I will consider this as part of the overall compensation claim, which we are continuing to discuss. I am advised that the works in the immediate vicinity of the property will take some time to complete and I acknowledge that it may well be difficult to let the property as a result of this. As discussed, providing your client uses his reasonable endeavours to market the property, and is not successful or is at a lower rent as a result of the scheme, I will include this loss in his overall claim.”
In cross-examination, Mr Cobb accepted that the letter of 22 June was not an offer of compensation, but merely an offer to consider arguments; however, he said the refusal now to entertain this head of claim was contrary to the spirit of that letter. He also acknowledged that the rental void from 24 December 2001 (the date to which TfL had paid rent under the surrender agreement) to September 2002 was a direct result of the surrender.
27. It was perfectly reasonable, he said, for Mr Welford not to have used an agent as many people of his ilk do not, due to their network of contacts. The comments made by Mr Moore relating to the date when the works were alleged to have been completed (August 2001) were not borne out by actual events, and that early date was clearly not anticipated in his letter of 22 June. Mr Welford had achieved a letting in September 2002 despite the works and disruption which were still continuing at that time. He said that he had visited the site after Mainport took occupation, and that there were some roadworks still to be completed including final surfacing, installation of kerbs and pavements etc.
28. Turning to the claim for injurious affection, Mr Cobb said that in his opinion, the loss of 20 sq m of forecourt to the warehouse area had a serious detrimental affect upon the rental value of the subject premises. The loading difficulties that had been created, by restricting the size of vehicles that could deliver, not only meant that WCG could no longer operate from there, but it also had a constraining effect upon the market – hence the delay in finding a new tenant. In his view, having considered Valuation Office Agency statistics for the adjacent Tower Hamlets area, the rental value was diminished by some 12.5%. In cross examination, he accepted that the statistics he referred to were for buildings with a much smaller office content (10 – 15%). This was not, he agreed, principally a warehouse, but a hybrid building with between 38 and 45% office content, showroom and ancillary warehouse accommodation. It would not therefore appeal to tenants requiring mainly warehouse, storage or distribution facilities.
29. Mr Cobb said that, in terms of yield, a building like this with full HGV access would attract a 10% return, but with the aforesaid access restrictions, associated reduction in opportunities for rental growth, and more limited tenant demand, that should move out to 11%. He produced, at the hearing, revised ‘before and after’ valuations (that methodology having been agreed as appropriate with Mr Moore) based upon a rental value at September 2001 of £30,000 pa. They were set out thus:
As original with adequate loading access
Rental value
5,573 sq ft @ £5.50 psf £30,000
Years purchase in perpetuity 10
£300,000
Without adequate loading access
Rental value
5,573sq ft @ £5.50 psf £30,000
Less 12.5% £ 3,750
£26,250
Years purchase in perpetuity @ 11% - say 9
£236,250
Diminution £ 63,750
30. He also produced, just before the hearing, an alternative “term and reversion” valuation on before and after bases to reflect the rent that should have been passing at the valuation date (£26,000 pa), rather than the rental value, and the review due in 2004. This resulted in a figure of £59,468. However, Mr Cobb stressed that in his view the first valuation was appropriate. He said in cross-examination that his adjustments to rental value and yield were not supported by comparables (other than the VOA figures referred to), and were his professional opinion based upon experience.
31. Mr Cobb said that his first valuation reflected Mr Moore’s “negotiating stance” that the lease that TfL took over was an annual periodic tenancy and could be terminated on 6 months notice. He had also assumed that the surrender that actually took place in June 2001 was effective as of the valuation date. This meant that the premises were valued as if vacant from that date, at the then rental value of £30,000 pa. He subsequently accepted that the surrender was effective at the date of the Deed in June, that TfL was the tenant from 27 February 2001 to that date, and that the lease was, indeed, for a term certain to 2009. He said that TfL’s letter of 7 June 2001 proposing the surrender had been taken, and interpreted, as if it were a notice.
32. In response to submissions from the acquiring authority, that whilst any betterment that might occur as a result of the scheme cannot be set off against other compensation, it could serve to reduce or negate the extent of injurious affection, Mr Cobb said that he accepted the principle but did not think that there had been any betterment under the Highways Act. As to any adjustment to reflect TfL’s superior covenant as tenant in the “after” valuation, this would in his opinion fly in the face of the Compensation Code. The nature of the interest in the property was taken as at the date of the Notice to Treat but valued as at the date of possession, and it would thus be erroneous to bring in TfL’s subsequent occupation as an argument to offset adjustments to rental value and yield caused by detrimental affects of the scheme. It would also disadvantage TfL in terms of their liability to pay compensation as it would effectively have to pay greater value to reflect its own superior covenant. He said that he was not aware of this argument ever having been raised in other compensation cases.
33. Regarding the City Eggs building, Mr Cobb said that he believed compensation for loss of rent could be claimed as the freehold of that building was held together with World Wide House. Furthermore, they shared the same main access and staff car parking area. In his view Pattle v Secretary of State for Transport [2009] UKUT 141 (LC) had paved the way for it to be covered under rule (6) of section 5 of the Land Compensation Act 1961 as an alternative to the claim under section 7 of the Compulsory Purchase Act 1965 (the 1965 Act). The tenant had left as a direct result of no longer being able to continue to trade due to the dirt, dust, noise and nuisance caused by the scheme works. There was a 34 week rental void after City Eggs vacated on 28 September 2001, and before it was re-let at the same rent in June 2002. The loss was therefore calculated at £500 per week for 17 weeks: £17,000. In his alternative valuation, calculated on the same basis (ie loss in value of the land) as his alternative figure for World Wide House, Mr Cobb said he reached a figure of £15,315. In the result, he said he suggested a compromise of £16,000.
34. Mr Cobb said that the right to compensation under section 7 of the Compulsory Purchase Act 1965 arises where the land has been compulsorily acquired from the claimant, he has an interest in other land which was held with the land actually acquired, and the value of the claimant’s other land has been depreciated by either severance or injurious affection as a result of the compulsory purchase. The City Eggs building met all the relevant criteria, and the measure of loss was, he said, the loss of rent that had been suffered. Alternatively, if it were to be determined that the City Eggs land was not held (for these purposes) with the World Wide House land, a claim would arise under section 10 of the 1965 Act – see Wildtree Hotels v L B Harrow [2001] 2 AC 1.
35. The claimant’s claim for his personal time, in the sum of £10,000 was based, Mr Cobb said on 100 hours at £100 per hour expended by Mr Welford over a period of approaching 10 years. That included all the time spent in meetings, monitoring scheme events and works, liaising with advisers and the acquiring authority and regular visits to and inspections of the subject premises whilst they were vacant.
36. As to the acquiring authority’s assessment of the value of the 20 sq m land taken, under rule (2) at £750 and which had not been claimed by Mr Welford, Mr Cobb said that Mr Moore’s approach appeared to be purely arbitrary.
Acquiring Authority’s case
37. Mr Moore is a chartered surveyor with over 20 years experience in the valuation of property, and compulsory purchase matters. He was, at the time of preparing his initial and rebuttal reports, a director of the Chelmsford office of Lambert Smith Hampton, Property Solutions. He is now Head of Property and Strategy at Essex County Council. He said that he had initially dealt with the WCG claim, and negotiations were underway with Mr Cobb who was also acting for them, prior to Mr Welford’s claim being submitted.
38. He said that the claim for compensation in the claimant’s case summary had not been set out under the usual heads adopted for the assessment of compensation claims: land taken, injurious affection and severance, disturbance and any other matters not directly based upon the value of the land (Section 5, rule (6) LCA 1961). It was difficult to see precisely how some of the claimant’s figures fitted into those discrete heads. His own valuation had been set out in accordance with the traditional basis, using his own experience and advice from TfL’s legal team, but he also produced alternative valuations adopting Mr Cobb’s analysis. He said that his initial view had been that there was no compensation due as betterment had occurred as a result of the scheme, but accepted at the commencement of his examination-in-chief that any betterment figure should not be deducted from any compensation otherwise due. His assessment of the value of the 20 sq m forecourt under rule (2) at £750, and a nominal £1,000 for the claimant’s personal time was, therefore, payable, but no other compensation was due. Whilst it was accepted and understood that the loss of part of the forecourt had a “particular and peculiar” significance for WCG’s business, because of their reliance upon deliveries from very large articulated vehicles, the minor reduction in the area would be of no consequence to other occupiers.
39. Mr Moore said that on 27 February 2001 TfL acquired the rights and obligations under the lease of a building for which it had no use. These included the liability to pay rent for the remaining 8 years of the lease, which was unclear in terms of the ability to sub-let or assign, and as to the liability for dilapidations at the end of the term which were estimated to be in the region of £30,000 as at the date of possession. He said that, in connection with WCG’s claim, he had made a reservation of £60,000 against his advance payment calculations because of the liabilities that TfL had inherited with the lease – one of those being the risk that the landlord (Mr Welford) might attempt to backdate the abated portion of the rent to the review date of May 1999. As WCG were pressing TfL for the release of that retention, Mr Moore said that he advised TfL, in May 2001, to use that as a negotiating tool in trying to extract itself from the ongoing obligations under the lease. His opinion then was that they were committed until 2009, and would not have been able to bring the lease to an end on giving 6 months notice. However, TfL’s advisors said that was questionable, and he therefore admitted that he had used their assessment of the legal situation as a negotiating stance. The negotiations resulted in the surrender occurring on 29 June 2001, and he accepted that that had not been in contemplation when the lease was taken over in February.
40. As to Mr Cobb’s suggestion that he had reneged on the indication set out in his letter of 22 June 2001 that he would be prepared to consider a claim for void periods, Mr Moore said that had been subject to a proviso that Mr Welford carried out reasonable marketing of the premises, and in his view, that proviso had not been met. A reasonable claimant would, he said, have appointed an agent, arranged for a letting board to be erected, and for the premises to be advertised. Although the claimant did eventually find another tenant for the subject premises (and for the City Eggs building), there was no evidence that the market had been properly tested, or details of any other interested parties or any other rental offers that might have been made. Although it was accepted that there had been considerable disruption in the area of Lanrick Road for the duration of the works, he said that the acquiring authority had kept access to the premises available throughout the period that it was vacant. He said that the statements in his letter were made in the course of negotiations at the time, and had not been carried forward in subsequent years prior to the notice of reference being lodged.
41. Regarding his approach to valuation, Mr Moore said that his methodology recognised and reflected the value of TfL as a tenant (in covenant terms) and his opinion that there was no adjustment necessary to reflect the loss of a small area of yard. He said that his opinion of the value of the land taken at £750 was based upon other settlements where nominal payments had been made for small plots of land with little value. In considering the questions of severance and injurious affection, he said that whilst it was right to value on a before and after basis, that should be on a term and reversion calculation. TfL took over the lease, and remained as tenant. It was not appropriate, therefore, as Mr Cobb had done, to assume full rental value at 27 February 2001 in perpetuity.
42. Turning to the claim for loss of rent prior to the acquisition (£21,666), Mr Moore said that he assumed this was made under rule (6). In order to be compensatable, the loss must be a reasonable consequence of the acquisition and must not be too remote (per Shun Fung). The claimant should also take steps to mitigate his loss. In his view, a reasonable landlord in the claimant’s position would not have reduced the rent. The tenant was obliged to pay it under the terms of his lease, and it should have been suggested that an approach be made by WCG to the acquiring authority once the scheme works had commenced, and their effects were known. In fact, the works did not commence until October 2000 (at the earliest) – some 17 months after the date from which the rent was said to have been abated. It was not for the claimant to decide the level of “compensation” due to the tenant, and then to seek reimbursement from TfL. In any event, he said, the claimant had stated that the rent reduction was 50% (from the review figure that had not been implemented), and there was no suggestion that the value of the premises had been reduced by a half. Any suggestion that TfL had taken the benefit of the rent reduction in its own compensation negotiations with WCG was refuted. Mr Moore said that in determining the value of WCG’s business, the £13,000 reduction in rent was added back to calculate the goodwill.
43. There could be no entitlement, Mr Moore said, to the loss of rent claimed for the alleged “void period” between February 2001 and September 2002. TfL had taken over the lease, and the obligation to pay rent for the remainder of the term at the figure said to have been reviewed to £26,000 with effect from May 1999. Any rent due prior to the transfer to TfL on the valuation date was the responsibility of WCG. Any rent after that date fell to be paid by TfL, and indeed it was paid for the period 27 February 2001 to 24 December 2001 (that liability forming the bulk of the surrender premium negotiated with Mr Welford). The claimant was not obliged to accept the surrender that was offered and, Mr Moore said, he was surprised that he had. Although it appeared he had not taken legal advice on the issue, he was being advised by Mr Cobb. It was Mr Welford’s choice to accept TfL’s proposals and the fact that he suffered a rental void from December 2001 to September 2002 was nothing to do with the acquiring authority’s actions under the CPO. As he had said in response to Mr Cobb’s reference to his letter of 22 June 2001, no agent had been appointed and the premises were not, in his view, properly marketed. Furthermore, it should be noted that the claimant actually started to receive rent at £31,200 pa from Mainport in September 2002, whereas if the surrender had not been accepted, the rent payable by TfL to the next review in 2004 would have remained at £26,000 pa.
44. As to the claim of £63,750 for injurious affection to World Wide House, and £17,000 loss of rent on City Eggs, Mr Moore produced valuations on a term and reversion basis that reflected TfL’s continuing occupation for the rest of the term – the subsequent surrender not being in contemplation at the valuation date, and not therefore to be taken into account. There would be no loss of value, as Mr Cobb had suggested; indeed the value of the investment would improve with TfL being a “blue-chip” tenant. His valuation was thus:
Injurious affection and severance
No Scheme World (WCG as tenant)
Rent passing £26,000
YP 3.215 yrs @ 9.5% 2.69
£ 69,908
Reversion to omrv £30,000
YP in perp def’d 3.25 yrs @ 10.25% 7.10
£213,141
Say £283,000
Scheme World (TfL as tenant)
Rent passing £26,000
YP 3.25 yrs @ 7.5% 2.79 £ 72,614
Reversion to omrv £30,000
YP 5 yrs @ 8.0% 3.99
deferred 3.25 yrs @ 8.0% 0.7787
£ 93,274
Reversion to omrv at lease end £30,000
YP in perp def’d 8.25 yrs @ 10.25% 4.36
£130,850
Say £296,700
Betterment £ (13,700)
No permanent affect upon City Eggs building, so compensation under that head of claim nil.
45. Regarding Mr Cobb’s methodology, Mr Moore said that for the reasons he had given, it was not right for him to have assumed a full market rent from the date of valuation; the surrender agreement should be ignored as it was not known about at the relevant date; there had been no adverse effect upon either the rental value or the investment yield by the taking of a small area of forecourt, and there could be no entitlement to the alleged loss of rent from the City Eggs building. The two properties were not held together, for the purposes of assessing compensation and, furthermore, he could not see how a claim arose under rule (6) as it was a temporary loss, and there had been no suggestion that the value of the building had been affected as a result. The alleged loss of rent was too remote from the land taken to be considered as a natural and reasonable consequence of the acquisition and, on the question of disturbance, the claim does not relate to the dispossession from the land at World Wide House.
46. City Eggs occupied, at best, on a quarterly tenancy so any valuation of the investment would, in any event, assume a significant risk to a tenant vacating at short notice. It was a fact that the property was physically unaffected by the scheme, and access was maintained at all times. Even though there may have been access difficulties due to the restrictions in the road, and some noise/dust disturbance, the acquiring authority had no record of complaints being made and the tenant did not actually vacate the premises until the works were all but completed.
47. Mr Moore produced two alternative valuations. The first was upon the assumption that the Tribunal did not accept his view that TfL’s taking over of the tenancy of World Wide House should be taken into account (although it allowed for the rent they paid as a surrender premium), and excluded any compensation relating to City Eggs building.
World Wide House
No Scheme World
Rent passing £26,000
YP 3.25 yrs @ 9.5% 2.69
£ 69,908
Reversion to omrv £30,000
YP in perp def’d 3.25 yrs 7.10
£213,141
£283,000
Less
Scheme World
Rent equivalent £26,000
YP 0.75 yrs @ 7% 0.71
£ 18,378
Reversion to omrv £30,000
YP in perp def’d 1.25 yrs @ 10.25% 8.64
(includes void to Sep 2002) £259,074
Say £277,500 Total loss in respect of World Wide House, say £ 5,500
48. The second alternative valuation was produced on the same basis as the first, but included the City Eggs loss of rent, should the Tribunal find that to be justified. However, the rent had been discounted to its value to the claimant at the valuation date – otherwise he would receive statutory interest on compensation for as sum that he did not actually lose until some time afterwards. The valuation of the City Eggs element was:
City Eggs
No Scheme World
Rent passing £26,000
YP in perpetuity @ 11% 9.09
£236,364
Less
Scheme World
Rent passing £26,000
YP in perpetuity @ 11% 9.09
£236,364
Less void period rent £17,000
Deferred I yr @ 11% 0.90
£ 15,315
£221,048
49. The maximum compensation, under the heads of claim, would therefore be:
Value of land taken £ 750
Pre-acquisition rent abatement £ Nil
Loss of rent World Wide House post
acquisition – included within injurious
affection claim
Injurious affection - World Wide House £ 5,500
Injurious affection – City Eggs £15,315
Claimant’s personal time £ 1,000
TOTAL £22,565
50. In terms of his valuation of the City Eggs claim, Mr Moore said he had agreed a compromise with Mr Cobb in the sum of £16,000, should that head be accepted.
51. In cross-examination, Mr Moore said he was unable to comment on the arguments relating to when the interest of the claimant was fixed, whether or not the lease was legally assigned to TfL and whether it was right to assume two tenants in the same day on the valuation date. These were matters that, he assumed, would be covered in legal submissions.
Submissions
52. Extensive and comprehensive closing submissions in writing have been received. The claimant’s initial closing submissions were 89 pages long, and some 49 authorities were referred to and provided. Those submissions contained a detailed summary of the law as it applies to compensation, and an analysis of a large number of cases said to have direct relevance to the issues that had been before me. Mr Zwart had said, at para 72(a) of his opening skeleton: “No points of law arise in this reference, and the claimant relies on trite law.” Mr Honey agreed that the claim did not raise any novel point of law, but said it did raise legal issues relating to the compensation code.
53. At the end of the hearing Mr Zwart had agreed that his closing submissions would not raise new points of law that had not been referred to in his opening or during the proceedings, unless he had first notified Mr Honey. As these submissions did appear to raise new legal issues, I gave the acquiring authority the opportunity to reply, as I had not been advised that Mr Zwart had, indeed, provided Mr Honey with a note setting out those new points. In fairness, I then allowed a further 7 days for the claimant to respond to the authority’s additional submissions, as a result of which, I received a further 13 page “note” and two more authorities.
54. It has to be said, I think, that the length and detail of the claimant’s submissions were out of all proportion to the nature, extent and quantum of the dispute between the parties, and also, in part, sought to advance arguments that were clearly contrary to the agreed statement. It would equally be disproportionate for me to make any attempt summarise those submissions at any length. I simply refer to them, as far as is necessary within my conclusions below.
55. The closing submissions were, of course, in addition to full and lengthy skeleton arguments that had been received from both parties prior to the hearing. The nature of skeleton arguments, and volumes of papers generally before the court have been the subject of critical comment in two recent judgments of the Court of Appeal: see Tombstone Ltd v Raja and Another [2008] All ER (D) 180 (paragraphs 122 – 128) and Midgulf International Ltd v Groupe Chimique Tunisien [2010] EWCA Civ 66 (paragraphs 71 – 75). In Midgulf, Toulson LJ said, after summarising the extent of Midgulf’s documentation:
“72 I am afraid that this case is a grotesque example of a tendency to burden the court with documents of grossly disproportionate quantity and length. It is a practice which must stop. Far from assisting the court, it makes the work of the court infinitely harder. Hours had to be spent reading through Midgulf’s voluminous skeleton arguments, and they were largely wasted hours. It will no doubt have added greatly and unnecessarily to the costs of the appeal.”
At para 73, after pointing out that the issue before the court was a very short one, he said:
“ … The ordinary principles of contract law in this area are so well known there was no need for reference to authorities, let alone well over 100 authorities.”
He went on to refer to Tombstone and set out paras 125 – 128 of that judgment before concluding:
“75 The problem has not lessened, and the present is a particularly egregious example… That [the burdening of the court] may accord with the practice in other jurisdictions, where it is customary for appellate courts to limit the time allowed for oral argument to a short period, but it is emphatically not the proper practice in this jurisdiction.”
56. Although the criticisms in those cases were aimed particularly towards skeleton arguments and other documentation placed before the court, I think that those preparing closing submissions should be mindful of what was said. Whilst reference to authorities, and inclusion of those that are particularly relevant to the particular case before the Tribunal, are of course to be encouraged, it is clear to me that what I received here was, as I have said, totally disproportionate to the matter in hand.
Conclusions
57. This claim relates to the acquisition of a very small area of forecourt, together with some highway land. Whilst it was agreed that no value was attributable to the half road width, nothing has been claimed in respect of the value of the land taken. Thus, the amounts claimed are based on section 5, rule (6) of the Land Compensation Act 1961 and on section 7 of the Compulsory Purchase Act 1965.
Pre-acquisition loss of rent
58. Mr Zwart submitted that the three principles established in Shun Fung were satisfied (see Nicholls LJ at para 126). The rent concession, and thus the loss of income suffered as a result, was clearly caused by the threat of acquisition – it would not otherwise have been made. He said it was not the claimant’s nor WCG’s fault that TfL took so long to acquire the land after the Notice to Treat had been served. At the time he made the concession, Mr Welford and the tenants were aware, from the Bellamy Roberts report, of the impact that the reduction in the size of the forecourt would have, and this had been acknowledged by TfL. WCG, at the time they asked for the concession, could not have known how long it would be before the land was actually taken, and the actual length of the concession given was thus entirely reasonable. It followed, therefore, that the loss was a direct result of the acquisition, and it was not too remote. The claimant had also acted reasonably as there was a risk that the tenant would have vacated if no concession had been agreed; a reduced rent was better than none at all.
59. Mr Honey said there was no causal link. WCG’s letter to the claimant of 25 October 1999 stated that “in connection with the forthcoming rent review” it is “the imminent road works” and “the disruption these will cause” which should lead to the rent reduction. Also, in a letter of 8 February 2001 from the claimant’s solicitors to Mr Cobb, it was stated that the rent concession was “due to the uncertainty of the pending development.” Further, the claimant’s pleadings consistently stated that the concession was agreed as a result of the anticipated works – see the claimant’s statement of case, and its reply to the acquiring authority’s request for clarification, Mr Cobb’s evidence and the joint statement which referred to the reduction being agreed “as a result of the forthcoming road scheme.” It was not, therefore, granted in connection with the proposed acquisition, or the threat of it.
60. Secondly, he said the loss must not be too remote. At the time the concession was agreed, well over a year before the works commenced, it was not reasonably foreseeable or the natural or probable consequence of the acquisition that an abatement of rent would, in all the circumstances, be agreed. Thirdly, the claimant did not take reasonable steps to avoid his loss. He did not need to agree such a large rent reduction, or indeed one at all, as there was no indication the tenant was, or was likely to, suffer any loss arising from the proposed acquisition of land. In any event, it was not for the claimant to step into the acquiring authority’s shoes and effectively provide financial assistance to the tenant whose claim, if indeed it were justified, should be against TfL. The concession, Mr Honey said, appeared to be entirely arbitrary and was much too far away from the actual acquisition, or commencement of the works, for it to be justified on those grounds.
61. Whilst the principle of the pre-possession losses of rent being compensatable is agreed (see Pattle v Secretary of State for Transport [2009] UKUT 141 (LC) LT ref: ACQ/7/2007), the question here is whether the three principles in Shun Fung are satisfied, and in that regard, I think the issue can be dealt with quite shortly. On 25 October 1999, Mrs Savic, a director of WCG, and Mr Welford’s sister, wrote to him saying:
“Regarding the forthcoming rent review, would you please consider the imminent road works and disruption these will cause to our business. We feel that, due to the long-standing tenancy we have had and good record of payment, would you please be able to reduce the rent for the coming year.”
I agree that this makes no reference to the proposed acquisition of the land required for the scheme, and find from the evidence (despite what Mr Welford said in respect of the tenant’s alleged concerns about delivery restrictions) that it was the prospect of the works and the potential disruption these would cause that prompted the tenant’s request. Indeed, that fact was agreed in the experts’ joint statement. In my judgment, therefore, it was not the prospective acquisition of the reference land and any potential effect this might have on rental value (although as will be seen from my conclusions below I consider there was none) that caused the claimant’s alleged loss, but the prospect of the roadworks.
62. In any event, it was not reasonable for the claimant to agree what was a purely arbitrary reduction in rent for the period prior to the events that were claimed to have caused the loss in rental value. Mr Welford confirmed in cross-examination that there were no roadworks in Lanrick Road prior to the date of possession, and that the premises were not affected during that period. He had not checked with the acquiring authority when the works were expected to start, nor did he take any legal or professional advice before agreeing to the abatement. He clearly, as the acquiring authority suggested, stepped into the acquiring authority’s shoes in granting a reduction in rent that was to be subsequently claimed as compensation. As to the threat of WCG leaving, they were committed to pay rent under the terms of the lease until 2009, and could not just walk away. Furthermore, it was agreed that the location of the premises was “perfect” for the tenant’s business, and I find that the evidence has failed to establish that they would have vacated before they had to if the rent concession had not been granted.
63. It follows that in my judgment, the Shun Fung principles have not been established under this head, and I determine that no compensation is, therefore, payable. In his evidence, Mr Welford also said that Mrs Savic’s letter had alerted him to the fact that the rent review had not been implemented. It stands to reason, in my view, that had she not written to the claimant, the rent the tenants were paying may well have continued at the rate of £18,000. Mr Cobb did accept, in cross-examination, that if this element of the claim could be compensated, then the loss must be based upon £5,000 pa. I agree that that must be the case, and if it were to have been established that the losses were directly caused by the threat of acquisition of the land, then it would be in the sum of £5,416 – 13 months at £5,000 pa (£18,000 less £13,000 as there was no evidence that the rent review was ever actually instigated).
Loss of rent during letting void
64. The acquiring authority said that TfL had taken over the responsibilities and liabilities of the WCG lease on 27 February 2001 and, having no use for the premises, took steps through its agent, Mr Moore, to extract itself from its ongoing commitment. It was the claimant’s choice to accept the surrender terms that had been offered, and if he had not done so, TfL would have been liable for the rent for the rest of the term and he would not have suffered a rental void. It was clear from the evidence that all parties accepted that this was the situation. Mr Cobb and Mr Moore had both understood the lease to have been transferred to TfL, but by the time of the hearing appeared to have reversed their positions as to their understanding of the nature of the lease which, in his decision on the preliminary issue, the President had described as “exiguous”. In his initial report, Mr Cobb said he had valued the loss of rent during the void period on the assumption that TfL would be committed until the end of the lease in 2009, but in cross-examination in answer to a question from me, he said that he had been wrong. Mr Moore also prepared his initial valuation on the basis that TfL were committed for the rest of the term, and confirmed in cross-examination that that was, indeed, his view. He had been persuaded by the acquiring authority’s advisers to use the possibility that it could be terminated on 6 months notice as a negotiating tool to get the claimant to agree to a surrender, but that was not what he really thought to be the case.
65. The question of the nature of WCG’s lease and whether TfL had, in law, actually taken it over on 27 February 2001 were the subject of very extensive submissions by the claimant’s counsel, both in terms of this head of claim, and the subject of injurious affection. He said that the claimant had never relied upon the acquiring authority having a tenancy other than from the date of, and engendered by, the deed of 29 June 2001. That was a deed of assignment as required by the Law of Property Act 1925. He said that for the purposes of section 11(1) of the 1965 Act the handing over of keys on 27 February 2001 may qualify as granting possession (see Simmonds v Kent County Council [1990] 1 EGLR 227), but it was clear from the wording of the surrender deed that no rent was paid prior to it being effected on 29 June, and the parties had agreed that that was the case. The acquiring authority’s assertion that it had inherited liabilities was misplaced, Mr Zwart submitted, since sections 52(1), 52(2) and 52(3) of the LPA 1925 prevent an assignment otherwise than by deed (see Street v Mountford [1985] 1 AC 809 and Crago v Julian [1992] 1 WLR 372). To emphasise the argument that TfL had not, until 29 June 2001, taken an assignment (and then immediately surrendered that interest), reference was also made to Trustees of St John’s Hospital v Keevil and Anor [2001] EWCA Civ 1730, Rhone v Stevens [1994] 2 AC 310 and Slipper v Tottenham and Hampstead Junction Railway Co [LR] 4 Eq 114, together with Woodfall’s Landlord and Tenant at para 16.080. Absent payment of rent by TfL, there can have been no privity of contract as between it and the claimant, and thus there was no assignment in law or in equity. As a result, any argument by Mr Moore that the investment increased in value as the result of TfL allegedly becoming the tenant (in terms of the claim for injurious affection) was misconceived.
66. It was also submitted that, despite the clear understanding of the parties and their experts, the lease that TfL took over (whether on 27 February or 29 June 2001) was no more than a “lease in possession” ie., a tenancy at will, from year to year, or an annual periodic tenancy. That was made clear in the claimant’s claim in answer to notice to treat as far back as 1999. The essentials of a lease include the requirement for its express terms to identify the relevant land and/or its address. It did not, and as such could only be deemed a contract. WCG could have vacated upon notice of a year. A lease for more than three years (which this was), was required by section 52(1) of the LPA 1925 to be made by deed and is otherwise void at law. The acquiring authority had, Mr Zwart said, therefore, failed to properly direct itself in law, and in his final note of reply (to TfL’s further submissions), he set out extensive reasoning to refute their assertion that WCG had an equitable lease of 20 years.
67. In summary, Mr Zwart said that the loss of rent post acquisition was clearly a consequence of the scheme and should be compensated accordingly under section 5(6) of the LCA 1961.
68. Mr Honey submitted that the lease agreement to WCG granted it exclusive possession of the property for a fixed term or 20 years, with a fixed commencement date of 2 May 1989 and for an agreed (initial) rent, subject to review. These were the essential elements of a lease. It was in writing and signed by both parties, but as it was not executed by deed, it was not a legal lease but an equitable lease under the doctrine of Walsh v Lonsdale [1882] LR 21 Ch D 9. The parties were in exactly the same position as if the agreement had been effected as a deed (see R v Tower Hamlets LBC ex p Van Goetz [1999] QB 1019). It could not have been a periodic tenancy, and Mr Cobb was wrong to have changed his mind. Further, this was the position that was agreed in the joint statement, and the claimant cannot now resile from that. It should also be noted that, in the preliminary issues decision, it had been plainly regarded as a lease.
69. As to whether or not the lease was assigned, Mr Honey said that TfL had agreed with the tenant, WCG, to acquire its leasehold interest in the property, and that was put into effect by taking possession and the handing over of keys on 27 February 2001. TfL, by taking possession, took over all of WCG’s liabilities, and stood in its shoes as tenant. This fact had also been acknowledged by the parties in the agreed statement of facts, and once again the claimant could not resile from that. Indeed, there was a string of documents providing the evidence, including a letter to Mr Cobb from the claimant’s solicitor dated 8 February 2001, providing details of the lease, and noting that “Transport for London was now taking over the lease.” Mr Honey said that the claimant was driven to argue this point because if TfL had not been the tenant, then there was no need for a deed of surrender. That surrender did not grant an interest to TfL (as Mr Zwart was intimating), but purely surrendered an interest that already existed.
70. On the nature of the lease, Mr Honey is clearly right, in my judgment. In the absence of a deed, the lease took effect in equity only and there can be no assignment of an equitable interest entitling the landlord to sue the purported assignee for the rent. However, I note from the statement of agreed facts prepared in respect of the preliminary issues hearing of this reference, signed by the solicitors to the parties, that the following were agreed:
“10. The acquiring authority took over the lease of World Wide House from World Class Gifts Limited on 27 February 2001.
11. On 29 June 2001 the parties entered into a Deed of Surrender by which the acquiring authority agreed to give up its interest in World Wide House and to pay the claimant £21,625 in respect of the loss of rent under the lease from 27 February 2001 to 24 December 2001.”
71. The relevant clauses of the Deed of Surrender stated:
“ 2.3 Agreement to Surrender
It has been agreed that TfL will surrender all his estate and interest in the Premises to the Landlord in consideration of payment by TfL to the Landlord of the amounts specified in clause 3.1 and the release of TfL by the Landlord contained in this deed and that the Landlord will accept such a surrender in consideration of the payment by TfL of the amounts specified in Clause 31 and the release of the Landlord by TfL contained in this deed.
3. Surrender and Acceptance
3.1 Surrender
In consideration of
(a) the sum of £8,320 representing the rent due under the Lease from the Date of Entry to the 23 June 2001; and
(b) the sum of £13,000 representing rent due under the Lease from 24 June 2001 to 24 December 2001; and
(c) the sum of £305 representing the equivalent of empty rate liability of the Premises for a period ending 24 December 2001
now paid by TfL to the Landlord (receipt of which the Landlord acknowledges) and of the release by TfL by the Landlord contained in this deed TfL with full title guarantee surrenders yields up and releases to the Landlord all his estate interests and rights in the Premises (if any), to the intent that the residue of the term of years granted by the Lease and all or any other estate interest or rights of TfL in the Premises, whether granted by or arising from the Lease, is to merge and be extinguished in the reversion immediately expectant on the term of years granted by the Lease.
3.2 Acceptance
In consideration of the payments made by TfL to the Landlord (receipt of which the Landlord acknowledges) and of the release of the Landlord by TfL contained in this deed the Landlord accepts the surrender
4 Release
The Landlord and TfL each release the other party from all his obligations contained in and all liabilities whatever under the Lease, whether past present or future and all damages, actions, proceedings, costs, claims, demands and expenses arising from such obligations and liabilities.
5 -
6 Compensation
TfL shall have the right to refer to the existence of this Deed when calculating net compensation payable to the Landlord pursuant to or as a consequence of the CPO and may refer to any dispute resolution procedure or the Lands Tribunal to this Deed.”
72. This is clear, and the arguments advanced by Mr Zwart on this issue are therefore not only new, but fly in the face of what was indisputably understood, and agreed, by the parties. The parties, by entering into the deed of surrender, came to a contractual agreement that assumed an assignment had taken place. That, in my view, precludes the claimant from arguing that the lease had not been assigned on the date of entry, or at all. The claimant is estopped from so asserting and from asserting that, in the absence of a deed, the acquiring authority would not have been liable as tenant for the rent for the rest of the term. For the purposes of my decision on the issues of post acquisition rental void, and injurious affection, therefore, I proceed on that basis.
73. Firstly, as to the claim for loss of rent during the void period, I agree with the acquiring authority that the claimant was not obliged to accept the surrender (which Mr Welford admitted), and if he had not, no void would have occurred. It was an entirely commercial decision taken by him. I find that, in any event, Mr Welford failed to mitigate the losses that he did incur. Although the evidence suggests that, during the roadworks, the area was in a mess and could have been considered unattractive to potential tenants, I am sure any prospective occupier would have realised they were only temporary. Access to the premises was, as confirmed by the HA, maintained at all times and I am far from convinced that the claimant could not have found an agent willing and able to market the building. It was suggested that people of the claimant’s ilk often do not employ agents because of their contacts network, but to fail to do so, in my view, suggests that reasonable steps were not taken to mitigate any losses. I also note that Mr Welford admitted that he did not bother to promote the premises to the market “for some time after October 2001” because he thought he would be wasting his time. I do not accept this as taking reasonable steps. It is a fact that he achieved, when he did re-let the building, a rent that was higher than that to which TfL would have been committed until the next rent review in 2004.
74. For these reasons, I conclude that the claimant is not entitled to any compensation under this head.
Injurious affection – effect on value of World Wide House
75. On the basis of the evidence, I am satisfied that the compulsory acquisition of the reference land value did not adversely affect the value of the premises as an investment. Mr Cobb accepted in cross-examination that World Wide House was a “hybrid” building and not principally a warehouse. The majority of potential users would not, therefore, have the same, unique, requirement for access by very large articulated vehicles that WCG had. No objective evidence was produced to support Mr Cobb’s opinion that the rental value and yields would reduce, and I find that his arguments are not made out.
76. The acquiring authority submitted that anything to do with the deed of surrender should be ignored, because it was not in contemplation at the valuation date. That was the date upon which the property should be valued. I agree. As to the claimant’s argument that the interest to be valued was fixed at the date of the notice to treat (and thus any knowledge or prospect of of TfL as tenant was to be ignored), the acquiring authority referred to Rugby Joint Water Board v Shaw-Fox [1973] AC 202 which shows that it is the nature, extent and quality of the interest to be compensated that is fixed on service of the notice to treat. In this case there was no change except for the identity of the tenant, and in any case, Mr Honey said, there was a consistent line of Lands Tribunal cases that determined the interests should be taken as they stand at the date of entry - see, for example, Banham v Hackney LBC (1971) 22 P & CR 922 where Sir Michael Rowe QC said, at 927 that it was:
“…impossible to say that the interests in land compulsorily acquired are immutably fixed by the service of a notice to treat. The true rule would seem to be that interests as well as values must be taken as at the date of valuation or entry unless the owner has done something which so altered the interests as to increase the burden of compensation on the acquiring authority.”
I accept that this should be the case. No compensation is payable under this head.
Injurious affection - City Eggs building
77. This head of claim was made under section 7 of the Compulsory Purchase Act 1965. However, putting aside whether or not the land was held with the subject land, there was no suggestion that the value of the land had been depreciated – it was simply a claim for loss of rent. I do not consider it necessary to go into all the legal argument that ensued on this issue as, in my judgment, the loss of rent cannot be put down to the CPO, the subject of this reference. The tenants vacated (without giving the required 3 months notice) in August 2001 some 6 months after the date of entry into World Wide House. By then, the majority (but not all) of the roadworks had been completed, and I accept the acquiring authority’s evidence that it had no records of any complaints being made by City Eggs, or for that matter, any of the other local occupiers. It was also stated that the waste transfer station opposite had been relocated, and there is no reason therefore not to suppose that by a time very soon after City Eggs left, the area would, if anything, be better than it had been previously. I also note that there was no evidence that Mr Welford took steps to market the premises, and he thus again failed to take reasonable steps to mitigate his loss.
78. No compensation is payable under this head.
Claimant’s personal time
79. I cannot accept Mr Welford’s claim for two visits per week for two hours at £100 per hour for a period of 18 months – the whole period during which the premises were vacant. Until 29 June 2001, the parties have agreed that TfL had taken over the rights and responsibilities of the former tenant, and whilst they did not physically occupy the premises, it was not Mr Welford’s job to carry out regular inspections. If there had been any damage or dilapidations occurring during the period up to the surrender, they could be taken into account in dilapidations. Any inspections during the period after the surrender are not a matter for the acquiring authority. As I have said above, it was Mr Welford’s choice to accept it, and what he did to the building, or the time he spent there was entirely his concern. It is, of course, reasonable to make an allowance for his time spent on matters relating to the reference, but he has produced no record of the hours spent, or the actions he was undertaking, other than the statement referred to above. The acquiring authority has offered an arbitrary £1,000. Although I think that £100 per hour is too much, I do think it would be reasonable to assume that he could have spent up to 50 hours on related matters and at, say, £50 per hour (agreed by the acquiring authority to be an acceptable rate), that amounts to £2,500. I so determine.
Pre-reference costs
80. The claimant claimed £7,686.69 in respect of professional fees incurred to Mr Cobb and Hughmans prior to the notice of reference being made. The acquiring authority pointed out that some of the legal fees related to the deed of surrender which had been paid separately by TfL, and some of Mr Cobb’s fees related to a period after the reference was made, and £660 in respect of the deed of surrender which was not a matter for this Tribunal. In their view the maximum that should be paid under this head was £5,391.50. In the absence of the provision of copy invoices, I determine the pre-reference costs in the sum of £5,391.50
Value of land taken
81. Although the claimant made no claim for the value of the land taken, the acquiring authority offered the sum of £750 which, Mr Moore said, was an arbitrary amount that was in line with sums paid for other small pieces of land that had no particular or material value. I conclude that this should be paid as part of the overall compensation.
Summary
82. The compensation payable to the claimant is determined as follows:
1. Pre-possession loss of rent Nil
2. Post-possession letting void Nil
3. Injurious affection to World Wide House Nil
4. City Eggs loss of rent Nil
5. Claimant’s personal time £2,500.00
6. Pre-reference costs £5,391.50
Value of land taken £ 750.00
Total £8,641.50
83. I determine compensation in the sum of £8,641.50. The parties are now invited to make written submissions on costs, and the decision will become complete when, and not before, costs are determined.
DATED 9 April 2010
P R Francis FRICS