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You are here: BAILII >> Databases >> England and Wales Lands Tribunal >> Ryde International Plc v London Regional Transport [2001] EWLands ACQ_147_2000 (12 February 2001) URL: http://www.bailii.org/ew/cases/EWLands/2001/ACQ_147_2000.html Cite as: [2001] EWLands ACQ_147_2000

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[2001] EWLands ACQ_147_2000 (12 February 2001)

ACQ/147/2000

LANDS TRIBUNAL ACT 1949

Land Compensation Act 1961, s.5 rule 6 - Claim for "holding costs" on property rendered unsaleable by threat of acquisition -Loss to take account of movement in market and rent received - Effect of overall blight arising from scheme distinguished.

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN RYDE INTERNATIONAL plc Claimant

and

LONDON REGIONAL TRANSPORT Acquiring

Authority

Re: Evelyn Court, Teevan Close

Addiscombe, Croydon

Before: His Honour Judge Michael Rich QC

Sitting at 48/49 Chancery Lane, London WC2A 1JR

On 5 and 6 February 2001

The following cases are referred to in this decision:

Director of Buildings and Land v Shun Fung Ironworks Ltd [1995] 2 AC 111

Emslie & Simpson Ltd v Aberdeen City District Council [1994] 1 EGLR 33

Prasad v Wolverhampton Borough Council [1983] 1 ch 333

Other cases referred to in argument:

Harry Lester Ltd v Southwark LBC [1999] 3 EGLR 179

Mallick v Liverpool City Council [1999] 2 EGLR 7

Wrexham Maelor Borough Council v Macdougall [1993] 2 EGLR 23

Appearances: For the claimant: Mr Christopher Katkowski QC and Mr Timothy Mould instructed by Argles, Stoneham, Burstows

For the acquiring authority: Mr David Elvin QC and Miss Kate Olley instructed by Frances Low Solicitor to London Regional Transport.


 


DECISION

Issues

1. The claimant claims compensation upon the compulsory acquisition of its freehold interest in 37 flats and four bungalows all erected as retirement homes together with a fifth bungalow for the use of a warden, known as Evelyn Court and Evelyn Mews, Teevan Close, Addiscombe, Croydon. The acquiring authority exercised its powers in order to demolish the dwellings and construct on their site a tramway as part of the Tramlink Scheme for Croydon.
2. Amongst the heads of claim included in the notice of reference was "Holding costs pursuant to Section 5 Rule 6 of the Land Compensation Act 1961 in the sum of £482,944". This was computed as the interest payable by the claimant for borrowing money to buy the site on 29th November 1988 and to erect the dwellings thereon, from the date when it claimed that it would, but for the authority's scheme, have disposed either of the individual dwellings or of the whole site, until the date when the authority took possession, upon which date the market value of the premises falls to be assessed.
3. By order dated 25th September 2000, I ordered that the claim for holding costs should be tried as a preliminary issue. In preparation therefor the parties agreed a number of facts which, providing that the actual computation of the "holding costs" was postponed, made the calling of any evidence unnecessary. At the request of the parties, I was therefore content to determine only matters of principle in regard to the entitlement to and computation of the holding costs claimed, rather than the whole claim in regard to such costs, as originally ordered.
4. I have already recited some of the facts as agreed, but those of most direct relevance to the issue now falling for determination, were set out as "matters agreed" in paragraph 9 of the agreed statement. These are to be found at Appendix 1 of this Decision.
5. Counsel also identified three issues for decision of the Tribunal, of which the second and third were directed to the principles of calculation of the loss resulting to the claimant as a result of any impossibility of disposing of the premises at the date when they would, but for the Scheme, have done so. In a skeleton argument prepared for the hearing, however, counsel for the claimant accepted that the assessment of the "holding costs" would have to take account of the price that would have been realised on such sale as the claimant would have made but for the exercise of the compulsory powers, as compared with the market value assessed at the valuation date, as well as the net cost of being kept out of such proceeds of sale for the relevant period. The net cost would, of course, have to take into account the net proceeds of lettings of the dwellings during such period. After I had heard argument on the sole issue to which this Decision is now directed, I therefore gave the parties an opportunity to discuss further the basis for assessment of "holding costs", if, as a matter of law, they were, in the circumstances of this case, a proper head of compensation. The parties were able to reach an "Agreed approach to valuation", which defines the "holding costs", claimed in this case. The Agreement forms Appendix 2 to this Decision.
6. The sole issue for the determination of the Tribunal upon this preliminary issue is therefore, whether, as a matter of law, the claimant is entitled to recover its holding costs (to be assessed in accordance with the Agreed approach to valuation) incurred in the period from 25th March 1993 to the date of entry (agreed as 8th August 1997).

Facts

7. It appears to me that the crucial facts amongst those which, after careful examination of the claimant's proposed evidence, the parties have been able to agree, are:

"9.1 The nature of [the claimant's] business is that of a property developer developing properties for onward sale.

"9.2 The problems encountered by [the claimant] in selling the individual units upon completion were occasioned by the state of the market in 1989 and 1990 onwards.

"9.4 Had it not been for the Tramlink scheme and the CPO, eventually [the claimant] would have been able to sell the individual units or the development as a whole.

"9.5 But for the scheme the property would have been sold on 25th March 1993..[9.6] with vacant possession.."

8. Mr Elvin, for the acquiring authority, sought to persuade me that this agreement went no further that an admission on the part of the authority that the sale was inhibited by the "scheme" to construct a tramway system in Croydon. The only effect of that scheme upon the subject premises, however, was that they would have to be acquired and demolished in order to allow the tramway to be constructed. In my judgement the only proper inference from the agreement, is that, whereas prior to that date market conditions made sales difficult, it was the threat of the acquisition under compulsory powers, making the dwellings unsuitable for purchase as retirement homes, that prevented the sale of the property which would otherwise have taken place on 25th March 1993. It is upon the basis of such facts that I will determine the agreed issue.

Decision

9. It is common ground that entitlement to be compensated for loss on compulsory acquisition of land is to be determined in accordance with the decision of the majority of the Privy Council in Director of Buildings and Lands v. Shun Fung Ironworks Ltd [1995] 2 AC 111. At p.137H Lord Nicholls of Birkenhead speaking for the majority, expressed the principle thus (in the context of the law of Hong Kong, which was held otherwise to be the same as English law, compulsory acquisition is referred to as "resumption"):

"To qualify for compensation a loss suffered post-resumption must satisfy the three conditions of being causally connected, not too remote, and not a loss which a reasonable person would have avoided. A loss sustained post-scheme and pre-resumption will not fail for lack of causal connection by reason only that the loss arose before resumption, provided it arose in anticipation of resumption and because of the threat which resumption presented."

The acceptance that the acquisition could cause events which preceded it, because the subsequent event throws its shadow before it, was consistent with the decision of the Court of Appeal in Prasad v Wolverhampton Borough Council [1983] 1 Ch 333, which the Privy Council expressly approved at p. 139.

10. In approving Prasad's case however they added:

"Stephenson LJ's observation in [that] case at p.137, that loss of medical practice by Dr. Prasad and his wife due to the threat of impending compulsory purchase was not compensatable, will need reconsideration if this is to be read as an observation of general application."

Mr Katkowski, for the claimant, relies upon this dictum as indicating that any loss of profit caused by the scheme, for the purposes of which compulsory powers are exercised, is a compensatable loss if the land upon which the loss is suffered is subsequently acquired under compulsory powers.

11. The observation of Stephenson LJ to which the Privy Council referred was that

"Loss of practice due not to his quitting the premises but to the threat of impending compulsory purchase and demolition of the premises will not be compensatable."

This appears to be an acceptance of the submission of Mr Simon Brown as amicus at p.338D that

"business losses are only recoverable in so far as they follow from vacating the land. Thus, if, dispossession being imminent, a business owner reasonably moves before notice to treat in order to mitigate his anticipated loss, he will be entitled to his reasonable expenses in moving from the land and business losses subsequent to quitting the land. But he cannot recover losses caused by running down the business prior to quitting the land."

That is not a distinction that can stand in the light of the decision in Shan Fung, where the losses which were held to be compensatable did arise, at least in part from such running down of the business, albeit involuntarily. The claim is explained thus at p.135C:

"The claimant first became aware that the business was under threat when it received the letter from the government in November 1981. The news spread quickly. During the first half of 1982 the possibility that the claimant's site might be resumed at some indefinite date became generally known. This had a paralysing effect on the claimant's operations. The Tribunal found that the removal of the business from the land was in the nature of a slow asphyxiation of the claimant. Customers became unwilling to enter into long term forward contracts. Even New World told Hip Hing Ltd., its building subsidiary which took half of all the claimant's high tensile rebars, to stop entering into new long term contracts with the claimant because of the threat of resumption. For its part the claimant reasonably and properly decided in June 1982 not to enter into contracts of more than six months' duration. [My emphasis]

In the result, in the long drawn out period from November 1981 to January 1987, while operating as best it could under the threat of resumption, the company suffered financially to the extent of $18,173,000. This is the difference between the losses the claimant made in fact and the profits or reduced losses it would have made in this period had there been no threat of resumption."

12. Although such losses might be categorised as disturbance of the claimant's business, caused by the shadow of acquisition, I can see no difference in principle between the holding costs, as now defined in the subject case, and the losses held to be compensatable in Shan Fung. They are, of course, clearly not disturbance because they arise from the impossibility of selling the premises, but they are an "other matter not directly based on the value of land" within Rule 6 of s.5 of the Land Compensation Act 1961. Although, as Mr Elvin points out, that rule does not create but merely preserves heads of compensation as they are presumed to have existed in 1919, he very properly accepts that if the costs are losses which fall within the principle defined in Shan Fung they are recoverable.
13. Of the three conditions which have to be satisfied in order that these costs should fall within that principle, Mr Elvin reserves such points as may be available in respect of whether they are losses which a reasonable person could have avoided to the stage of quantification. On the "Agreed approach to valuation", the question of the amount of rent that could reasonably have been achieved whilst the claimant was unable to sell the dwellings, is left for agreement or subsequent determination. Mr Elvin however contends that the claim ought to be rejected either as not being causally connected with or being too remote from the acquisition or the threat of acquisition.
14. Mr Elvin relies upon the decision of the majority of the Scottish Court of Session in Emslie & Simpson Ltd v Aberdeen City District Council [1994] 1 EGLR 33. That case is not recorded as having been cited in Shan Fung, and certainly is not referred to in the judgements in that case. It was a claim for loss of profits suffered by the tenant of property in an area of comprehensive development, whose tenancy was eventually compulsorily acquired, due to the blighting effect of the scheme. Lord President Hope at p.37B said:

"The point at issue is whether the loss must be shown to have been caused by the dispossession, that is to say by the taking of the premises from the claimant in the exercise of compulsory powers, or whether it is sufficient for the loss to be recoverable that it was caused by the overall effects of the scheme of acquisition."

At p.38 he rejected the claim on a basis which must, I think be too wide, having regard to the decision in Shan Fung, where, in the passage which I have already cited from P.136, specific reference is made to the loss having been caused by "the threat of resumption". At letter A the Lord President said:

"It is dispossession caused by the taking of the lands which gives rise to compensation, not the threat of dispossession or the effects of publication of plans for the execution of the works."

I would not accept this as a correct statement of the law as it now stands. The agreed facts in this case and the inferences which I have drawn from them, have led me to the conclusion that the "holding costs" as now defined, if they in fact turn out to amount to losses, were losses caused by the threat of dispossession; and that, as a matter of law, is a sufficient causal connection with the compulsory acquisition to satisfy the first of the conditions for a loss to qualify for compensation.

15. There remains the question of remoteness. Mr Elvin made no separate submissions as to remoteness. Lord Nicholls at p 126D of the Shan Fung judgement referred to the "familiar and perennial difficulty [of] attempting to formulate clear and practical guidance on the criteria by which remoteness is to be judged". He observed that:

"The tools used by lawyers are concepts of chains of causation and intervening events and the like. Reasonably foreseeable, not unlikely, probable, natural are among the descriptions which are or have been used in particular contexts. Even the much maligned epithet "direct" may still have its uses as a limiting factor in some situations."

It seems to me that it is hard to think of any effect upon a proposal to market retirement homes for people to live in, of a threat to acquire those homes compulsorily from any purchaser for the purpose of demolishing them that is more obviously foreseeable, likely, probable or natural than that such proposal for marketing will be frustrated. I therefore conclude that the second condition for the loss claimed in this case to be compensatable is also satisfied.

16. Having reached the conclusion which I have by the reasoning which I have tried to set out, it has not been necessary for me to consider whether the conclusion which the majority in the Court of Session reached in the Emslie Case was wrong as well as the particular reasoning which I have found it necessary to reject. Nor has it been necessary in this case, as the Privy Council has suggested will be necessary on an appropriate occasion to reconsider Stephenson LJ's observation in the Prasad case in so far as it might apply to loss of profit due to blighting of the area as a whole such as was being considered in the Emslie case. The effect of the scheme in such sense falls to be disregarded in the assessment of market value as at the date of entry. Whether losses suffered by those whose property is eventually acquired, during the period when the scheme is being brought to fruition, as a part of the overall effect of the scheme upon the area generally, as opposed to the particular effect of the threat of acquisition of the premises themselves upon that property, is compensatable, is a matter upon which I would not wish to be taken as having expressed an opinion without argument in circumstances where that question arises for decision.

Costs

17. The formulation as to the computation of the claimant's holding costs which has been agreed, leaves open the possibility that the claimant may have suffered no loss. It is by no means impossible that when the state of the market is investigated, it will turn out that the claimant will have been better off being unable to sell in the market conditions of 1993 but receiving rent to off-set the interest on the price at which the property would have been sold until the compulsory acquisition in 1997. I say this because the way in which the claim was originally presented appeared to indicate that a sale when the property was first marketed would have involved the claimant in accepting a loss on its investment in the land and development.
18. For this reason, having heard counsel on the appropriate order as to costs on a hypothetical basis, I will order that the authority should pay the claimant's costs of this preliminary issue if the claimant succeeds in establishing its claim for holding costs as now formulated. Otherwise there should be no order as to costs.

Dated: 12 February 2001

(Signed) Judge Michael Rich QC

APPENDIX 1

19. MATTERS AGREED
20. 1 The nature of Ryde's business is that of a property developer developing properties for onwards sale.
21. 2 The problems encountered by Ryde in selling the individual units upon completion of the development were occasioned by the state of the market in 1989 and 1990 onwards.
22. 3 Ryde decided in 1990 to let the individual units on a short term basis although planning permission had been refused for general housing (see 4.3 and 4.4 above). No enforcement action had been taken by the planning authorities.
23. 4 Had it not been for the Tramlink scheme and the CPO, eventually Ryde would have been able to sell the individual units or the development as a whole.
24. 5 But for the scheme the property would have been sold on 25 March 1993 and therefore the calculation of the holding costs should start from 25 March 1993.
25. 6 The development would have been sold on 25 March 1993 with vacant possession but only if Ryde had first taken steps to terminate the existing tenancies and obtain vacant possession before sale.
26. 7 Knowledge of the proposals for Tramlink was in the public domain as at May 1991.
27. 8 Croydon Council's decision do promote the tram bill was made on 4 November 1991. Ryde petitioned the House of Lords in opposition on 4 February 1992 and the House of Commons in April 1993. On 23 April 1994 Ryde withdrew its petition and LRT gave a parliamentary undertaking to Ryde.

APPENDIX 2

AGREED APPROACH TO VALUATION

28. Find the value at which the subject property would have sold in the open market with vacant possession on 25 March 1993, disregarding the effects of the Tramlink Scheme (deducting the costs if any of obtaining vacant possession).
29. Add interest to that 1993 value for the period between 25 March 1993 and 8 August 1997 at the rate at which money was in fact being borrowed by the Claimant during the said period.
30. Subtract the rent received from letting the subject property as fully as could have reasonably been achieved during the said period net of the Claimant's estate management costs for the said period (i.e. the costs of letting, managing and maintaining the subject property during the said period).
31. The product of Steps 1 to 3 above is to be set off against the open market value of the subject property as at 8 August 1997 (i.e. the value of the subject property for the purpose of rule (2) of the land compensation rules).
32. To the extent that the set off described in 4. above produces a positive figures, that figure shall represent the amount of the holding costs payable to the Claimant by the Acquiring Authority in accordance with rule (6) of the land compensation rules. That figure (together with any other disturbance compensation properly payable to the Claimant) shall then be added to the value of the subject property as assessed in accordance with rule (2) of the land compensation rules, in order to arrive at the overall amount of compensation payable by the Acquiring Authority to the Claimant for the compulsory purchase of the subject property. An appropriate adjustment will then have to be made for the advance payment made by the Acquiring Authority.