Lancaster City Council v Thomas Newall Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,Lord Justice Underhill,Lord Justice Mummery |
| Judgment Date | 11 July 2013 |
| Neutral Citation | [2013] EWCA Civ 802 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: C3/2012/2787 |
| Date | 11 July 2013 |
[2013] EWCA Civ 802
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
Mr N.J. Rose FRICS
[2011] UKUT 437 (LC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lord Justice Rimer
and
Lord Justice Underhill
Case No: C3/2012/2787
Mr Guy Roots QC and Ms Stephanie Knowles (instructed by Eversheds LLP) for the Appellant
Mr Neil King QC and Mr Barry Denyer-Green (instructed by Holdens Solicitors) for the Respondent
Hearing dates: 25 and 26 April 2013
Approved Judgment
Introduction
This appeal, by Lancaster City Council ('the Council'), is against a decision of the Upper Tribunal (Lands Chamber, Mr N.J. Rose FRICS) dated 4 September 2012. The decision was on a reference made on 16 September 2008 (originally to the Lands Tribunal) by Thomas Newall Limited ('TNL', the respondent) as to the compensation payable by the Council, the acquiring authority, for the Council's compulsory acquisition of TNL's freehold interest in a former mill known as St George's Works, St George's Quay, Lancaster. The land was part of an area known as Luneside East which the Council intended to be the subject of a comprehensive redevelopment project.
The compensation due was that identified by clause 15 of an agreement dated 16 February 2006, which entitled TNL to:
'any compensation which would be payable to TNL as a result of any acquisition pursuant to the CPO including but not limited to any payments under the Compulsory Purchase Act 1965, the Land Compensation Acts 1961 and 1973 and the Planning and Compulsory Purchase Act 2004.'
The agreed valuation date was 1 August 2006, which was taken as the date when the acquired interest vested in the Council.
The tribunal valued TNL's freehold interest at £1,752,000, as to which there is no issue. What remain in controversy are two elements of the tribunal's award to TNL of compensation for its disturbance loss suffered in consequence of the acquisition, which brought the total award to £2,045,043.93. One element is an award of £17,985 in respect of 'management time'; the other, an award of £72,620 in respect of 'loss of rent', which the Council asserts was, in three respects, unjustifiably excessive. The total amount in dispute represents a tiny percentage of the total award and one might ask why the Council regarded a battle over them in the Court of Appeal as a game worth the potentially expensive costs candle. Part of the answer is that if the Council is successful to a material extent, it will be entitled to ask the court to remit to the tribunal for re-determination its decision that the Council should pay TNL's costs of the reference, which Mr Roots QC, for the Council, accepted was a significant consideration. He also told us, however, that it was not the Council's sole motivation for the appeal, the public money at stake being regarded as anyway sufficient to justify it. Permission to appeal on both points was given by the tribunal.
St George's Works
The land has an area of some 1.73 acres. There are several buildings on it, and the tribunal described buildings 1, 4, 5, 6, 7 and 12 as at the valuation date. Building 1 was constructed in about the 1870s and was derelict. Building 4, constructed in about the 1840s, had four floors, with about half the ground floor containing cellular office accommodation, with mezzanine offices above. Buildings 5 and 6, constructed in the 1840s and 1850s respectively, were also composed of four floors. The ground floor was made up of a variety of types of accommodation, including offices, studios, a trade counter, workshops, showroom and storage. On the first floor, there was office and showroom accommodation, with some storage; on the second floor, there were open plan offices, a gymnasium and artists' studios; and on the third floor, workshop and storage accommodation. These two buildings accounted for about two-thirds of the total floor area of all the buildings. Building 7 was a single storey building constructed in the 1850s. Building 12, divided into two units 12 and 12A, was also a single storey building, constructed in about the 1950s. Unit 12 had a toilet and kitchen with mezzanine offices above, and unit 12A had an office and a toilet with mezzanine storage above.
The tribunal found that at the valuation date 31,105 sq ft of the buildings' total net internal area of 67,378 sq ft were occupied, all such occupation being in buildings 5, 6 and 12. TNL occupied 916 sq ft in building 6; and 4,973 sq ft in building 5 was occupied by a relative of Stephen Loxam, TNL's managing director. The tribunal said in paragraph 26:
'Very little formal lease documentation has been produced. Some units were occupied on informal agreements, others on formal leases which had expired, the tenants holding over. Most tenants were protected by the provisions of Part II of the Landlord and Tenant Act 1954. In general tenants were responsible for rates and internal repairs, and [TNL] was responsible for repairs to the exterior and common parts. Some tenancy agreements entitled the landlord to demand a service charge for certain services including heating, water, electricity, security alarm, insurance and decoration of common areas'.
A. The 'management time' award
This is the first issue. The tribunal dealt with it in paragraphs 136 to 140. It recorded that TNL's business consisted almost entirely of managing St George's Works, which had been sub-divided into many units; and Mr Loxam's evidence, in paragraph 26.1 of his witness statement of 13 May 2011, was that TNL derived 99% of its income from the Works.
TNL's amended claim under this head was for compensation of £21,281 for time spent on dealing with the consequences of the Council's proposal to acquire the land compulsorily. That figure represented 327.4 hours, at £65 an hour, of the time spent by five TNL directors (all members of the Loxam family), between 21 June 2006 (when TNL was notified of the confirmation of the compulsory purchase) and 20 June 2008, the date of the reference to the Lands Tribunal. Stephen Loxam accounted for the majority of the hours so spent.
The tribunal related, in paragraph 138, that the Council's case in opposition to the claim was that a claim for management time must be supported by evidence not simply of time spent by particular individuals, but of how that time translated into something that could be reasonably be regarded as loss suffered by the claimant, in this case TNL, a company. There was no dispute that Mr Loxam and his co-directors had spent the time claimed but it was said that there was no evidence of expenditure by TNL on management time generally; and no evidence that any overtime or other unusual amounts had been paid to any of the directors in respect of such time. The Council accepted that in order to show loss, it is not necessary to show financial expenditure, but it asserted that it is likely in most cases to be difficult to prove loss without showing how the time spent had manifested itself in the claimant company's accounts. It was said that there was no evidence that the totality of time spent over the relevant period was significantly more than the time the directors would have spent carrying out management tasks in the absence of the CPO.
The counter-argument before the tribunal, advanced by Mr Denyer Green, was that as the Council had accepted that the claimed loss need not be measured by reference to actual expenditure and had not disputed that the time claimed was spent by the Loxam directors on events caused by the proposed acquisition, the relevant 'loss' was the loss of such time to TNL. TNL was a family company, which could only act through its human agents, and the relevant agent was Mr Loxam, the active director. The reported cases showed that if the claimant is an individual who spends time dealing with the acquisition, he will be compensated for his time so spent and, therefore, lost. It was said that there was no difference in a case in which the claimant is a company that acts through an individual who spends like time dealing with the acquisition.
The tribunal accepted TNL's arguments. It said, in paragraph 140:
'… TNL's business consisted almost entirely of managing St George's works, which had been sub-divided into many units and was clearly a management intensive investment. In my judgment, if Mr Loxam had not spent over 300 hours dealing with the consequences of the CPO, the profitability of TNL's investment would have been higher and it would be unjust to deprive it of compensation for the profit foregone in this way. Mr Asher [TNL's valuer] said that the suggested hourly rate of £65 was significantly below the rates charged by all [TNL's] professional advisers. He added that he believed it represented a fair rate "based on similar cases". I was not given information about those cases and Mr Massie [the Council's valuer] did not suggest an hourly rate. In what is necessarily a subjective judgment, I determine compensation for management time based on £55 per hour, namely £17,985.00'.
Discussion
There is no dispute that TNL was in principle entitled to recover by way of compensation not just the market value of its land but also compensation for any 'disturbance loss' suffered in consequence of the compulsory acquisition. The latter right was originally established by judicial decision and is now expressly recognised by rule (6) in section 5 of the Land Compensation Act 1961. The function of any such award is to...
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