London County Council v Tobin
Jurisdiction | England & Wales |
Judgment Date | 02 March 1959 |
Judgment citation (vLex) | [1959] EWCA Civ J0302-2 |
Court | Court of Appeal |
Date | 02 March 1959 |
[1959] EWCA Civ J0302-2
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Morris
Lord Justice Sellers (not present) and
Mr Justice Wynn-Parry
MR R.D. STEWART-BROWN, Q.C. and MR K.F. GOODFELLOW (instructed by Mr J.G. Barr, Solicitor to the London County Council) appeared on behalf of the Appellants (Respondents below).
MR W. SCRIVENS (instructed by Messrs Silkin & Silkin) appeared on behalf of the Respondent, Claimant below.
The facts which gave rise to the claim of Mr Tobin are clearly recorded in the Decision of the Lands Tribunal and in the Case Stated, and I do not propose to recount them at length. Mr Tobin's premises at 382, Mile End Road, which he owned and which he occupied for the purposes of his business as an optician, became subject to a Compulsory Acquisition Order. notice to treat was served upon him on the 14th January, 1952, but he did not vacate until the 6th June, 1955, when he moved his business into new premises at 129, Whitechapel Road. Notice of reference to the Lands Tribunal was given on the 30th December, 19557, The hearing before the Tribunal was in February, 1957, and the decision of the Tribunal is dated the 14th June, 1957. The further amended Particulars of Claim, which were the subject of reference to the Tribunal, included many items, but only two of these are now in question. There was one item under which £3,000 was claimed for "Damage of profits and goodwill". The claim was alleged to represent the loss of goodwill consequent upon the removal to the new premises.
The Lands Tribunal dealt with the claim in their decision in the following words: "It was contended that an established one-man business in freehold premises would command three years purchase of the average profits, whereas a now business in leasehold premises and a business which involved the employment of a qualified assistant would command only one year's purchase of the profits, Mr Moore, for the purpose of his valuation, assumed that the profits before deducting rent and rates would, remain constant, and that the difference in the new profits was therefore wholly attributable to the increased rent. This appears to us to be really an attempt to compensate the Claimant for his increased rent which it is clear from the authorities (see per Lord Justice Denning in Harvey v. Crawley Development Corporation at page 338) cannot be done. It must, we think, be assumed that the increased rent is justified by the increased business capacity of the new premises, and indeed it is clear from the evidence that the average groos takings for the two years subsequent to removal are £6,725, whilst those for the two years prior to removal are £4,472. However, the business which is being carried on at the new premises differs from that formerly carried on by Mr Tobin in regard not only to the premises and their situation but also in the employment of a fully qualified assistant, A direct comparison is therefore impossible, and it seems to us that what we have to attempt to evaluate is the lose which Mr Tobin has suffered in the goodwill which was attached to the business carried on by him in his premises at 382, Mile End Road. Had he been able to acquire premises in its immediate vicinity it is obvious that the loss would have been negligible, while if he had been forced to re-establish himself in an entirely different part of London, little or none of the goodwill would have followed him to his new premises. It was contended on behalf of the Claimant that the correct method of assessing his loss was by comparing the capital value of the old business in the acquired premises arrived at by taking three years' purchase of the average net profits for the last two years, namely, 1953/54 and 1954/55, with the capital value of the new business in the new premises, arrived at by taking one year's purchase of the average of the net profit for 1955/56 and the estimated net profit for 1956/57. We approve this method in principle, but its application has necessitated our making a number of adjustments to the figures in the accounts in order to make a fair comparison between the net profits of the old business and those of the new one. In valuing the old business we have decided that the correct method is to multiply the average net profit by three years' purchase as contended for by the Claimant, but we have adopted the average profits for three years as contended for by the London County Council. In valuing the new business we are unable to accept the evidence of the Claimant's advisers that it was unsaleable or worth at most only one year's purchase. Having regard to our finding that a not inconsiderable part of the goodwill has remained, and to the fact that the net profits of the new business have been substantially higher than those of the old business and, according to our calculations, have been on the increase, we consider these views to be unduly pessimistic. We are also mindful of the fact that Mr Moore, in an earlier calculation which he discarded but which was communicated to the London County Council by Messrs Silkin & Silkin in a letter of 16th February, 1956, valued the new business at two years' purchase of the net profit. In the light of all this evidence we have come to the conclusion that one and a half years' purchase is a the appropriate multiplier, and this is the figure we have applied. In the result, we calculate the loss sustained under this head of the claim at £750".
The question of law as stated by the Lands Tribunal is whether upon their findings of fact they came to a correct decision in law in determining that the Claimant was entitled to the sum of £750 in respect of his claim for damage to the goodwill of his business.
It is to be observed that the approach of the Lands Tribunal involved ascertaining the "capital value of the old business" in the premises which were acquired and comparing it with the "capital value of the new business in the new premises".
In their context the phrases "capital value" clearly refer to the value of the goodwill and only to that. It does not seem to me that this is wrong in principle. Mr Tobin was compelled to move. He was compelled to relinquish the capital asset, i.e., the goodwill which had resulted from his having built up an established business in his own premises at 382, Mile End Road. If, because of his enforced uprooting, his new capital asset, i.e., the value of the goodwill of his business in the new premises has been diminishod, then he has suffered a loss. It is said, however, that the method of approach of the Lands Tribunal is erroneous because it assumed a sale of the goodwill of the business in the new premises at or about the date of the hearing before the Lands Tribunal, and it is said that as no sale had taken place or was in prospect the award compensated Mr Tobin for a loss which he had not suffered nor was about to suffer. The Lands Tribunal have found that the goodwill of a business. which is an asset which can be realized at any time, increases in value the longer the business is carried on at the same premises or near thereto. But the Lands Tribunal could not peer into the future and could only make a reasonable comparison between what Mr Tobin possessed when he was forced to leave his premises and what he later possessed. He had been at the old premises for over 40 years, and had had no intention of leaving them; his goodwill was valued on the basis of three years' purchase of his average net profits. The Lands Tribunal were comparing like with like when they endeavoured to assess the value of the goodwill in the new premises which again Mr Tobin had no intention of leaving. Had the Lands Tribunal been dealing with the claim in December, 1955, at the time of the reference to them, their task would have been indeed difficult. As they were dealing with the claim in February and June, 1957, it was possible for the Lands Tribunal to have regard to the fact that the business had been continued and was continuing and to the known facts of performance and achievement at the new address; it was entirely proper for the Lands Tribunal to take these known facts into calculation. (See Bwllfa and Merthyr Dare Steam Collieries v. Pontypridd Waterworks Company, 1903 Appeal Cases, page 426). The difficult task of the Tribunal was to decide the number of years purchase to apply in the case of the business at its new address. After all the years at the old address three years' purchase was taken. It might have been that immediately after She hearing or after the decision of the Tribunal Mr Tobin might have died. What was the appropriate number of years purchase? It seems to me that it is only accidental that at the date of the hearing Mr Tobin had been in the new premises just over one and a half years and that the Tribunal took one and a half year's purchase. It may be that the Tribunal were of the opinion that there would have to be many more years of occupancy and trading activity before the goodwill could be sold on the basis of more than one and a half year's purchase. But the question as to the multiplier to be taken, i.e., the number of years purchase, was essentially a question of fact for the Tribunal, and, unless they have erred in principle, then it is not for this Court to say that the decision is wrong in law. It may be that a different multiplier could have been taken and that the resultant figure for loss of goodwill would have been less; but the difficult task of fixing the appropriate number of years to be taken was essentially a matter of judgment having regard to the facts, figures and features of the case. It is said that no sale had taken place at the date of the hearing and that none was in prospect. That is perfectly...
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