McEwing & Sons Ltd v Renfrewshire County Council
| Jurisdiction | Scotland |
| Judgment Date | 19 November 1959 |
| Date | 19 November 1959 |
| Docket Number | No. 9. |
| Court | Court of Session (Inner House - First Division) |
1ST DIVISION.
Compulsory Powers—Assessment of compensation—Compulsory acquisition of land bought for development as housing estate—Claim in respect of loss of prospective profit on sale of houses—Competency—Acquisition of Land (Assessment of Compensation) Act, 1919 (9 and 10 Geo. V, cap. 57), sec. 2, Rules (2) and (6)—Lands Clauses Consolidation (Scotland) Act, 1845 (8 and 9 Vict. cap. 19), secs. XVII, XIX.
The Acquisition of Land (Assessment of Compensation) Act, 1919, enacts by sec. 2 rules for the assessment of compensation where land is acquired compulsorily for public purposes. Rule (2) provides that, "The value of land shall … be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise …" Rule (6) provides that, "the provisions of Rule (2) shall not affect the assessment of compensation for disturbance or any other matter not directly based on the value of land."
In 1956 a firm of building contractors bought a plot of ground in Greenock from the Admiralty with the intention of developing it as a housing estate, and building on it dwelling-houses for sale, a purpose for which they had received planning permission. The plot of ground was the only site remaining in Greenock of a size suitable for private houses. In August 1957 Renfrewshire County Council compulsorily acquired the ground, and served a notice to treat under the Lands Clauses Acts on the building contractors.
In the resulting arbitration the building contractors sought compensation in respect of (a) the market value of the land, (b) expenditure incurred by them in preparing the land for development, and (c) loss of the estimated profit to be expected from the sale of houses which by the compulsory purchase order they were prevented from erecting. The County Council opposed the claim for loss of profit which they maintained was incompetent.
Held that the claim for loss of profit was not a claim for disturbance under Rule (6); that, as the profit to be expected from the development of the land had already been reflected in its market value, to allow the claim would be to give the claimants more than their actual loss at the date of the compulsory acquisition, and, accordingly, that the claim was incompetent.
Collins v. Feltham Urban District CouncilUNK, [1937] 4 All E. R. 189, Wimpey & Co. v. Middlesex County CouncilUNK, [1938] 3 All E. R. 781, and dictum of Lord Moulton in Pastoral Finance Association Limited v. The MinisterELR, [1914] A. C. 1083, at p. 1088, approved.
Lanarkshire and Dumbartonshire Railway Co. v. MainUNK,(1895) 22 R. 912, and Venables v. Department of Agriculture for Scotland, 1932 S. C. 573, distinguished.
The County Council Of The County Of Renfrew compulsorily acquired land in Greenock, known as the Balclutha Site, of which D. M'Ewing & Sons, Limited, were the proprietors.
Arbitration proceedings under the Acquisition of Land (Assessment of Compensation) Act, 1919, were afterwards instituted for the determination of the compensation payable by the County Council. A claim was lodged by the proprietors for compensation in respect of (a) the market value of the land, (b) abortive expenditure incurred by them in preparing the land for development as a housing estate, and (c) loss of the profit which they estimated they would have received from the erection and sale of forty-five houses which they were prevented from erecting on the land by the compulsory purchase order. The claim for loss of profit, inter alia, was objected to as incompetent by the County Council.
On 12th June 1959, the arbiter, after hearing a debate, issued an interlocutor allowing the claimants a proof of their whole averments.
At the request of the County Council, the arbiter stated a case for the opinion of the Court of Session under section 6 of the 1919 Act.
The case stated, inter alia:—"(2) The claimants were the proprietors of ground in Greenock extending to 3.938 acres or thereby (hereinafter referred to as the “Balclutha Site”). The claimants carry on business in Greenock as building contractors and in the closed record in the arbitration they plead that the said ground was the only sizeable remaining site in Greenock suitable for development for private houses. The claimants also plead that they proposed to develop the ground for the purpose of building private houses for sale on a speculative basis and the respondents in answer aver that they believe this to be true. The claimants further aver that the Balclutha site was zoned in the Greenock town development plan exclusively for residential purposes and that planning permission was granted to them by the Corporation of Greenock as local planning authority (a) on 9th August 1956 to erect two semi-detached villas, (b) on 6th September 1956 to erect sixteen houses and (c) on 8th October 1956 to erect twenty-seven dwelling-houses, making a grand total of forty-five houses. (3) On 4th December 1956 the respondents gave notice to the claimants of a compulsory purchase order made on 3rd December 1956 in relation to the Balclutha site, and in respect that the consideration to be paid for the conveyance of the ground was not agreed between them, the respondents, after confirmation of the compulsory purchase order on 20th August 1957, served on the claimants on 27th August 1957 a notice to treat; thereafter the matter was jointly referred to arbitration. (4) The usual procedure in such an arbitration has been followed and a closed record was in due course made up in which the respondents pleaded, inter alia:—“The averments of the claimants being incompetent and irrelevantet separatim lacking in specification ought not to be admitted to probation.” The arbiter directed the parties to debate before him on 27th April 1959 on the respondents” said plea in law. (5) Mr Kissen, Q.C., for the respondents, argued at the debate that in four respects (including, inter alia, a claim for “loss of profit”) the claimants” pleadings ought not to be admitted to proof and Mr Hunter, Q.C., for the claimants, moved that the arbiter allow the claimants a proof of their whole averments. The arbiter took the question to avizandum, and on 12th June 1959 issued an interlocutor allowing the claimants a proof of their whole averments. The arbiter was thereafter, by letter dated 24th June 1959, requested by the respondents to state a case for the opinion of their Lordships on his findings in respect of his allowance to the claimants of a proof of their averments of “loss of profit.” (6) At the debate the main argument by the respondents was that the item of compensation claimed under the heading “loss of profit” should not be allowed to go to proof. The following excerpt from the closed record, page 6, constitutes the claimants” averments of loss of profit:—
“Loss of Profit—
| 45 houses at selling price of £3500 each, | £157,500 | ||
| Average profit of the 3 years from 1954 to 1956 after charging works expenses, 10·3% | £16,222 10 | ||
| Less administration and office expenses before charging interest and proprietors” remuneration, 4·7% | £7,402 10 | ||
| Less Deduction for saving on development on the one site resulting in easier administration, 1/3rd | 2,467 10 | 4,935 0 | £11,287 10” |
"The findings of the arbiter in that connexion in the note annexed to his said interlocutor of 12th June 1959 were:—
"Loss of Profit—
Mr Kissen also challenged the competency of the claimants” averments that they are entitled to be compensated for the loss of future profit which they claimed that they would have made on the houses which they would have erected and which they expected to sell. He founded his argument in the main on two English cases, Collins v. Feltham Urban District Council.UNK, [1937] 4 All E. R. 189 andWimpey v. Middlesex County Council.UNK, [1938] 3 All E. R. 781, in both of which the English Courts held that builders from whom land had been acquired by a local authority were not entitled to compensation for loss of future profit. I am however faced with the proposition that "the probability of a more profitable future use is one such advantage which may be taken into consideration"— see Cripps on Compulsory Acquisition of Land, (10th ed.) p. 4028, par. 4—013 where the advantages of land present or future in the hands of the owner, which have to be taken into account in assessing compensation, are discussed. I was referred by Mr Hunter for the claimants to two Scottish cases—Lanarkshire and Dumbartonshire Railway Company v. MainUNK, (1895) 22 R. 912, and Venables v. Department of Agriculture for ScotlandSC, 1932 S. C. 573, which oblige me to take into account in assessing the compensation due to the claimants the whole loss or damage resulting to them from acquisition of their land. This arbitration concerns parties in Scotland disputing as to the value of heritage in Scotland and I am bound to follow the law of Scotland in determining the compensation due to the claimants. I am satisfied that loss of profit which they expected to make by selling the houses which they would have built on the land is a loss to them (if substantiated) which is directly attributable to and following on the acquisition of their land by the claimants.
"I shall accordingly take into account in assessing the compensation due such loss of profit as the claimants may satisfy me by proof that they have suffered except in so far as such loss may already be reflected in their statement of the value of the land. I can find no reason that they are not on principle entitled to be compensated for loss of future profit and I shall accordingly allow them a proofhabili modo of their averments in this respect."
The question of law was:—"Was the arbiter right in holding that he ought to take into account in his assessment of the compensation due to the claimants the whole loss or damage (so far as...
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