Ryde International Plc v London Regional Transport
| Jurisdiction | England & Wales |
| Judge | Lord Justice Carnwath,Lord Justice Mance,The Vice-Chancellor |
| Judgment Date | 05 March 2004 |
| Neutral Citation | [2004] EWCA Civ 232 |
| Docket Number | Case No: C3/2003/1389 |
| Court | Court of Appeal (Civil Division) |
| Date | 05 March 2004 |
[2004] EWCA Civ 232
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LANDS TRIBUNAL
(P.R. Francis FRICS)
Royal Courts of Justice
Strand,
London, WC2A 2LL
The Vice-Chancellor
Lord Justice Mance
Lord Justice Carnwath
Case No: C3/2003/1389
Christopher Katkowski QC and Timothy Mould (instructed by Argles, Stoneham. Burstows) for the Appellant
Joseph Harper QC (instructed by Transport for London) for the Respondent
Introduction
This is an appeal against a decision of the Lands Tribunal (P R Francis FRICS) as to the compensation payable to the claimant ("Ryde") for the freehold interest in a block of 37 flats and 5 bungalows known as Evelyn Court and Evelyn Mews in Croydon, Surrey ("the property"). It was compulsorily acquired by London Regional Transport ("LRT") in connection with the Croydon Tramlink Scheme ("the scheme").
The Tribunal found the following facts, which were largely based on an agreed statement, and were not in issue before us:
i) The subject property comprised a development of 37 flats and 5 bungalows located off Teevan Close in Addiscombe, Croydon. It was constructed by the claimant, a property developer, in 1989 pursuant to a detailed planning permission dated 29 November 1988 as 36 elderly persons' flats together with warden's accommodation (Evelyn Court), 5 elderly persons' bungalows (Evelyn Mews), communal gardens, access road and 12 parking spaces. The property was of traditional construction having brick faced walls to the ground floor with part tile hung and part rendered elevations to the first, under concrete tile covered pitched roofs.
ii) In November 1989 the units were offered in the open market for sale as sheltered accommodation, but due to the then state of the property market no sales were concluded, and, from September 1990, the claimant decided to let them for general housing purposes on short-term tenancies, despite a further planning application for general housing purposes having been refused on appeal. The lettings were tolerated by the local planning authority as, with the Croydon Tramlink scheme coming into the public domain in May 1991, it became evident that the whole of the subject property would need to be compulsorily acquired, and the purposes for which it had been constructed would not therefore be achievable. There was also an informal arrangement with the local council whereby housing benefit tenants were accommodated in the units.
iii) Had it not been for the scheme, the development would have been sold by 25 March 1993, subject to steps having first been taken by the claimant to obtain vacant possession of the flats and bungalows. Holding costs, if any, would therefore be calculated from that date.
iv) The acquiring authority deposited the Croydon Tramlink Bill in November 1991 with an application for leave to introduce it during the 1991–1992 Parliamentary Session. The claimant petitioned both Houses of Parliament in opposition, but withdrew its petition in April 1994 and received a Parliamentary Undertaking from the acquiring authority. In July of that year the Croydon Tramlink Act received the Royal Assent.
v) Notices to Treat and Notices of Entry were served on the claimant on 1 May 1997, and possession of the subject property was taken on 8 August 1997, this being the valuation date for compensation purposes. The property was demolished late in 1997.
vi) The valuations of the subject property were to be based upon its permitted use for sheltered housing, and the 'ultimate' value of all the units (including the value of the freehold reversion but before sales and other costs) was agreed at £2,585,000. The costs of sale were also agreed at £65,175. Both valuers agreed that the appropriate basis of valuation, in respect of the open market value of the subject property at both 1997 and, in connection with holding costs, 1993 was the residual method.
The "holding costs" incurred by Ryde during the period in which the sale of the properties was delayed by the scheme were dealt with separately. In a preliminary decision, HH Judge Rich QC ( [2001] RVR 59) had held that such "holding costs" were in principle compensatable under section 5, rule (6) of the Land Compensation Act 1961 ("the 1961 Act"). The amount, if any, to be paid for holding costs was in issue before Mr Francis, but is not part of this appeal.
Accordingly, we are solely concerned with the assessment of compensation payable for the acquisition of the property at the valuation date.
The law
The relevant statutory law is in the Land Compensation Act, 1961, section 5, which reproduced rules first enacted in the Acquisition of Land Act 1919. Rules (2) and (6) are relevant in the present case. They provide:
"(2) 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 realize:
(6) 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:"
By way of background it is sufficient to refer to a recent authoritative statement of the basic principles of compensation law (in relation to equivalent provisions in Hong Kong) in Director of Buildings v Shun Fung Ltd [1995] 2 AC 111 PC, where Lord Nicholls said (p 125C-H):
"The purpose…is to provide fair compensation for a claimant whose land has been compulsorily taken from him. This is sometimes described as the principle of equivalence. No allowance is to be made because the acquisition was compulsory; and land is to be valued at the price it might be expected to realise if sold by a willing seller, not an unwilling seller. But subject to these qualifications, a claimant is entitled to be compensated fairly and fully for his loss. Conversely, and built into the concept of fair compensation, is the corollary that a claimant is not entitled to receive more than fair compensation: a person is entitled to compensation for losses fairly attributable to the taking of his land, but not to any greater amount. It is ultimately by this touchstone, with its two facets, that all claims for compensation succeed or fail.
Land may, of course, have a special value to a claimant over and above the price it would fetch if sold in the open market. Fair compensation requires that he should be paid for the value of the land to him, not its value generally or its value to the acquiring authority. As already noted, this is well-established. If he is using the land to carry on a business, the value of the land to him will include the value of his being able to conduct his business there without disturbance. Compensation should cover this disturbance loss as well as the market value of the land itself. The authority which takes land on…compulsory acquisition does not acquire the business, but the…acquisition prevents the claimant from continuing his business on the land. So the claimant loses the land and, with it, the special value it had for him as the site of his business……In practice it is customary and convenient to assess the value of the land and the disturbance loss separately, but strictly in law these are no more than two inseparable elements of a single whole in that together they make up the value of the land to the owner…"
The nature of the award as "a single whole" is reflected in the fact that interest, at the prescribed rate, is payable on the whole of the award (whether under rule ( 2) or (6)) from the date when the authority took possession (Compulsory Purchase Act 1965 s 11(1)).
The issue between the parties
Ryde's valuer (Mr Plant) based his valuation on the assumption that –
'… the claimant would, after obtaining vacant possession, refurbish and sell each of the flats and bungalows (apart from the warden's accommodation) individually over an 8 month period, and would then dispose of the freehold reversion to an investor."
Accordingly, his valuation started from the expected total sales revenue of the individual flats (£2,370,000), which was adjusted downwards (in summary, to reflect costs of cleaning and marketing, sales costs, and the fact that sales price would be achieved over 8 months), to give a final figure (after adding the "freehold investment value") of £2,400,000.
Miss Ellis, for LRT, assumed a sale as a single lot to a purchaser on the valuation date. She described the likely purchaser:
"The purchaser, who would most likely be an entrepreneur would, in effect, buy the property 'wholesale' with a view to 'retailing' the units individually. This was known in the trade as 'break-up'. In formulating his bid, the prospective purchaser would take into account what was required to be spent to bring all but one of the units into a suitable condition to be sold as sheltered accommodation, with the final unit to be retained for warden's accommodation. He would also build in a requirement for profit to cover his costs, risks and effort in undertaking the project." (para 17)
Her valuation was constructed in a rather different way to that of Mr Plant. She started from the "ultimate value" for the freehold of £2,585,000, from which she deducted figures for "profit", pre-sale works, finance costs over 9 months, and site purchase costs, to give a final "site value" of £1,960,000.
For present purposes the differences in detail are immaterial, save for the deduction for "profit". In her written evidence to the Tribunal, she had explained this element by reference to a familiar textbook:
"As for any risk enterprise, a person undertaking development...
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