Wrexham Maelor Borough Council v David Stuart MacDougall and Others
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE RALPH GIBSON,LORD JUSTICE MANN,LORD JUSTICE NOLAN |
| Judgment Date | 01 April 1993 |
| Judgment citation (vLex) | [1993] EWCA Civ J0401-10 |
| Court | Court of Appeal (Civil Division) |
| Date | 01 April 1993 |
[1993] EWCA Civ J0401-10
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
(Mr C.R. Mallett, Frics)
Before: Lord Justice Ralph Gibson Lord Justice Mann and Lord Justice Nolan
MR MORRIS KAY QC and MR KEVIN BARNETT (instructed by Messrs Brian Goddall, Wrexham, LL11 1AY) appeared for the Appellant
MISS ELIZABETH APPLEBY QC and MR THOMAS HILL (instructed by Messrs Boote Edgar Esterkin, Manchester, M3 2BE) appeared for the Respondent
This is an appeal by Wrexham Maelor Borough Council ("the Council") under section 3(4) of the Lands Tribunal Act 1949 from the decision of 14th May 1992 given by Mr C.R. Mallett, FRICS, the member selected to deal with the case.
Appeal is allowed on points of law only. The case concerned the claims of Mr D.S Macdougall to compensation in respect of the compulsory acquisition by the Council of his leasehold interest in offices at Lambpit Street in Wrexham. In those offices there was conducted the business of Crest Insurance Services Ltd ("Crest") and of Crest (Life and Pensions) Ltd ("Crest Life") in which companies
Mr Macdougall held three quarters of the share capital and Mrs Macdougall one quarter. Both were directors. Mr Macdougall had a lease for five years from 1st March 1987 granted by Mr Lea, the freeholder.
The member held that the value of the leasehold interest to Mr Macdougall was £9,000 and awarded that sum. No issue arises on that part of the award.
Next the member held that Mr Macdougall was entitled to compensation in respect of the loss of his service agreement with Crest as consequential loss due to the complusory acquisition of his leasehold interest and awarded the sum of £61,068 under that heading.
Finally, the member held that in consequence of the compulsory acquisition of the offices the business of Crest started to be extinguished on the date when the Council took possession on 2nd March 1990 and was finally extinguished at new office premises at Chirk in October 1991. Accepting the approach of Mr Braining, an expert on the valuation of insurance brokerage businesses, the member held the value of the goodwill of that part of the business of Crest which was extinguished in consequence of the complusory acquisition to be £263,000, and that sum was awarded to Crest under section 37 of the Land Compensation Act 1973.
The contentions of the Council on this appeal have been that the member was wrong in law to make the awards of £61,068 and £263,000.
There were other awards made including costs of removal and running down expenses which are not questioned on this appeal.
The first question of law raised by the Council is as to the proper construction of the provisions for disturbance payments contained in section 37 of the Land Compensation Act 1973. The second question is whether the award for the loss of the service agreement could properly be made on the facts found. Before addressing the questions of law it is necessary first to state the history of the dispute. The determination of the claims of Mr Macdougall has given rise to proceedings of much complication and to the expenditure of large sums in costs.
The history can be summarised as follows:
(i) Mr Macdougall and his wife were running a family business as joint shareholders in Crest which was formed in 1964. The business was moved to the offices in Lambpit Street in 1972. A large part of that business was private motor insurance in which most clients lived in the immediate vicinity and renewed their policies by visiting the offices.
(ii) The Council resolved in November 1985 to acquire compulsorily the north side of Lambpit Street including Mr Macdougall's offices, for the purpose of redevelopment by construction of new office space with shopping facilities. The traders and occupiers, including Mr Macdougall, attended meetings at which the implications of the proposed development were discussed.
(iii) In 1987 Crest Life was formed to take over that part of Crest's business which was concerned with life and pensions insurance. This business was concerned with a smaller number of clients who were distributed over a large region and who had no particular reason to visit the offices.
(iv) The first compulsory purchase order was made in November 1988 and confirmed in June 1989. Due to an error it did not include the leasehold interests in the Lambpit Street premises. The second order, including the leasehold interests, was made in August 1988 and confirmed in February 1990.
(v) Mr Macdougall moved Crest and Crest Life to alternative premises at Chirk, a village 10 miles south of Wrexham. There the business of Crest was wound down and extinguished in October 1991. The business of Crest Life was continued.
(vi) Mr Macdougall had a service agreement with Crest from 1979 which dealt with salary, expenses and his personal, insurances. In November 1987 a new agreement was entered into on similar lines whereby Crest agreed to employ Mr Macdougall at a salary of £15,000 per annum plus expenses and insurance and pension contributions.
(vii) Mr Macdougall's "Claim in answer to Notice to Treat" was dated 19th February 1990. That form asserted that "particulars of the claim together with the basic supporting documents were lodged on 17th January 1990". The amount of the claim was £896,292 plus unquantified items referred to in the particulars. In January 1991 details of additional items of claim were given to the Council including £52,287 for "blight loss" and £207,640 for termination of service agreements. The total claim thus advanced with the assistance of lawyers and expert witnesses exceeded £1,156,000. It is clear that in that amount it was a much inflated claim and there is no explanation in the decision of the member or in the material before the court as to how such a claim came to be advanced.
(viii) There was no agreed statement of facts as to any part of the issues before the member. The hearing took nine days in all. Mr and Mrs Macdougall and their companies were represented by Mr Morris Kay Q.C and Mr Kevin Barnett and the Council was represented by Miss Elizabeth Appleby Q.C and Mr Thomas Hill. At the outset of the hearing the claim was £844,993 but it was modified in the course of the hearing. The hearing commenced on 28th October 1991 and continued until 7th November 1991 over nine days. An interim decision was given by Mr Mallet on 11th February 1992. The member had not at the hearing announced an intention to give an interim decision. The reason for his so doing was because he was able on the evidence, which he accepted, to estimate the disturbance claim of Crest in the sum of £276,900 but only subject to a necessary deduction of the value of motor insurance business with commercial clients which part of the business was not proved to have been extinguished.
Since the amount of such commissions had not been disclosed by Mr Macdougall the member deferred his final decision and ordered the claimants to produce the necessary information within 21 days. The claimants were further ordered to produce invoices or proof of payment with reference to certain items claimed under costs of removal and evidence in support of the claims in respect of the computer system.
(ix) The resumed hearing was held on 12th May 1992. It took half a day. The Council had obtained information that on 13th April 1992 Crest had sent a written invitation to a Mr W Edwards inviting him to renew his household insurance policy which expired on 26th April 1992. On the basis of that information the Council invited the member to reverse his finding, set out in his interim award, that the business of Crest had been extinguished in October 1991. No prior notice of their intention to raise this issue was given by the Council to Mr Macdougall's solicitors. The evidence was tendered on the resumed hearing. Mr Macdougall was not present. It was said that he was ill. There was no application by the Council for further specific discovery of documents by Mr Macdougall or Crest.
(x) The final decision was dated 14th May 1992. After making allowance in respect of the commercial vehicle insurance the member assessed the disturbance claim of Crest in the sum of £263,000; he allowed nothing in respect of the computer; and refused to alter his decision as to the extinguishment of the parts of Crest's business in respect of which the award was made.
The case of the claimants.
The problems in this case have arisen because Mr Macdougall was himself the lessee of the offices and the only person with any obvious basis of claim as an expropriated owner. The businesses, however, which earned the living of Mr and Mrs Macdougall at the offices were those of Crest and Crest Life. That of Crest was much
the larger. The value of the business of Crest to Mr and Mrs Macdougall consisted of the profits which would continue to be earned while the offices were occupied and the value of the goodwill which they intended to sell upon
Mr Macdougall's retirement. There was no formal arrangement of any sort with reference to the use of the premises by Crest. The rent was paid by Crest to the landlord out of the profits of the business. Crest was obviously and to the knowledge of the landlord in occupation of the office.
It is probable that Mr Macdougall's arrangements for the conduct of his business are typical of many businesses. The rules for compensation in such circumstances ought to be both clear and readily applicable to such common...
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