WALKER AND PARTNERS LIMITED v THE COAL LCA/48/1997

UPPER TRIBUNAL

LANDS CHAMBER

LCA/48/1997

Case No LCA/48/1997

Between

WALKER AND PARTNERS LIMITEDApplicant

THE COALRespondent

Before

P R Francis FRICS

Jonathan Gaunt QC (instructed by Flint, Bishop & Barnett, solicitors of Derby) for Claimant

Stephen Jourdan (instructed by Flint, Bishop & Barnett, solicitors of Derby) for Claimant

Paul Darling QC (instructed by Nabarro Nathanson, solicitors of Sheffield) for Compensating Authority

Giles Harrison-Hall (instructed by Nabarro Nathanson, solicitors of Sheffield) for Compensating Authority

Venue Chesterfield County Court, St. Mary’s Gate, Chesterfield, S41 7TD

Date 13 December 2000

Hearing 12 to 16 June 2000

Property: Land and Premises, Inkersall Road Industrial Estate,, Staveley, Derbyshire

Catchwords: COAL MINING SUBSIDENCE – commercial and industrial premises – extent of damage – cost of repair– depreciation - Coal Mining Subsidence Act 1991 s.10 – depreciation £223,000 to be paid with interest from 5 October 1994.

[1]By a Notice of Reference dated 8 May 1997, Walker and Partners Limited (“the claimant”) sought a determination of this Tribunal to order the Coal Authority (“the compensating authority”) to take remedial action under the provisions of s.2 of the Coal Mining Subsidence Act 1991 (“the 1991 Act”) in respect of mining subsidence damage agreed to have occurred at the commercial and industrial premises at Inkersall Road Industrial Estate, Staveley (“the subject premises”), or to pay damages in respect of its failure thusfar to carry out those obligations and to pay interest under s.52(3) of the 1991 Act or under s.3 of the Law Reform (Miscellaneous Provisions) Act 1934.

[2]In the Points of Claim accompanying the notice of reference, the claimant stated that following initial subsidence that had occurred to the land and buildings at the subject premises during 1991 it had issued a Damage Notice in June of that year (under s.2 of the Coal Mining Act 1957 (the 1957 Act)) which had been accepted by the compensating authority. Stop Notices were served by the compensating authority under s.3(2) of the 1957 Act in 1991 and 1992 due to the fact that subsidence was continuing to occur, but by a letter dated 22 February 1993, they were revoked and proposals were made to commence permanent repairs or to make payments. The claimant alleged that as the compensating authority did not state which course of action it was proposing to take, s.4(2)(a) of the 1991 Act had been breached, and a breach of s.6 had also occurred as a schedule of remedial works had not been served. The claimant’s preliminary assessment of the cost of remedial works was £705,582 excluding VAT but inclusive of fees. (This was amended to £694,255 in the evidence to the hearing).

[3]By letter of 5 October 1994, the compensating authority elected to make a depreciation payment of £210,000 but the claimant alleged it had not agreed in accordance with s.5(3) of the 1991 Act and thus that section had been breached. The claimant stated that, even if it had agreed, the offer was inadequate, and should have been £520,000 plus interest. (This sum was increased to £1,000,000 in the evidence to the hearing).

[4]The claimant had therefore claimed:(1) Damages

(2) An Order to the compensating authority to carry out its obligation to take remedial action by sending the claimant a schedule of remedial works, followed by execution of the works and making a depreciation payment under s.11(3)(b) of the 1991 Act, or the making of a proper payment in lieu of those works or a proper depreciation payment under s.10 of the 1991 Act.

(3) Interest.

[5]The parties had failed, by the date of the hearing, to produce a statement of agreed facts and issues although the claimant had prepared a draft. Apart from comments therein alleging non-co- operation by the compensating authority and its experts, which were vociferously denied, no major objection to it was raised by the compensating authority. That draft statement has assisted me, and from counsel’s opening remarks and the evidence produced at, and following, the hearing I set out below my finding of facts. As to the issues, these were narrowed down considerably in the early 3 stages of the hearing from those upon which the claim, and the experts’ reports, were based and I think it is helpful to summarise the sequence of events as follows: Issues.

[6]There were initially three principal issues for which a determination of this Tribunal was sought:(a) Legal issues: Did the compensating authority properly comply with its statutory duties under the 1991 Act? If not, was the claimant entitled to damages or other relief, and if so, what?

(b) Technical issues: What was the extent of the damage to the subject property attributable to coal mining subsidence, what works were necessary to make good that damage so far as it was reasonably practicable to do so to the reasonable satisfaction of the claimant, and what would be the cost of those works.

(c) Valuation issues: By what amount was the value of the subject property depreciated by reason of that damage as at 5 October 1994. Opening submissions by Mr. Gaunt outlined the claimant’s contentions regarding the compensating authority’s alleged failure to comply with a number of its statutory duties under the 1991 Act, and the technical and valuation issues that I would need to consider in determining damages or compensation. Following this, the parties agreed each to produce a summary of questions regarding compliance with the 1991 Act that would need to be determined before dealing with the technical and valuation issues. These documents were prepared whilst I undertook an inspection of the subject property and some of the comparables on the second day of the hearing, June 13 2000.

[7]Both counsel for the claimant and the compensating authority spoke, on the resumption of the hearing, to the documents they had prepared during the adjournment. Following this, the hearing was further briefly adjourned whilst the parties held discussions, and upon resumption the parties produced an agreed statement which can be summarised as:

[1]The Lands Tribunal shall determine the amount of the depreciation in value to [the subject premises] in accordance with Schedule 1 paras 2 & 3 [of the 1991 Act], the relevant date for the purposes of those paragraphs being 5 October 1994.

[2]Upon determination of (1) above, the compensating authority shall pay that amount as a depreciation payment under s.10 of the 1991 Act together with interest under para.4 of Schedule 1 in that Act for such period as the Tribunal may consider to be appropriate. The claimant shall be entitled to contend that the “relevant date” should have been earlier than 5 October 1994 and the compensating authority shall be entitled to contend that there has been unreasonable conduct by the claimant leading to that delay.

[3]Payment of the sums determined under paras 1 & 2 above shall discharge the compensating authority’s obligations to the claimant under [the 1991 Act].

[4]In determining what order to make in respect of the costs of this Reference the Lands Tribunal shall not treat either party as having acted unreasonably in incurring costs in investigating the scope and cost of the necessary works. 4

[8]The result of this agreement was to preclude the necessity for consideration of the legal issues (6(a) above), and also the need for compliance with Rule 50(4) of the Lands Tribunal Rules 1996 which states: “ Where an amount awarded or determined by the Tribunal is dependent upon a decision of the Tribunal on a question of law which is in dispute in the proceedings, the tribunal shall ascertain, and shall state in its decision, any alternative amount or value which it would have awarded or determined if it had come to a different decision on the point of law”.

[9]As to the technical issues (6(b) above), I advised the parties that an appreciation of the extent of damage, and the estimated cost of remedial works was necessary to determine the level of depreciation that such would cause to the value of the subject premises. The technical experts agreed to further consider their respective reports and estimates with a view to reaching agreement on those aspects of damage that were caused by mining subsidence, the extent of repairs necessary to conform with the ‘reasonably practicable’ provisions of the 1991 Act, and the estimated costs thereof. By the end of the hearing, the technical experts had reached broad agreement on these issues, and in accordance with an Order made by me, submitted thereafter an agreed schedule of repairs incorporating either specifically agreed, or a mutually acceptable range of costs.

[10]In respect of the extent of repairs required to the office building, three alternative proposals had been costed, to accord with further supplementary reports I had requested from the technical experts, and which were also received following the hearing in accordance with my Order. The parties agreed that subject to my being satisfied from the further supplemental reports on the repairs to the office building, as submitted by the technical experts, that a resumed hearing was not necessary, my findings in respect of that aspect could be taken as a decision based upon written representations.

[11]With substantial agreement having been reached in regard to the technical issues, it was not necessary to call the technical experts at the hearing. At the end of the hearing I requested supplementary reports in respect of the extent of works necessary to the office building, following receipt of which I have concluded that they are sufficient to enable me to make a decision in regard to that aspect without the need for a resumed hearing. I refer to the supplementary reports of John Charles Lindsay C.Eng MICE MIStructE for the claimant, and J. Keith Green BSc C.Eng FICE MIStructE FIHT for the compensating authority, below. Valuation evidence was heard from Mr. Michael Henry Nattrass FRICS, for the claimant, and from Mr. Mark Adrian Lunn BSc (Hons) ARICS, IRRV for the compensating authority. Facts.

[12]The subject premises, which the claimant owns freehold, comprise between 3.23 acres (compensating authority) and 3.45 acres (claimant) of land forming part of the Inkersall Road Industrial Estate at Staveley, and upon which are constructed five buildings totalling about 30,000 5 sq.ft. The precise floor areas of each were not formally agreed, although there was little between the experts analyses, and I therefore adopt the descriptions and areas set out in the draft statement of agreed facts: Building No: When built Area (Sq.ft.) Use 1 1978 9,740 Showroom, warehouse & store 2 1966 3,267 (inc. mezz) Main workshop 3 1966 6,720 Electrical shop, showroom, warehouse & store 4 1973 8,204 Pump shop – showroom, warehouse & store 5 1969* 2,290 Offices Total 30,221 * The office building was substantially re-constructed in 1990, when the original timber framed walls were replaced with cavity brickwork.

[13]Although coal mining had taken place in the area surrounding the subject property at various times from the late 19th century to 1982, no significant subsidence resulted. Prior to the resumption of mining activities, British Coal commissioned a pre-mining inspection on the property from a Mr. Michael Parkes, and a report was produced on 5 July 1990.

[14]The mining which resulted in the subsidence was undertaken during 1991 and 1992 at a depth of approximately 490m. Following the carrying out of some temporary repairs by the compensating authority, the claimant served a Damage Notice under s.2(1) of the Coal Mining (Subsidence) Act 1957. On 13 August 1991 the compensating authority served a Stop Notice under s.3(2) of the 1957 Act as it was anticipated further subsidence would occur. A further Stop Notice was served on 10 August 1992, again under the 1957 Act, although the enactment of the 1991 Act on 30 November 1991 replaced the 1957 legislation. That notice stated that it was the compensating authority’s view that subsidence would be likely to occur for a further four months.

[15]On 22 February 1993, British Coal served a notice under s.3(2) of the 1957 Act revoking the Stop Notice and stating that “the Corporation proposes to commence permanent repairs, or make payments under the Act with as little delay as possible”. On 1 April 1993, the claimant was sent a letter enclosing a copy of a report by Burks Green & Partners (“BGP”) setting out the details of the damage and, at para. 8.1, concluded: 6 “ The site has been affected by settlement caused by mining activity. However, it is clear that a lack of adequate detailing of joints reinforcement, slip membrane and sub-base has contributed to the degree of damage caused by mining subsidence. Remedial work to the buildings and infrastructure should comprise the following…” and went on to list the remedial works recommended.

[16]On 24 May 1993, the claimant was sent a letter (headed “Coal Mining Subsidence Act 1991”) enclosing a drawing and priced bill of quantities showing the total cost of the works required to be £93,300, and inviting the claimant’s comments. The claimant’s then agents, Heritage Property Consultants, advised the compensating authority on 20 June 1993 that the proposals put forward by BGP were inadequate, and that the advice of independent engineers was to be sought before further comment could be made.

[17]The claimant then approached Mott MacDonald, Consulting Engineers for an initial report, and also obtained a valuation from Nattrass Giles, Chartered Surveyors. At a meeting with the claimant on 30 March 1994, the file note prepared by the compensating authority’s Mr. Clive Fleetwood reveals that he was told Nattrass Giles’ report had suggested a loss in value due to mining subsidence damage of £520,000. Also, that taking into account the works of repair that were required, a figure of £850,000 in full settlement of the claim would be acceptable. Mr. Fleetwood, in declining the claimant’s proposed figure, advised that the compensating authority would obtain its own valuations on the basis of(a) value unaffected by subsidence.

(b) value in damaged condition and

(c) value assuming repaired, but with residual tilt. He outlined the bases under which the compensating authority could then elect to make payments (under s.10 or s.11(3) of the 1991 Act), and that it would seek the most cost effective solution.

[18]On 5 October 1994, the compensating authority wrote to the claimant, under the heading “Coal Mining Subsidence Act 1991” advising that it had received valuations from Lambert Smith Hampton indicating an undamaged value of £535,000 and a damaged value of £325,000. The letter stated that it appeared to the compensating authority that the total cost of the remedial works exceeded the depreciation in value by at least 20 per cent, and it was therefore electing to make a depreciation payment under s.10(1) of the 1991 Act of £210,000. The execution of remedial works, or a payment in lieu would not be made. On 18 January 1995, the claimant’s then solicitors, M.J. Darby & Co., advised the compensating authority that the Lambert Smith Hampton valuation was not accepted, and suggested that the valuers get together to discuss their reports.

[19]Deakin Walton limited, Consulting Engineers, (“DW”) (formerly Deakin Callard & Partners) were instructed by the claimant in December 1996, their report concluding (as revised in the final version submitted in evidence) that the total cost of remedial works required amounted to £694,255. This contrasts with the final report of BGP suggesting a cost of £114,425.

[20]The Notice of Reference to the Lands Tribunal was dated 8 May 1997. 7 Claimant’s Case.

[21]Following the narrowing of the issues, and particularly the parties’ agreement not to pursue the legal questions set out in para 6(a) above, I do not recite counsel’s arguments on those matters. As to the technical issues, I set out the agreed schedule of works and costs at Appendix 1, and deal with the written evidence in respect of item 4(c) therein submitted by the engineering experts following the hearing after the valuation evidence.

[22]Mr. Gaunt said in respect of the remaining issue in para 7(1) above, that although the alleged diminution in value due to subsidence, as set out in the pleadings, was £520,000, this had been amended by Mr. Nattrass to £1,000,000 to take account of the additional value attributable to the sui generis use. He outlined the principal areas of difference between the experts on their valuation approach for the property in its undamaged state and after subsidence. The critical distinction was that whilst they had adopted a similar approach in valuing the site in its undamaged state – taking a rental value for the buildings, applying an appropriate yield and adding the value of the remaining land, Mr. Nattrass had incorporated a 50 per cent uplift for the special use. Mr. Lunn had allowed nothing for this and had also only allowed for 0.5 acre additional land whereas Mr. Nattrass had valued the whole of the two acres not covered by buildings and roads.

[23]On the valuation of the property post subsidence damage, Mr. Gaunt said that Mr. Lunn had allowed a small reduction in the rental value of the buildings, and applied an increased yield to reflect the risk, but had not depreciated the land at all. Mr. Nattrass had very substantially reduced the value of the buildings, applied a much higher yield and had also depreciated the remaining land. This resulted in diminution in value of circa 78.5 per cent which was borne out by the check valuations from analysis of the “Metry” transactions and the comparables he would be referring to. Finally he had produced alternative calculations based upon the cost of repairs, as per the DW report of c. £700,000, these serving to support his diminution figures.

[24]Mr. Gaunt said that the Metry site, which was immediately adjacent to the subject property, contained two industrial buildings, one of which had attached single storey offices, the buildings totalling just over 20,000 sq.ft. and the total site area was 1.3 acres. That property had been affected by coal mining subsidence, and the floors to the industrial areas were tilted in similar fashion to the subject property. Whilst the compensating authority had acquired the property from the previous owner for £465,000 (this in his submission indicating its pre-subsidence damage value), it had been bought by the claimant two years later for £100,000 – just over 20 per cent of that original value. Thus Mr. Nattrass’s diminution figure of almost 80 per cent was substantiated.

[25]He also referred to the acquisition by the claimant of 4.38 acres of land on the opposite side of the railway to the subject property at £50,000 per acre, whereas the rental value of £15,000 (£3,425 per acre) that had been previously agreed with the vendor, Chesterfield Borough Council, suggested a capital value of £30,000 per acre. This again went to prove that there was a substantial uplift in value for the sui generis use as also confirmed in an internal Council memorandum dated 9 June 2000, a copy of which was produced to the Tribunal. Mr. Gaunt pointed to the planning history of the subject property which, he said, indicated the difficulties that had been encountered by the claimant in obtaining planning permission for its required use, and specifically the reluctance of 8 the planning authority to countenance granting permission where there would be such a low level of employment created.

[26]Mr. Nattrass is a founding partner of Nattrass Giles Chartered Surveyors, Commercial and Industrial Property Consultants of Birmingham and has over 30 years experience since qualifying, including 3.5 years with the District Valuer’s office in Chesterfield. He was instructed by the claimant in respect of the damage claim in 1993. He described the claimant’s business which comprises the acquisition of used plant and machinery – from small electric motors and pumps to massive milling and crushing machines, conveyor systems and complete plant installations which are stored and where necessary refurbished on the site. Following preparation they are displayed for sale and sold and shipped throughout the world. Due to the nature of the business, and the type of equipment stored on the site, Mr. Nattrass said this constituted a special use in planning terms. Whilst the open storage of large amounts of used equipment might give the impression of a scrap yard, which would not require particular infrastructure requirements, the reality was that this was high value machinery which needed a predominantly level site, and buildings with level floors capable of withstanding considerable weight.

[27]Within the buildings there were substantial areas of racking for the storage and display of equipment and, Mr. Nattrass said, it was essential the floors were level and stable to facilitate the use of fork-lift trucks, for the movement of these palletted goods, and for the proper set up and use of fixed machinery. Likewise the interconnecting roads and paths needed to be level and free from cracks caused by subsidence, or flooding caused by the alleged subsidence damage to the drains.

[28]In his view, Mr. Nattrass said the principal problem that had caused the land and buildings to become unsuitable for his client’s use, was the tilting to the floors in all the buildings (including the offices), the question over the possibility of voids opening up beneath the floor slabs, and the state of the roads and drains. He said his client had suffered worry and stress not only as a result of the subsidence damage, but also the delays in coming to terms with the compensating authority. It was not just the particular use to which the claimant put the premises that the subsidence affected, but the buildings were of a type that would attract general engineering companies who would also need level floors and stability. Any prospective purchaser viewing the site and the buildings would, Mr. Nattrass said, be put off by the damage, and even if it had been repaired to leave a residual tilt, they would in his opinion make haste to another site. This would therefore have a devastating effect on value, hence his conclusion that diminution was 78.5 per cent of the undamaged value.

[29]Mr. Nattrass, in approaching to the valuation of the site in its undamaged state relied upon the history of transactions on the adjacent Metry site (to give a capital value for the buildings of £18.27 per sq.ft.), comparable land sales at Ireland Industrial Estate, Staveley in 1993 at £70,000 per acre, and asking prices on other sites at between £85,000 and £87,000 per acre to support his estimated value of the land at £70,000 per acre. He had adopted a rental value of £2.70 per sq.ft. overall for the buildings based upon nearby lettings of commercial and industrial premises at Compton Crescent, Telford Crescent and Speedwell Industrial Estate. He had also used Mr. Lunn’s own valuation of the RSL premises at Fan Road Staveley, a mining damaged property upon which compensation had been paid, and his own analysis of the AGW premises at Hayford Way, Staveley, another subsidence damaged property located nearby. 9

[30]As to Metry, Mr. Nattrass said the figures relating thereto entirely supported, and formed the basis of, his conclusions on the value of the subject property particularly as it is next door, and was affected in a similar way by the same mining operations. The compensating authority had acquired the premises, in discharge of its liability for the subsidence damage, for £465,000 in October 1992. In his view this was a forced sale value (the owner having been trying to sell it since 1990 for £625,000) as the owner was in financial difficulties, and could not afford to wait any longer. Despite this view, Mr. Nattrass had devalued the purchase as if it were an open market value transaction as he was also aware of a valuation undertaken by Bothams in October 1992, which assessed the value in its undamaged state at £395,000.

[31]The Metry purchase by the compensating authority devalued, on the basis of Mr. Nattrass’ comparables as to: 1.3 acres @ £70,000 = £91,000 To balance 20,463 sq.ft. @ £18.27 = say £374,000

£465,000

[32]Mr. Nattrass’ valuation calculations for the subject property, in its undamaged state were therefore: 3.45 acres at £70,000 = £241,500 30,000 sq.ft. at £18.27 = £548,100 £789,600 alternatively: 2 acres developable = £140,000 30,000 sq.ft. @ £2.70 = £81,000 pa x 8.5 YP = £688,500 £828,500 Taking a mean of the two figures gave an open market value of £810,000 to which Mr. Nattrass applied a 50 per cent uplift for the special use, to give a value to the claimant of £1,215,000.

[33]In assessing the value of the subject property in its damaged state, Mr. Nattrass said that the value of the two acres of storage/potential development land had been diminished due to the subsidence, owing to questions over its stability, and it was thus no longer suitable for his client’s needs. For instance, foundations for any new buildings would need to be more substantial, and thus more expensive to construct than if the land was stable. In applying a damaged value of £30,000 per acre, he had analysed the 4.38 acres on the other side of the old railway line that the claimant had eventually purchased from Chesterfield Borough Council. This figure was based upon the rental value agreed with the owner in respect of the new lease negotiations (in November 1996) prior to the purchase. In his view, a YP of 8 or 9 was appropriate for bare land and if applied to the £3,425 agreed, would give the capital value used of £30,000 per acre. This analysis was confirmed, he said, in an internal memorandum of the Planning and Estates Department of the Council dated 9 June 2000, a copy of which he produced in evidence. 10

[34]Mr. Nattrass had also considered the price that the claimant had paid for the Metry site when it purchased it from Strawson Holdings Limited in 1997 (that Company having acquired the site from the compensating authority as part of a “job lot” by tender in that year). The price paid was £100,000 for the subsidence damaged property (which he had negotiated on the claimants behalf) and was only just over 20 per cent of the figure the compensating authority had paid on an undamaged basis. He had analysed the price as to: 1.3 acres @ £30,000 per acre = £ 39,000 20,463 sq.ft.@ 60 p per sq.ft. = £12,278 pa x 5YP = £ 61,389 say £100,000 An alternative approach, produced to the Tribunal as an addendum during the hearing was: 0.3 acres (surplus land) @ £30,000 per acre = £ 9,000 20,463 sq.ft. @ 90p per sq.ft. = £18,416pa x 5YP = £ 92,080 say £100,000

[35]In applying these figures to the subject property, Mr. Nattrass calculated the value in their damaged state thus: 2 acres at £30,000 per acre = £ 60,000 30,000 sq.ft. @ 0.90 per sq.ft. =£27,000 pa x 5YP = £135,000

£195,000

[36]The diminution in value was therefore £1,020,000 – say £1,000,000. Mr. Nattrass said that this figure was supported by the estimated cost of partial rectification of the subsidence damage, as calculated by DW at around £700,000. Even after those works, the site would be permanently depreciated by at least £300,000.

[37]Mr. Nattrass also produced his analysis of the compensation paid in respect of the AGW premises, in response to Mr. Lunn’s figures. He said this provided a useful check in support of his valuation of the subject property. AGW comprised modern detached industrial type premises of 7,909 sq.ft. on 0.53 acres and the compensating authority had made a merged works payment in accordance with s.8(5) of the 1991 Act of £150,000. The agents who were marketing the premises in 1996 at £150,000 in their damaged state had assessed their undamaged value in the region of £180,000. They were eventually sold to a Company who now use the premises for the retail and wholesale sales of bathrooms in April 1997 for £110,000. Mr. Nattrass said that the surplus land, excluding the buildings amounted to 0.17 acre. In its undamaged state, he produced the following valuation: 0.17 acres @ £70,000 per acre = £ 11,900 7,909 sq.ft. at £2.70 per sq,ft. = £21,354 x 8.5YP = £181,511 11 say £190,000 Less compensation £150,000 £ 40,000 The damaged valuation becomes: 0.17 acres @ £30,000 per acre = £ 5,100 7,909 sq.ft. @ 0.90p per sq.ft = £7,118 pa x 5YP = £ 35,590

£ 40,690

[38]Mr. Nattrass said that his figure of £190,000 for the AGW premises in their undamaged state fitted well between the agent’s assessment of £180,000 and the figure at which that agent had said it would have been marketed - £200,000. The reason he had taken a residual value of £40,000 was because the sale price of £110,000 reflected the opportunity the purchaser had to use the premises for retail, and if it had just had a value as workshop or industrial, then the figure would have been nearer £40,000 due to the lack of demand for subsidence damaged industrial premises.

[39]As to Mr. Lunn’s other comparables, Mr. Nattrass said that in his view, none of those outside Staveley were relevant, as the market and values in other locations would differ. This was particularly so with Morven Works at Cresswell. That property was ‘in the middle of nowhere’ some 8 miles from the subject property, had difficult access in that there was a 13’9” bridge on the only access road that would prevent deliveries of large machinery, and the access to the site itself was through a residential street.

[40]The J.Pass premises at Fan Road, Staveley had incomplete information upon which Mr. Lunn could not realistically rely and as to the RSL unit at Fan Road, he pointed out that the £3.25 (undamaged) figure per sq.ft. being used by Mr. Lunn was higher than the figures he had used for the subject property (£2.70), although he accepted that RSL was a better, more modern unit.

[41]In connection with his own valuation, Mr. Nattrass said all his comparables were in Staveley, and the most important, ‘Metry’, was right next door, was a similar type of unit and had suffered similar damage.

[42]In cross examination, Mr. Nattrass was asked why he had not referred, either in his main proof of evidence, or in the addendum that had been presented to the Tribunal during the hearing, to the purchase of the 4.38 acres of land on the opposite side of the railway, by the claimant in 1998 for £50,000. He said that the transaction was not completed until after his first proof was produced, and despite the fact that he was acting for the claimant and had, on his behalf, offered £219,000 (£50,000 per acre) some 18 months earlier, understood that uncompleted transactions, which could fall through, should not be used in evidence i.e., was inadmissible. Mr. Darling said that reference had been made in the proof to the rental negotiations with Chesterfield Borough Council, but the lease was not concluded at the time. Mr. Nattrass said that these negotiations were admissible as they were in connection with the claimant’s continuing occupancy of the land which they were occupying on an old lease. 12

[43]As to why he had still made no reference to the purchase price in his May 2000 addendum, or the fact that the rent negotiated may have been a discretionary one pending completion of the purchase, Mr. Nattrass said he had been told not to. His addendum, he said, was purely corrections to his original report, and adduced no new evidence. In response to the suggestion that the selective use of the rental information, and exclusion of reference to the purchase details was a serious dereliction of his duty to the Tribunal, Mr. Nattrass said he thought the compensating authority already had the information, but in retrospect accepted that reference thereto should have been made, and that failure to do so could result in an accusation that his report had been tailored to assist his client’s case.

[44]Mr. Darling asked why it was that when an offer had been made for the 4.38 acres in 1991 of £164,000 in its undamaged state, was this increased to £219,000 later in its damaged state. Surely that proved there was no diminution for subsidence. Mr. Nattrass responded that the earlier offer which he had only just heard about – it was made before he was instructed, had been made when the rental being paid was very low (only £2,600) but as the lease renewal approached, it was realised that the increase in rental would be substantial, thus increasing the value of the land. He did not accept the suggestion that the rent negotiated in 1996 was part and parcel of the land acquisition process and might have been discretionary. It was a negotiated figure, the Council’s initial proposal having been £26,280 pa.

[45]In respect of the difference between the £30,000 per acre Mr. Nattrass had said the site was worth, and the £50,000 per acre paid, he said this was the additional value attributable to the fact that it was adjacent to the claimant’s main site, was one upon which the sui generis use was established, and that the claimant ‘did not like leases’. Any special value, he said, was lost due to the mining subsidence and he was required to value on an open market basis, ignoring the special purchaser. Any other purchaser, therefore, would consider the land to be worth only £30,000 per acre in its damaged state.

[46]In response to questions as to whether or not Mr. Nattrass considered he had complied with the RICS Practice Statement and Guidance Notes for Surveyors Acting As Expert Witnesses, he said that he had.

[47]Referring to the Metry site, Mr. Darling pointed to the RICS Practice Statement 4 ‘Definitions of Bases of Valuation: Assumptions’, definition No. PS 4.1.1. which reads:

“The estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

Mr. Nattrass accepted that this definition was not applicable in respect of the purchase of the Metry site by the compensating authority at £465,000. There were ‘special considerations’ (PS 4.1.3), it was not a ‘willing buyer’ in the sense of PS 4.1.6, or a ‘willing seller’ (PS 4.1.7) due to the seller’s financial difficulties; the property had not been marketed (PS 4.1.9) and the purchase could not be described as ‘without compulsion’ (PS 4.1.11). Mr. Nattrass said that whilst he had not seen the valuations prepared by Amblers in 1990 (£625,000) or Bothams in 1992 (£395,000), he was aware of them and did not accept that the figure he had used to base his valuation (the £465,000 paid by 13 the compensating authority) was more than the market value. He had accepted that figure as the open market value, and had not done his own valuation exercise on the Metry premises.

[48]Mr. Darling asked if the practice of valuing the whole site (including the area upon which the buildings stand) and then adding the value of the buildings was standard. In this exercise, it gave a capital value of the Metry buildings of £18.27 per sq.ft. Mr. Nattrass said either method (citing also the practice of valuing the surplus land and then de-valuing the balance to give the value of the buildings) was acceptable so long as consistency of approach was applied. Mr. Darling said using the second method gave a capital value of the buildings of £21.51 per sq.ft. Mr. Nattrass said from a given figure for a ‘done deal’, you work back adjusting rental value and YP accordingly. Mr. Nattrass said that he had used the same bases for valuing the subject property as for devaluing the Metry transactions. For the undamaged valuation he had used £2.70 per sq.ft rental value assumptions on both properties, 8.5 YP and £70,000 value per acre for the land. For the damaged valuation, the figures were 0.90 per sq.ft., 5 YP and £30,000 per acre respectively.

[49]He accepted that he had no capital value evidence other than Metry, and no specific evidence as to appropriate yields, other than his own market knowledge. The £2.70 had been arrived at by looking at the comparable lettings, and specifically the Units 28/29 Speedwell Industrial Estate. He did not accept the suggestion that Speedwell was a very different type of property in that it was a standard ‘shed’ on an industrial estate.

[50]As the offices (building 5) were only about 10 per cent of the overall space, Mr. Nattrass had not analysed those rental values out separately, but had looked at the buildings overall. He had assumed them, in his assessment of the pre-mining damage value, to have been in good condition and suitable for their purpose. He stressed that the sui generis use added considerable value to the land, and that if the claimant had to relocate, considerable difficulty would be encountered in finding a site where the use would be acceptable to planners.

[51]Mr. Nattrass said that he did not agree with Mr. Lunn’s YP of 7.69 (13 per cent yield) for the subject property, but felt that a band of 8 – 9 YP (11 to 12.5 per cent yield) more accurately reflected the market. As to capital values of the buildings, Mr. Darling sought an explanation as to why he had capitalised the subject property’s buildings at between £22 and £23 per sq.ft., when Metry which was undoubtedly newer and in better condition had been capitalised at £18 to £21 per sq.ft. Likewise, the comparables that came out at similar figures to the subject property were all better or more modern. Mr. Nattrass said that he had not considered this particular aspect when preparing his report, but in any event the buildings at the subject property would look as good as the Metry unit if they were painted. As to Metry, he accepted that whilst he had not done a formal valuation exercise when negotiating the purchase at £100,000 it had been “a good purchase” for his client.

[52]In response to the suggestion that there was no evidence that it has become impossible for the claimant to use the premises or land, Mr. Nattrass said that machinery which needed a level surface could not be used in any of the buildings, and access to the racking with fork lift trucks was now impossible – in fact one had been irreparably damaged as a result of working on tilted floors. The site and roadways now flooded to an increased degree and his client was suffering worry and distress. 14

[53]Mr. Nattrass said that his interpretation of the term ‘special value’ (which had created the uplift he was seeking) differed from the RICS Practice Statement PS 4.1.3 in that that related to a special purchaser whereas he was considering the value for the claimants use. He accepted that he had no evidence to support his contention for a 50 per cent uplift. He said that the original assessment of diminution at £520,000 was before he had considered the value of the use, and ‘other matters’ that had come to his notice.

[54]Finally Mr. Nattrass said that a prospective purchaser would not necessarily directly relate the estimated cost of remedial works to the price he was prepared to pay. He said a buyer would not consider undertaking all recommended repairs, but would look at what use he could put the property to in its damaged state, and would only be prepared to pay a ‘knock down’ price. A purchaser, he said, would be unlikely to rebuild or level up the tilting floors because he would be concerned that further subsidence could occur.

[55]Mr. Lindsay is a chartered structural and civil engineer and is a consultant to Deakin Walton, Consulting Engineers of Harrogate. His supplementary report, received following the hearing, commented upon the revised scheme of works to the office building that had been prepared by Burks Green and Partners. That scheme was based on a proposal to support the roof structure on Acrow props incorporating light metal wind posts to provide bracing against wind pressures, then largely demolish and rebuild (off the existing footings) the four external brick walls, which were suffering from unacceptable levels of tilt, and at the same time jack up and level the existing sloping floors, and extend the central sleeper wall to resume support.

[56]Having considered the implications of the scheme, Mr. Lindsay concluded that it did not offer a practical alternative to the demolition and reconstruction of the building (which had been his original recommendation). The proposals, whilst not impossible in engineering terms (the building is very light) were impractical and dangerous in respect of stability against wind pressures whilst the works were being carried out and, in respect of jacking up the floors from the void beneath, would place the operating personnel at risk. The retention of the existing tilted foundations upon which to construct the external walls led also to questions over the building’s long term stability. It was his view that the risks associated with undertaking this unusual form of jacking were too great, although he accepted that many of his concerns regarding safety and stability during the works could be overcome by the incorporation of additional bracing and props, but the difficulties that would be encountered by people working in the void beneath the floors were of great concern, and the proposals were thus unacceptable on health and safety grounds.

[57]Notwithstanding, Mr. Lindsay had prepared his own estimate of costings on the basis of the BG scheme but adding additional items and costs which he thought had been omitted in the BG proposals. His figure, to be inserted at 4(c) of the schedule [Appendix 1] was £66,208 as against BG’s figure of £36,800. [The figures under 4(c)in the agreed schedule were shown as a range of £63,000 to £83,000, but in submissions I was invited to substitute the specific figure]. However, Mr. Lindsay’s supplementary report concluded that he would not advise a prospective purchaser to undertake the scheme for the reasons given, but to completely rebuild the offices at an estimated cost of £126,668 in accordance with the advice included within his original report. Compensating Authority’s Case. 15

[58]Mr. Lunn is a chartered surveyor, and an associate director in the professional department of Lambert Smith Hampton in Sheffield. He has 16 years experience in the valuation of commercial and industrial property in the area for finance, rating, rent reviews and compulsory purchase.

[59]In assessing the diminution to the value of the subject property in accordance with s.10(1) of the 1991 Act he had assessed(1) the open market value with vacant possession as at 5 October 1994 (agreed by the parties to be the relevant date), ignoring the effects of coal mining subsidence;

(2) the value taking into account the damage (having regard to the Burks Green report of January 1998 and assuming the cost of works to be circa £92,000), and

(3) on the basis that the buildings are repaired in accordance with BG’s recommended remedial works but leaving a residual tilt to the floors. His valuations were (1) £525,000, (2) £330,000 and (3) £395,000. The diminution, caused by the subsidence was therefore £195,000.

[60]In respect of valuation 1, the property in its undamaged state, he had applied a rental value of £2 per sq.ft. for each of the four industrial buildings (with 50p per sq.ft. for the mezzanine section of building 2) and £4 per sq.ft. for the offices. This analyses to an average of £2.11 per sq.ft. [30,752/64,955]. A yield of 13 per cent (7.69 YP) gave a capital value of £500,000 to which he added 0.5 acre of surplus land at £50,000 per acre making a total of £525,000. Excluding the surplus land, Mr. Lunn’s valuation equated to a capital value for the buildings of £16.23 per sq.ft.

[61]As to the valuation of the property in its damaged state, Mr. Lunn considered that the rental values would have been reduced by about 20 per cent to £1.60 per sq.ft. for the industrial buildings (the mezzanine remaining at £0.50 per sq.ft.) and £3.20 per sq.ft. [£1.72 per sq.ft. overall] for the offices to which he applied an all risks yield of 17 per cent (5.88 YP). Assuming the surplus land remains at £50,000 per acre, the open market value became £330,000 (£9.91 per sq.ft capital value of buildings). This was 62.8 per cent of the undamaged value.

[62]Finally, (although this is not directly relevant to this decision) Mr. Lunn considered that the value with residual tilt to the floors in all buildings, but otherwise repaired was £1.75 per sq.ft. to the industrial buildings and £3.50 per sq.ft. for the offices, to which a yield of 15 per cent (6.66 YP) should be applied giving a figure of £395,000. Again, the value of the land would remain the same at £50,000 per acre and on this basis the buildings would have a capital value of £12.03 per sq.ft.

[63]Mr. Lunn had analysed a total of nine comparables in conducting the valuation exercises, and said that in each case the breakdowns justified his resulting figures. Firstly, the AGW Electronics site at Hayford Way, Staveley which had been sold for £110,000 in its damaged condition, partially repaired but with residual tilt to the floors suggested a capital value of £13.90 per sq.ft against a capital value of £22.75 per sq.ft. based upon its considered undamaged value of £180,000. The sale price represented 61.1 per cent of the undamaged value, the property having been freely exposed to the market and, he said, supported his valuation (3) when taking into account the element of damage, other than tilt, that remained. Mr. Lunn thought AGW was a superior building to the subject property, and had a much higher office content. He did not think the fact that the building is now being used for retail purposes affected the sale price, as planning permission for that use did not exist when it was sold. A merged works payment of £150,000 under s.8(5) of the 1991 Act had been made by the compensating authority, but, in cross examination, Mr. Lunn said 16 that he did not know why that payment amounted to more than double the apparent diminution, but this went to prove that diminution is likely to be less than the projected cost of works.

[64]In respect of his analysis of the Metry transactions, Mr. Lunn said that he had taken the undamaged value to be £395,000 (from the valuation undertaken in 1992 – there being no noticeable market movement between then and the valuation date), a rental value of £2.49 per sq.ft. for the buildings and a yield of 13 per cent (8.5 YP). In his view the buildings were better than those at the subject property being more modern (although he later accepted that one of the industrial units at the subject property was more modern) were of better construction (having concrete block base walls), heating and better eaves heights than most of the subject property’s buildings. There was also a better office content. His comparable at Units 2a and 2b, Deepdale Close, Staveley at £2.55 per sq.ft. supported his figure for Metry. In cross-examination, Mr. Lunn said that neither the compensating authority’s purchase of the damaged property at £465,000 nor the sale to the claimant at £100,000 were open market transactions, but accepted that the figure paid by the compensating authority was based upon the building in its undamaged state, even though he did not agree that that was necessarily the undamaged value. He also accepted that, despite the property not having been advertised or marketed when it was sold to the claimant, to all intents and purposes it was an open market transaction.

[65]The Cresswell Works at Morven Street Cresswell had been sold by Lambert Smith Hampton in 1996 for £205,000. There were 34,710 sq.ft. of buildings, 24,500 sq.ft. of which comprised small, dilapidated fabrication shops of little value. The main fabrication shed at c. 10,200 sq.ft. was similar to the subject property’s industrial buildings and, he said, devalued to a capital value of about £14.00 per sq.ft. The total site area was 6.5 acres. The 5.5 acres surplus land he had valued at £10,000 per acre. In cross-examination Mr. Lunn accepted that whilst this property bore many resemblances to the subject property, the access was far from perfect and, with the low bridge on the main road restricting access by large vehicles, it would not be a suitable site for the claimant’s business.

[66]The J. Pass Commercials premises at Fan Road, Staveley were located close to the subject property, and had been affected by coal mining subsidence. They were more modern, extending to some 7,227 sq.ft. on a site of 2.3 acres. Mr. Lunn understood that they had been sold for £185,000 in 1996 to RSL, the adjoining land owners, in their damaged and unrepaired state, and allowing for 1.5 acres surplus land at £50,000 per acre (the same figure he had applied to the subject property), the buildings devalued to £15.22 per sq.ft. Whilst he was aware that a schedule of works had been prepared by Burks Green and Partners at £236,945 plus contingencies, he was unaware that the compensating authority had made a payment of £266,945 in full settlement of the claim, under s.8 of the 1991 Act in April 1993 [this information being provided, at the Tribunal’s request, following the hearing].

[67]The RSL premises at Fan Road, Staveley, comprised a modern single storey industrial unit of 3,411 sq,ft. again affected by subsidence and which Lambert Smith Hampton had valued, for the compensating authority at £155,000 in its undamaged state, and £124,000 as damaged. Those valuations were not accepted by the occupier, but a depreciation payment under s.10 of the 1991 Act was accepted in the sum of £60,000. Reconstruction of the building had been costed by Burks Green and Partners at £90,000, or alternatively extensive repair to the existing building at a cost which had not been quantified. Mr. Lunn said that his firm’s valuation had been based upon £3.25 17 per sq.ft. for the buildings, with a yield of 12.5 per cent (8 YP) and surplus land at £65,000. The capital devaluation of the buildings amounted to £25.79 per sq.ft., and the compensation payment, on Mr. Lunn’s analysis was £17.60 per sq.ft. Mr. Gaunt, in cross-examination, produced figures that suggested the depreciation payment equated to a capital buildings value of £8.79 per sq.ft. At a 17 per cent yield (as applied to the subject property in its damaged state) that produced a rental value, as damaged, of £1.49 per sq.ft which did not square with the £1.70 per sq.ft. used in his damaged valuation of the subject property. Thus, Mr. Gaunt said, Mr. Lunn should have used a much lower rental value on the subject premises in its damaged state, and if as Mr. Lunn had suggested, the RSL building was much better than the subject property, Mr. Nattrass’s figure of 0.90p per square foot was probably justified.

[68]Mr. Lunn accepted that smaller units would command higher values, and this was the case with the Foxwood Road unit at Sheepbridge, Chesterfield, sold in 1994 for £165,000 giving a capital value per sq.ft. of £23; Units 2a and 2d Speedwell Industrial Estate, let in March 1992 at £2.55 per sq.ft. and Unit 21, Crompton Crescent, (one of Mr. Nattrass’s comparables) Let to Errutt in 1989 at £2.50 per sq.ft. Likewise, Units 10b and 11a Telford Crescent, Staveley, let to Lada’s in 1996 at £3.00 per sq.ft. He did not agree with Mr. Nattrass that only comparables in Staveley were relevant, and it was necessary to look farther afield, as he had done, and make any necessary adjustments for location.

[69]As to the rental value Mr. Lunn had applied, at £2 per sq.ft., to his undamaged value of the subject property, Mr. Gaunt said that all the comparables indicated that figure was too low, and that Mr. Nattrass’s figure of £2.71 was much nearer the mark. Mr. Lunn did not agree, and said that the comparables were all on smaller properties that appealed to a different market, and his figure had been arrived at ‘in the round’ and taking into account a broader range of properties and transactions than had been considered by Mr. Nattrass. Likewise, the yields reflected what was happening in the marketplace, and his analysis of sales and devaluations. A higher yield would be required to offset the risks of acquiring subsidence damaged property. Mr. Lunn conceded that his analysis of the surplus land values at £50,000 per acre were not based upon any comparable evidence, but was his considered opinion. There had, he said, been no diminution in respect of the surplus land.

[70]In cross-examination, Mr. Lunn agreed that if all repairs were done, including relaying all floors to remove any tilt, then there would be no diminution in value. He said that in his view a prospective purchaser would take on board the advice he received from an engineer or surveyor as to the extent of remedial works required, and the cost, but would not necessarily reduce his offer by that amount. As with the AGW comparable, this proved, he said, that diminution did not reflect the cost of undertaking all the works. Mr. Lunn said that a purchaser would appreciate that to effect all recommended works, including taking up, strengthening and levelling floors (to present day specifications) would result in a property markedly improved, or bettered, than it was pre-mining subsidence.

[71]Mr. Green is a chartered civil and structural engineer, and a consultant to Burks Green and Partners, Engineers and Architects of Newark. His initial recommendations, prepared in connection with the claim, had proposed only partial rebuilding of the brick external walls, rebuilding of the steps to the main entrance and the provision of a false floor, over the existing tilted one to reduce the slope to a maximum of 1 in 250. However, following an inspection by the claimant's expert some 4 years later, it became apparent that due to the fact tilt to the external walls 18 had increased significantly, partial rebuilding would not, on its own, be sufficient. A further scheme was then prepared, providing for the installation of 16 brick piers to support the walls (this would also overcome any building regulation questions). No further plans were incorporated for the internal floors, and Mr. Green accepted that his initial proposals would result in a serious loss of headroom at one end of the building.

[72]Following continuing discussions between the experts during the course of the hearing, and a direction from the Tribunal at the end of the final day, Mr. Green prepared and submitted an alternative scheme, which he had costed out at £36,800 excluding preliminaries. This (as briefly summarised at para 55 above) allowed for the temporary support to the lightweight roof structure, and the removal and rebuilding of the cavity brick walls above foundation level to incorporate permanent wind bracing to improve and ensure continuing stability. After demolition of the existing walls, the existing internal floors would be jacked up to level in an operation that involved 56 jacks being placed beneath the floor joists. The central spine sleeper wall and the inner skin of the foundations to the external walls would then be packed to provide permanent support. The props supporting the roof, being built off the floor, would be locked during the operation, resulting in the roof being jacked up to level at the same time. The external walls would then be rebuilt, props removed, the roof re-felted and the whole building redecorated.

[73]In his conclusions, Mr. Green said this scheme offered a practicable alternative to the demolition of the existing building and complete reconstruction. The objective of returning the building to its level, pre-mining subsidence state would be achieved with the added advantage of the provision of improved lateral stability and compliance with building regulations. Closing submissions

[74]Mr. Darling said that during the course of the hearing, the parties had reached agreement on two very significant points. Firstly, that the claimant’s entitlement was to a depreciation payment in accordance with s.10 of the 1991 Act. That is defined as ‘a payment equal to the amount of the depreciation in the value of the damaged property caused by the damage’. He said that, as amplified in Schedule 1 to the 1991 Act, it is first necessary to identify the damage, and then establish the amount by which that damage depreciates the value of the property. Secondly, the parties experts had agreed the extent of the damage, and, broadly, the remedial cost . That cost was the amount which a prospective purchaser would be advised had to be spent in order to rectify all the damage caused by the coal mining subsidence (although one of the items in the agreed schedule – [see 2(b) of Appendix 1 to this decision] was a provisional sum dependent on the outcome of further investigations). Also, there were various options set out in the schedule as the experts had been unable to agree the exact remedy particularly in respect of the damage to the office building.

[75]For these reasons, Mr. Darling said that the agreed schedule should not be thought to be the same as a S.6 schedule which, if the tests of reasonableness and satisfaction were applied, and specific options (rather than a range) were identified, such a schedule may well be reduced. Some of the items may have qualified for a depreciation payment under s.11(3) of the 1991 Act in lieu of remedial works. 19

[76]It was inconceivable that a purchaser would expect the open market value of the property to be reduced by the full amount of the anticipated cost of works, because there would inevitably be some items he would be prepared to live with, and in other respects he would probably be doing alterations, so would not need to effect all the listed repairs. The amount by which the depreciation in value differed from the anticipated cost of repairs was the key issue for my consideration, Mr. Darling said, but come what may, the depreciation in value could never be more, as was being promulgated by the claimant, than the cost of works.

[77]In respect of the office building, Mr. Darling said that this was the one area where there was still a significant disagreement between the experts as to what needed to be done. Whilst it was the compensating authority’s primary submission that the repairs at item 4(b) of the schedule (those being Mr. Green’s revised proposals prior to he submission of the ‘new scheme’ (item 4(c) of the schedule) would be sufficient, if the Tribunal were to find that it was not, then the new scheme should be considered as appropriate, rather than, as the claimant submitted, complete rebuilding. Mr. Green’s new scheme was a practical and workable alternative that would cost in the region of £36,000 excluding preliminaries and would serve to eradicate all the slopes and tilts. He pointed out that it was the claimant’s submission that, in reality, a purchaser of this type of property would not go to the trouble of providing a ‘perfect’ solution, but would do the absolute minimum to make the offices useable. Also, bearing in mind Mr. Lunn had valued the office building at just over £70,000, it was inconceivable that a purchaser would contemplate spending double that figure on rebuilding it (the claimant’s rebuilding cost being estimated at £126,668 excluding preliminaries).

[78]Mr. Darling said that Mr. Lindsay’s comments to the effect that the new scheme was impracticable and dangerous were unfounded, as the mechanics of undertaking a jacking scheme are well known, and similar operations have been successfully undertaken elsewhere. If the new scheme is preferred by the Tribunal, Mr. Darling said that the claimant’s remedial costs, after add- ons and subtractions amounted to around £295,000 whereas the compensating authority’s figure would be £253,000. Taking a mid-point between those figures, and assuming two-thirds of that related to diminution, then a figure of £180,000 resulted.

[79]As to the expert valuers, Mr. Darling said that Mr. Nattrass’s evidence was partial and selective, particularly in respect of the claimant’s acquisition of the 4.38 acres of land on the other side of the railway. He was particularly critical of Mr. Nattrass’s failure to mention in his report the negotiations for the purchase of the land at £50,000 per acre whereas he had referred to the rental negotiations which, he submitted, were inextricably linked. Mr. Nattrass’s reliance on other Coal Authority compensation payments, the Metry building and a very limited number of comparables in Staveley only proved, he said, the weakness of his arguments.

[80]The other compensation payments could not be relied upon as indicative of open market values due particularly to the fact that the figures may be distorted due to the authority’s wish to settle and avoid references to the Lands Tribunal and in all but one case were not s.10 payments; neither the price paid by the compensating authority for the Metry building (£465,000), or that paid by the claimant (£100,000) were open market transactions in accordance with the RICS practice statements, and the comparables he had referred to were not comparable with the subject property. 20

[81]Mr. Darling said that the most appropriate approach to analysing all the comparables was to look at the capital value per sq.ft., this having the advantage of combining rental value and yield thus enabling a coherent comparison. The figures, he said, support an undamaged figure for the subject property of £16.66 per sq.ft. and £10.16 per sq.ft. in its damaged state. As to diminution in the value of the land, Mr. Darling pointed out that the claim related only to ‘buildings and structures’ (which would include roads and hardstandings) and thus any suggestion that the open areas of land had suffered diminution must fail.

[82]In connection with Mr. Nattrass’s contention that there was a special value to the claimant’s use which resulted in a 50 per cent uplift, Mr. Darling said this concept offended the principle of open market value as it was one that applied to a special user and/or purchaser. No evidence was adduced to support the contention and in any event remedial costs would be no greater due to that special use.

[83]On the subject of interest upon whatever amount the Tribunal determined, Mr. Darling submitted that there had been no undue delay between revocation of the stop notice in February 1993 and the offer made in October 1994, and therefore the relevant time for the commencement of interest (the rates for which were agreed) was 5 October 1994. It was necessary for the compensating authority to obtain the report from BG and it then commenced negotiations with the claimant’s then agents. In March 1994 the claimant had advised the compensating authority that he had obtained information from Mr. Nattrass and was considering a depreciation payment. The compensating authority then obtained its own valuation from Mr. Lunn, and made the depreciation offer in October 1994.

[84]It was at that stage that the claimant decided to pursue the claim for repairs, for tactical reasons, and it was submitted that this was why it had taken until the summer of 2000 for the matter to be determined. Mr. Darling said that if the claimant had accepted the principle of a depreciation payment, even if the amount could not be agreed, a reference to the Lands Tribunal would have been made much sooner, and it was likely the issues would have been determined by late spring 1997. In any event, the Tribunal was invited to consider the delays that had occurred since the matter was originally listed in February 2000.

[85]In conclusion, Mr. Darling invited the Tribunal to find a diminution in value figure in the region of £195,000 to £210,000.

[86]Mr. Gaunt said that a number of nearby properties of similar construction that had been affected by mining subsidence (AGW; Metry; J.Pass Commercials and RSL) had all had compensation paid at an average of £24.05 per sq.ft., and it was therefore surprising that the compensating authority were only offering £6.50 per sq.ft. on the claimant’s property (£195,000 / 30,000 sq.ft). The assessment of the amount of depreciation falls to be determined under s.10(2)(b) of the 1991 Act and does not have to be less than the cost of the works. Indeed, the depreciation could substantially exceed the cost of works either because the buyer would prefer to purchase an undamaged site, or if he did buy one and intend to repair it, he would need to allow for the time element in effecting the repairs and the risk that further works may come to light. However, Mr. Gaunt said that on the evidence, none of the surrounding occupiers had effected 21 repairs, and in reality a purchaser who was considering buying in their damaged state, and making do with them as they are, would only be prepared to pay a ‘knock down’ price.

[87]In summarising the difference between the parties in respect of the undamaged property, Mr. Gaunt set out the points thus: Lunn Nattrass(i) Rental Value (composite) £2.11 psf £2.70 psf

(ii) Yield 13% (7.69YP) 12% (8.33YP)

(iii) Surplus land area ½ acre 2 acres

(iv) Surplus land value £50,000 per acre £70,000 per acre

(v) Uplift for special user Nil 50 % (i)x(ii) Capital Value - Buildings only £16.23 per sq.ft £22.50 per sq.ft. £525,000

£1,215,000

[88]Whilst Mr. Nattrass had found helpful local evidence to support his rental value figure of £2.70 per sq.ft., it was not clear, Mr. Gaunt said, how Mr. Lunn had arrived at £2 – other than the fact he considered the buildings to be generally less valuable than the comparable units produced in evidence by both experts. The current shabby state of the claimant’s buildings in comparison with some (but not all) of the comparables was due to the fact that no money had been spent on decoration and maintenance due solely to this ongoing dispute over compensation. As to the purchase of Metry by the compensating authority, Mr. Lunn had chosen to assume the value was £395,000 at the relevant date (in accordance with the valuation prepared by Bothams) whereas it was the Mr. Nattrass’s view that due to the then owner’s financial difficulties, if anything the £465,000 was a forced sale figure and could even be increased. The compensating authority’s acquisition was not a forced purchase, Mr Gaunt said, and in these circumstances, the price paid was better evidence of value than the Bothams valuation which itself was not substantiated by comparables.

[89]Mr. Lunn’s comparables at Cresswell Works, Cresswell and Dunston Lane and Foxwood Road, Sheepbridge did not substantiate his assessment of the subject property’s capital value at c. £16.23 and in cross-examination, he could not defend their relevance. As to yield, the difference between the valuers was down to judgment, but, Mr. Gaunt said, Mr. Nattrass’s analysis of the Metry sale supported his figure of 12 per cent.

[90]In respect of the land value, whereas Mr. Nattrass had produced a comparable transaction to support his figure of £70,000 per acre, Mr. Lunn had been unable to produce any evidence to support his contention. The reason for Mr. Lunn’s use of 0.5 acre surplus land had not been explained, whereas Mr. Nattrass had established the buildings covered about 1.4 acres, leaving the balance of 2 acres as surplus land, and it was submitted, this figure should be preferred. 22

[91]Mr. Gaunt said that as an experienced valuer who had regular involvement with agency (unlike Mr. Lunn who was involved solely with professional work), Mr. Nattrass’s opinion on the value of the sui generis use should be accepted, especially now that it had been established the £50,000 per acre the claimant paid for the 4.38 acres adjacent to its existing property was substantially more than its open market value of £30,000 per acre. In conclusion, it was submitted that all of Mr. Nattrass’s evidence in respect of the property’s undamaged value could be substantiated, and was to be preferred.

[92]The difference between the parties as to the damaged value was: Lunn Nattrass(i) Rental Value £1.60/£3.20 psf £0.90 psf

(ii) Yield 17% (5.88YP) 20% (5YP)

(iii) Surplus land area ½ acre 2 acres

(iv) Surplus land value £50,000 per acre £30,000 per acre (i)x(ii) Damaged value £330,000

£195,000

[93]Mr. Lunn had been under the impression, from Mr. Green’s first initial findings (as revised), that it would cost in the region of £92,000 to effect the necessary repairs other than correcting the tilt to the floors in any of the buildings. His opinion of the diminution in value was £195,000 if no repairs were done, but only £130,000 if all the repairs other than the correction of the tilting floors was done. It therefore stands to reason, Mr. Gaunt said, that Mr. Lunn had attributed just £65,000 to the rest of the damage. According to Mr. Lindsay, the rest of the damage would have cost £232,334 to repair (at 1994 prices) and with the correction of tilt to the floors in the industrial buildings, that became nearly £360,000. Mr. Lunn had also assumed the offices did not need to be rebuilt, and had therefore, all in all, arrived at his opinions of diminution erroneously.

[94]Mr. Gaunt said that Mr. Nattrass’s analysis of the Metry sale to the claimant at £100,000 proved the extent of depreciation that resulted from a damaged building, and said there was no way the vendor would have sold for that figure if it had been worth substantially more. If Mr. Lunn’s analysis of the damaged AGW building at £13.90 per sq.ft. were used on Metry, it would give a value for Metry of £280,000. The AGW buiilding was not a good comparable, as it was a building that was suitable for, and eventually became, a retail outlet.

[95]As to Mr. Lunn’s analyses of the other damaged buildings, J.Pass Commercials and RSL, Mr. Gaunt said that his figures did not make sense, and that they had been based upon limited information, much of it hearsay. The facts of the matter were that a detailed breakdown of the RSL compensation supported a rental value figure (damaged) of £0.93 per sq.ft. which was close to Mr. Nattrass’s £0.90 used on the subject property. The sale by Pass was to RSL (who had the adjacent premises) and therefore was to a special purchaser.

[96]Mr. Gaunt pointed to Mr. Nattrass’s reasons for saying that the surplus land had been devalued by the subsidence. The claimant needed a level, stable site, and if they were to consider erecting further buildings the footings required for subsided land would be much more expensive 23 than where there was a stable base. He accepted that it may have been better if Mr. Nattrass had referred to the acquisition negotiations for the 4.38 acres in his report, but stressed that Mr. Nattrass had told Mr. Lunn about it in their ongoing negotiations, and it had been expected that the compensating authority would seek further information.

[97]Mr. Gaunt concluded, in respect of the damaged valuations that because of Mr. Lunn’s ignorance (prior to the hearing) of the highly significant sale of Metry to the claimant at a heavily reduced price, his erroneous assessment of the extent and cost of the damage to the subject property, his reliance upon unreliable or incomplete information in respect of the other damaged buildings and the effects the subsidence would have upon the useability of the subject property, his damaged valuation was much too high.

[98]There was absolutely no reason to conclude, Mr. Gaunt said, that the level of depreciation must be less, or even substantially the same as, the cost of works of repair – it may well exceed repair costs because the purchaser is taking on a liability, and an element of risk, that he would not with an undamaged property. There is no reason to suppose that a purchaser would be prepared to ‘absorb’ an element of the cost of repair, as was being suggested by the compensating authority.

[99]Mr. Lindsay’s evidence on the BG proposals for the repairs to the office building was clear, and Mr. Gaunt said a purchaser would not be satisfied that that the utility and value of the office block could be restored by such a potentially dangerous and de-stabilising project. The diminution in value to that building must be the cost of re-constructing it above foundation level, and the fact that that cost, even on BG’s assessment exceeded the value (per Mr. Lunn) was nothing to the point. If a purchaser needed to rebuild it for it to be useable, then he will discount his bid to reflect the cost of so doing.

[100]On the question of interest, para. 4(1) of Schedule 1 to the 1991 act directs that the depreciation payment shall carry interest at the applicable rate in respect of any period after the ‘relevant time’ which the claimant submits is the compensating authority’s notice of proposed remedial action, 27 February 1993. If no period of delay is attributable to the unreasonable conduct of the claimant (as is the case here) then the award of interest to the date of payment is mandatory. If it is suggested, Mr. Gaunt said, that the delay between then and the service of notice on 4 October 1994 was due to the claimant, then that is palpably absurd. The compensating authority had a duty to serve a s.4 notice as soon as reasonably practicable, and there was no reason why this could not be done in February 1993.

[101]The suggestion of delay by the claimant was not supported by evidence or submission and the Tribunal was asked to bear in mind the claim, outlined in the initial opening, that the compensating authority had not complied with its statutory procedures under the Act. For example, they had not served a s.6 schedule of works that they were obliged to do even if they elected to make a depreciation payment, and the compensating authority’s election for a depreciation payment, when it was made, was invalid. It would be wholly unfair, Mr. Gaunt said, to seek to deprive the claimant of interest on monies to which they are entitled, when the compensating authority has had the use of the money throughout the whole period. Decision. 24

[102]Following the agreement reached between the parties on the second day of the hearing, as set out at para 7 above, the principal issue for my determination in this reference is the amount of depreciation in the value of the subject property, resulting from the coal mining subsidence that has occurred. For clarity, I set out the parts of Schedule 1 to the 1991 Act relevant to this determination: Coal Mining Subsidence Act 1991 SCHEDULE 1 DETERMINATION OF AMOUNT OF DEPRECIATION PAYMENTS Basis of valuation 2.--------(1) For any purposes of section 10 or 11 of this Act, the value of a unit of property at any time shall be taken to be the amount which it might be expected to realise in the state in which it is at that time on a sale effected at that time.

(2) In the case of a property comprising land or buildings the sale referred to in sub-paragraph (1) above is a sale of the fee simple in the open market and with vacant possession, subject to – (a) any restrictive covenant, easement, quasi-easement or other right inuring for the benefit of other land; (b) any public right of way, right of common or other right inuring for the benefit of the public or any section of the public; and (c) any restriction imposed by or under any enactment. to which the property is subject at the time of the sale, but free from any other incumbrance.

(3) In the case of a property within sub-paragraph (2) above, the value shall be determined without regard to any liability of the property to become subject after the time of the sale to any restriction by virtue of any enactment other than – (a) a demolition or closing order made under the housing clearance powers; or (b) where the property is situated in England and Wales, the declaration of an area to be a clearance area under such powers

(4) In the case of a unit of property consisting of or comprising property of a kind not normally the subject of sales in the open market, provision may be made by regulations made by the Secretary of State for ascertaining the value of the property in any state by reference to such matters as may be specified in the regulations.

(5) In determining for the purposes of the preceding provisions of this paragraph the value of any property which has been affected by subsidence damage, any right to a depreciation payment in respect of that damage shall be disregarded.

(6) (Applies to Scotland only) Amount of depreciation (3).------ (1) For the purposes of section 10 or 11 of this Act the amount of the depreciation in the value of a unit of property caused by any subsidence damage shall be taken to be the amount by which the value of the property at the relevant time is less than what would have been its value at that time (determined in accordance with paragraph 2 above) if it had not been affected by the damage.

(c) [relates to section 11 of the Act]

[103]In determining the amount of depreciation it is necessary to consider:(1) The extent of repairs required.

(2) The estimated cost of those repairs.

(3) The value of the property in its undamaged state.

(4) The value of the property in its damaged state. It is not sufficient to consider (2) in isolation and assume that the cost of repairs represents the amount by which the value property has been depreciated. The depreciation amount is the difference between (3) and (4) and is represented by what the market will pay for a property that has suffered the damage as set out in s.10. In determining what the market will pay, the question I have to ask is: what effect will (1) and (2) have on a prospective purchaser in determining his bid on the basis of (4)? For example, if the damage and cost of repairs required to make good were very small, would it have any effect on value? Conversely if the damage was so extensive as to bring in the question of future viability of the site for any purpose, could the depreciation represent the whole of the undamaged value? As the parties were unable to quite agree all elements of damage, the precise repairs required, and thus the costs thereof, I need to determine those issues before considering the depreciation amount.

[104]As to (1), the extent of repairs required, the engineering experts continued discussions and negotiations during the hearing, whilst the valuation evidence was being heard, and to all intents and purposes reached agreement – sufficient for it not to be necessary to call them to give evidence. The schedule that was produced [Appendix 1] sets out the items that require attention to rectify the damage, together with respective estimates of cost, which I consider in detail under (2) post.

[105]The ability of the experts to virtually agree on rectification works represented a significant milestone following the pre-hearing impasse and the huge differences in their respective reports as to what the damage was, and what was needed to rectify it. The claimant’s estimate of the cost of repairs at c. £700,000 and the compensating authority’s at c. £114,000 was indicative of the differences between them. The only matter remaining for my determination, on the extent of works, relates to item 4, the office building.

[106]Mr. Lindsay said that the only practical solution was to demolish the offices (to foundation level) and rebuild them. This would eradicate the unacceptable tilting to the walls – which have continued to move since 1993, thus bringing into question their overall stability, and would create level floors. Mr. Green had thought that it would be sufficient to effect the repairs that had been outlined in his initial report, although that scheme, which would involve laying a false floor over the existing one, thus only partially levelling it up, had to be amended when the tilt to the walls increased. He then suggested the provision of supporting piers, but no other alterations to the floors. The experts had each costed the other’s proposals, as well as their own and Mr. Lindsay’s rebuild costs are shown in the schedule at 4(a), with Mr.

(b) 26

[107]I inspected the subject property in the company of Mr. Lindsay and Mr. Green on 13 June and formed the view that whilst the tilt to the walls would not be readily apparent to he untrained eye, the slope to the floors was an immediately evident major problem. The slopes were such that effective working in the offices would be seriously hindered, and uncomfortable for the occupants, even if the desks, filing cabinets and the like were shimmed up to make them level. Mr. Green’s proposals for the laying of a false floor would, on his admission, still leave a noticeable slope and the partial levelling process would make one end of this elongated building unuseable in terms of minimum ceiling height requirements.

[108]Notwithstanding the fact that it was evident the BG proposals would not form an acceptable or workable solution to the problems caused by the subsidence, the suggestion that the building needed to be completely demolished and rebuilt, at a cost of significantly more than it was worth, appeared to me to be substantial over-kill, and would result in a high degree of betterment. The offices had originally been built in 1969 to a very basic specification, with timber walls and a lightweight shallow pitch roof. The cavity brick outer walls had been constructed a section at a time after removal of the sections of the old timber walls in 1990, without, it transpired, planning or building regulation consent. In all other respects the offices remained very basic.

[109]Having indicated my initial thoughts to the experts, Mr. Green formulated the ‘compromise’ proposal for the propping of the roof, demolition and replacement of the walls and, by a sophisticated jacking process, the complete levelling of the floors and the roof structure at the same time. Despite Mr. Lindsay’s concerns over the practicality of the scheme, and the health and safety aspects (although he did admit that it was possible), I consider the proposal forms an acceptable solution. Whilst, with the provision of additional wind bracing, missing in the current building, a small element of betterment would occur, overall the ‘new scheme’, of all the alternatives discussed in the various experts reports prepared prior to the hearing, would be the one most likely to put the building back to the state it was in prior to the mining subsidence. It would, in my judgment, satisfy the tests of reasonableness and practicality and whilst the jacking exercise would need to be carried out with great skill and care, especially in terms of temporary support and protection from wind forces, in engineering terms it appears to me to be relatively straightforward.

[110]I therefore consider item 4(c) to be the appropriate method of repairing the office building.

[111]This brings me to (2) the cost of repairs. Dealing first with the office building under 4(c) there is approximately £30,000 difference between the experts. The additional costs proposed by Mr. Lindsay were due to his opinion that Mr. Green had left out a number of essential items. These included the temporary bracing that would be required to support the roof whilst the walls were removed and rebuilt in their entirety; the wrong types of jacks were proposed (hire cost for the right ones being significantly more) and a concrete block inner skin was costed for the walls, whereas the existing, unplastered internal walls were of rustic bricks (nearly four times as expensive). Mr. Lindsay also noted that insufficient permanent wind bracing had been allowed for and there was no provision for the reinstatement of ceilings that would need to be removed prior to the installation of the props.

[112]In my opinion the explanations given by Mr. Lindsay in his supplementary report for his estimated cost of the new scheme are entirely reasonable and support a cost, excluding 27 preliminaries, at 1997 prices of over £60,000. It is perfectly understandable that, in the extremely short time Mr. Green had to prepare his proposals for the new scheme, some items might have been overlooked, and it appears to me that Mr. Lindsay, having had time to analyse the proposals in some detail, has been able to prepare a ‘belt and braces’ costing that includes for the additional items he mentioned. I propose, therefore, to adopt Mr. Lindsay’s costings on 4(c) in the sum of £66,800 and have annotated Appendix 1 accordingly. Items 4(a) and 4(b) are therefore now irrelevant.

[113]As to the rest of the schedule, there was little difference between the experts, overall, resulting from the figures upon which they have not agreed a specific amount. Working through the figures (and adopting the sum of £66,800 on 4(c) as an agreed figure) the claimant’s estimate becomes £294,882 and the compensating authority’s £280,984 – a difference of £13,898 – say £14,000. I would not anticipate incurring the wrath of the parties if, in respect of this element, I ‘split the difference’ and determine that the estimate that an engineer advising a prospective purchaser would give of the likely the cost of repairs would be £288,000.

[114]In respect of (3), the value of the property in its undamaged condition, I firstly need to consider Mr. Nattrass’s contention that there was a 50 per cent uplift in value, from the £810,000 he had calculated to be its open market value, to give £1,215,000 as the value to the claimant.

[115]In valuation terms, Mr. Nattrass said his use of the term ‘special value’ was attributable to the sui generis use. He said the special value as defined in the RICS Practice Statement PS 4.1.3. was different in that it related to the special purchaser. The definition in the practice statement reads: “Special Value. A term relating to an extraordinary element of value over and above market value. Special value could arise, for example, by the physical, functional, or economic association of a property with some other property such as the adjoining property. It is an increment of value which could be applicable to a particular owner or user of the property rather than to the market at large; that is, to a purchaser with a special interest”. [my emphasis] Whether the use is described as sui generis does not seem to me to matter. Special value, as here defined, includes an increment of value applicable to a particular user, or potential user, of the property, and has to be ignored in valuation terms. The planning permission that was granted in 1966, under the Town and Country Planning Act 1962, was ‘for a fenced depot for contractor’s plant and engineering machinery, complete with storage and service buildings’. That use is the use to which the land is currently put, and can properly be described as ‘industrial with a substantial amount of storage’. Mr. Nattrass adduced no evidence, other than pure assertion, to show that the subject property would command, in the open market, a price in excess of the industrial value.

[116]Mr. Nattrass said that, following the subsidence, any special value disappeared due to the fact that the property was no longer suitable for his client’s requirements. To me, this simply proves the point. If the assertion was that there was a particular value, then that necessarily has to be excluded because it was not part of market value. I conclude therefore that Mr. Nattrass’s assertions regarding uplift in value cannot be taken into account.

[117]Turning to the evidence of value (excluding any special value), Mr. Nattrass relied to a significant extent on his analysis of the Metry transactions, that analysis in terms of rental value and 28 surplus land value being derived from comparables. He had adopted the £465,000 paid for the property by the compensating authority as its open market value, despite his assertions given in evidence that it may well have been more (due to the financial position of the vendor) although the valuation and asking price some years earlier were hardly appropriate. Mr. Lunn adopted the Bothams valuation of £395,000. Although the purchase price is different from a s.10 payment, there was no evidence to suggest that the £465,000 was not considered to be the open market value, in its undamaged state, (apart from Mr. Lunn’s assertion that it was a ‘special purchase’), and I therefore consider that for the basis of analysis, that was an appropriate figure.

[118]The rental value of the subject premises, at £2.70 per sq.ft. adopted by Mr. Nattrass (and used in the Metry analysis) was based upon lettings of nearby industrial units. Mr. Lunn had looked over a wider area and concluded that £2.00 per sq.ft. (£2.11 including the offices) was the appropriate figure. However, Mr. Lunn’s valuation of the RSL premises in their undamaged state was £3.25 per sq.ft. (although they were smaller, of better construction, and more modern than the subject property’s buildings) and the ‘Post Office’ premises at Deepdale Road, Staveley were let at £2.55 per sq.ft. in March 1992. Again they were smaller and had less eaves height and poorer access doors, but were located in an attractive and easily accessed position.

[119]There is no doubt in my mind that the standard ‘sheds’ that Mr. Nattrass used as comparables would, as Mr. Lunn said, command a higher rental value. The argument put forward by Mr. Nattrass that the subject property comprising five separate buildings could be split up to provide smaller units does not hold water because, as pointed out by Mr. Lunn, four of the buildings have no office content at all, and the fifth is all offices. It is my view that the rental value would fall between the figures used by the experts, but considering the basic nature of the subject buildings, nearer to Mr. Lunn’s rental value. I therefore determine that at the relevant time the rental value of the buildings in their undamaged state would have been £2.25 per sq.ft.

[120]The value of the surplus land – which I accept was 2 acres, there having been no explanation from Mr. Lunn as to how he had arrived at 0.5 acre, was £70,000 in Mr. Nattrass’s opinion, and £50,000 in Mr. Lunn’s. Mr. Nattrass had referred to a sale of 17 acres of land, in plots, at the Ireland Industrial Estate, Staveley at £70,000 and, less convincingly, some asking prices at two locations in Chesterfield at £85,000 and £87,000 respectively per acre. Mr. Lunn had no evidence of land sales, and had expressed a view from his experience. The 4.38 acres of land that the claimant acquired on the other side of the old railway, in 1998, was at £50,000 per acre, but that was land that had may have suffered subsidence. However, there were no buildings on it and it is my view that depreciation from full market value will be marginal. As will be seen later, I do not accept Mr. Nattrass’s assertion that the 4.38 acres only had a value of £30,000 per acre.

[121]If there was a marginal reduction in the value of the 4.38 acres from its undamaged state, then a figure of £60,000 might have been appropriate. As the surplus land is part of the claimant’s main site, with roads and accessways already in place, and with ready access off two of the estate roads, it could be argued that it was worth more than the 4.38 acres. The comparable evidence also supports Mr. Nattrass’s opinion and I therefore adopt a value for the land at £70,000 per acre.

[122]Mr. Nattrass adopted a yield of 12.5 per cent (8.5YP) whereas Mr. Lunn used 13 per cent (7.69YP). The 12.5 per cent had been used by Mr. Lunn in his valuation of the RSL unit, and 29 accepted by Mr. Nattrass. RSL was a more modern industrial unit, with better quality buildings than the subject property. Both experts accepted that the adoption of a particular yield was a matter of valuer’s judgment. In my judgment, the market would not use the same yield for he subject property as it would for a modern, standard industrial unit such as RSL. I therefore adopt Mr. Lunn’s approach, and determine that an appropriate yield would have been 13 per cent (7.69 YP).

[123]The valuation of the subject property, as undamaged, becomes: 30,221 sq.ft. @ £2.25 = £67,998 x 7.69 YP = £522,904 2 Acres @ £70,000 = £140,000 £662,904 say £663,000

[124]In regard to the damaged value, Mr. Nattrass said the subject property was depreciated to about 20 per cent of its undamaged value, and this was supported by the Metry purchase by the claimant at £100,000. It was his view that whereas there had been an element of special value to reflect the sui generis use prior to the subsidence damage, there was no longer any such additional value once the property had been affected by mining subsidence, as it was no longer suitable for his client’s needs. As I have already said, I do not accept this hypothesis. The surplus land was, he said, also devalued (to £30,000 per acre). This is patently not justified, as there was no evidence to suggest that the land could not be, or was not being used for the purposes for which it was required. The site is not now, and never has been level, and none of the experts suggested there had been any deterioration to the open storage or future potential development areas caused by subsidence.

[125]There had been suggestions that the roadways had been affected, but from a series of photographs taken before the subsidence, and from my inspection there was no indication that they were in any worse condition, and this fact was accepted by the parties. It was also suggested that the land was now more prone to flooding due to the damage to the drains – this being one of the items costed on the schedule of required repairs. As I have said, I consider that there may be some depreciation in open market value due to the questions that a purchaser may have over overall stability, and the possible need for more expensive foundations to any additional buildings, but I do not think this would be significant. This is especially so as the land would be most likely used by a potential purchaser for open storage, and as such the fact there had been subsidence, which has now stabilised, would not be a major deterrent. I propose to adopt £60,000 per acre, this also taking into account the possibility of additional flooding.

[126]Mr. Nattrass had devalued the purchase price of Metry by the claimant to give a rental value for the buildings of £0.90 per sq.ft., with a 20 per cent yield (5YP) and £30,000 for the surplus land. He accepted in cross-examination that he had no comparable evidence to support either the rental value or the yield, but these were the figures that resulted from the transaction using the same basis as he had done previously. In his own words, when submitting his invoice to the claimant for his fee for negotiating the purchase, it was a “very good buy”. Mr. Lunn did think that the £100,000 purchase price was an open market transaction but did not agree that it could be used to support 30 such a large depreciation in value as was being suggested for the subject property. I agree with him, except that I do not see that purchase as truly open market, and find that the figures suggested by Mr. Nattrass do not square with any other evidence, especially that relating to the other damaged units referred to by Mr. Lunn.

[127]Mr. Lunn’s valuation suggested that the rental value of the subject premises would be depreciated by about 20 per cent to about £1.72 per sq.ft. overall. He did not think the land would be depreciated at all. As to yield, he suggested 17 per cent (5.88 YP). This would give a capital value for the buildings of £9.91 per square foot against £16.23 in their undamaged state, or a depreciation in value of 39 per cent (or 61 per cent of its undamaged value) which happened to be precisely the same as the analysis he had carried out of the AGW building. That building had had a capital value of the buildings undamaged at £22.75 per sq.ft. and £13.90 per sq.ft. damaged. Those values were more because it was a better building.

[128]The sale of the J.Pass Commercials building at an equivalent of £15.22 per sq.ft. in its damaged and unrepaired state was much higher than his estimate of the damaged value of the subject property because it was a better building, and incorporated a high office content. The RSL building was £25.79 undamaged and £17.60 per sq.ft. was paid in compensation. Mr. Lunn had valued the damaged property at £124,000 which would give a capital value for the buildings of £17.29 per sq.ft., but there had been no sale. This would give a 33 per cent reduction in capital value due to the subsidence. It was suggested by Mr. Gaunt that the figures were unreliable, and that the capital values, damaged, were much less.

[129]Whilst the analyses of capitalised values undoubtedly helps to build up an overall picture, there are dangers in placing too much reliance thereon as was evident from the reports and discussions in cross-examination and submissions, especially in respect of J.Pass. I must also bear in mind that, in respect of the other damaged properties, the basis of compensation was only the same (s.10) in one case. Overall, I prefer Mr. Lunn’s conclusions on depreciation in value, and am satisfied that, on the basis the evidence and analyses of comparables, a reduction in value of around 35 per cent, rather than the 80 per cent suggested by Mr. Nattrass, with no supporting evidence other than Metry, is what a prospective purchaser would expect to achieve. Mr. Nattrass’s proposed yield was, in my judgment, too far removed from that which was applicable to the undamaged premises and a movement of 4 percentage points, from 13 per cent to 17 per cent (5.88 YP) to reflect the perceived and actual risk would be more appropriate. I also adopt Mr. Lunn’s depreciation in value of 20 per cent, which I apply to the £2.25 per sq.ft. I have determined in para 119 to reach a depreciated price of £1.80 per sq.ft.

[130]The valuation of the subject property as damaged, on the basis of the market evidence becomes: 30,221 sq.ft. @ £1.80 psf =£54,398 x 5.88YP = £319,860 2 Acres @ £60,000 per acre = £120,000 £439,860 Say £440,000 31

[131]The difference between the damaged and undamaged valuations is therefore £223,000 or a reduction of 34 per cent. 132 In considering now the correlation between the estimated cost of repairs at £288,000 and the difference in values shown above of £223,000, it should be remembered that the schedule of repairs includes for replacement of the tilted floors throughout all the buildings, substantial overhaul and some improvements to the offices, repairs to drains and some of the roads and hardstandings together with gates and fences. Those works would put the premises as far as it was reasonably possible and practicable to do so, into the condition they were prior to the mining subsidence. I accept the compensating authority’s submissions that a purchaser would not necessarily reduce his bid by the whole amount of the estimated cost of repairs, as he would most likely be prepared to live with some of the faults. For example, not all purchasers would need level floors in all of the buildings, and might only get some of them repaired or renewed.

[133]I do not accept Mr. Gaunt’s submission that a purchaser will achieve a reduction of more than the cost of the works to compensate him for the time and aggravation of having to do the works. It is much more likely that, in the real market, a purchaser would attempt to negotiate a reduction from the undamaged value of as high a percentage of the estimated cost of repairs as possible, but would not expect, or as I have said, need to save the whole amount.

[134]The depreciation figure of £223,000 represents, in my judgment, an appropriate percentage of the cost of the repairs. At the end of the day the prospective purchaser, in being professionally advised as to value and building repair matters will be told that whilst undertaking all the recommended works would cost more than £280,000, the true market value of the property, as damaged is still only £223,000, or 34 per cent, less than its full undamaged value.

[135]The claimant could well argue that, if it is going to cost it £288,000 to alleviate all subsidence damage problems, then that must be the amount by which the value is depreciated – otherwise they could spend all that money and only expect to get £223,000 of it back if it was sold. Paragraphs 2 and 3 of Schedule 1 to the 1991 Act are clear as to the basis of valuation and, to my mind, prove the point that the cost of repairs and depreciation do not necessarily run in tandem. I have to consider what the market would pay for the damaged property, and that is not necessarily the full undamaged value less the costs of repair.

[136]I determine therefore that the depreciation in value to the subject property as at 5 October 1994 was £223,000 in accordance with Sch 1 and 2 of the Coal Mining Subsidence Act 1991, and the compensating authority shall pay that sum to the claimant together with interest at the agreed rate from the relevant date (see below).

[137]As to interest, Schedule 1, para (3)(2)(a) to the 1991 Act is clear. The date upon which the compensating authority gave the claimant notice of the proposed remedial action was 5 October 1994, and I accept the submission that a notional earlier date would be inappropriate. I also accept that there was not an undue delay between the revocation of the stop notice and the letter of 5 October 1994. I therefore determine that to be the relevant date for the commencement of interest, and in all the circumstances, particularly bearing in mind the compensating authority’s apparent 32 failure to comply strictly with the requirements of the 1991 act, it is appropriate that it should be calculated to the date upon which it is paid.

[138]This decision so far concludes my determination of the substantive issues in this case. It will take effect as a decision when the question of costs is decided and at that point, and not before, the provisions relating to the right of appeal in section 3(4) of the Lands Tribunal Act 1949 (as amended) and Part 52 of the Civil Procedure Rules will come into operation. The parties are invited to make submissions as to the costs of this reference and a letter accompanying this decision sets out the procedure for submissions in writing. DATED: 12 September 2000 (Signed): P.R.Francis FRICS Addendum as to Costs

[139]I have received submissions on costs from the parties. The claimant seeks an order that the compensating authority pay its costs of the reference on the grounds it had ‘won’ in that my award exceeded, by more than a de minimis amount, the only open offer that had been made.

[140]That offer, made on 5 October 1994, was for £210,000 being the authority’s assessment, under s.10(1) of the 1991 Act, of the depreciation in value of the claimants premises at the relevant date. The offer was rejected and at no time was it increased. Indeed, an offer of £150,000 ‘without prejudice save as to costs’ was made by the compensating authority on 11 April 2000 shortly before the hearing of this reference. This, the claimant said, appeared to be based upon the original offer together with a calculation for interest, but less its costs to that date. It was subject to a time limit for acceptance of 14 days, and this offer was also rejected. No sealed offer had been made, but if the authority had elected to make an increased open or sealed offer that had equalled or exceeded the compensation awarded, including interest to the date of the offer, its position on costs would have been protected.

[141]It was the claimant’s view that the rule that costs should follow the event was applicable in these circumstances, and there was no special reason from departing from that well established principle. The claimant had not raised issues or made allegations which caused a significant increase in the cost or duration of the proceedings, nor did it raise issues or make allegations unreasonably or improperly. Conversely, by electing at the hearing to pursue the claim for depreciation only, it had almost certainly shortened the hearing and saved costs.

[142]The claimant submitted that the evidence relating to the scope and cost of works required to remedy the subsidence damage, and the investigations relating thereto, was necessary. In any event, during the hearing, the parties had expressly agreed that in determining costs, neither party would be treated as having acted unreasonably in that regard. 33

[143]Finally, any costs incurred in respect of the application that resulted in the corrigendum to the decision should be treated generally as costs in the reference.

[144]In response to the claimant’s submissions, the compensating authority pointed out that the authorities referred to by the claimant were pre-Civil Procedure Rules (“CPR”) and thus now only of limited assistance. In contrast, its own submissions were based upon Part 44 of the CPR. However, it is submitted that even before the CPR the Tribunal would have been justified in ordering the claimant to pay all, or at least a substantial part of the respondent’s costs for the reasons it had given in its own submissions.

[145]As to the absence of a sealed offer, the authority said that the claimant was equally entitled to make one, and the fact that it did not is significant in the light of its claim to victory at £223,000 against a claim of £1m. In the authority’s submission the claimant had indeed acted unreasonably or improperly in electing to pursue damages and cost of works in addition to depreciation. Far from shortening the proceedings, it was because the claimant’s case was based upon these additional grounds, incorrectly, that the first two full days of the hearing were taken up on legal argument on that aspect. The claimant did not, as it had suggested, ‘elect’ to take a depreciation payment, but, at the hearing, it merely accepted the force of the authority’s arguments, and, in effect, conceded its error in formulating the claim on the broader basis.

[146]The compensating authority, in its own cost submissions, asked the Tribunal, in exercising its discretion on costs, to take into account the claimant’s conduct. The original offer of £210,000 as a depreciation payment was made in October 1994 as a direct result of the claimant putting forward a settlement proposal of £850,000. From the conversation the claimant, through Mr Walker himself, had had with the authority’s Mr Fleetwood, at which the figure of £850,000 was proposed, the authority concluded that the claimant would prefer a depreciation payment and, indeed, had sought to continue negotiations on that basis, despite the parties being a long way apart.

[147]It was not until two years and seven months after the authority’s offer had been made that the claimant submitted a Notice of Reference that claimed damages together with the execution of repair works and a depreciation payment under s.11(a) of the 1991 Act or a depreciation payment under s.10 or a payment in lieu of works. Only after the second day of legal argument at the hearing did the claimant concede that compensation should be assessed on the basis of depreciation under s.10, acknowledging that it could not recover the cost of carrying out the works without actually doing them. In effect, therefore, the claimant was reverting to the position the respondent had been in, in 1994, when making its offer.

[148]Whilst the agreement referred to in the claimant’s submissions relating to the costs incurred in investigating the scope and cost of the necessary works was accepted, that could not, the authority submitted, be construed as an acceptance that the claimant had acted reasonably in pursuing the claim in the way that it had. The claimant had chosen to pursue the claim on a wholly unsustainable basis, and this resulted in the respondent incurring significant and unnecessary expense on expert’s and legal fees.

[149]Furthermore, the claimant had sought, at the commencement of the hearing, to increase its claim £1m. That was grossly exaggerated and was an indication that the claimant had an over- inflated notion of the value of the claim. With such a notion there was not, it was submitted, much chance of compromising the claim. 34

[150]As to whose evidence the Tribunal preferred, it was submitted that the claimant was only favoured, in the decision, on two points in relation to Mr Nattrass’s evidence- the undamaged value of the Metry property, and the area and value of the surplus land. In all other respects, the respondent’s evidence was preferred, and the award itself, being only £13,000 above the authority’s 1994 offer (and which was considered de minimis) but £773,000 less than that claimed, proved who had succeeded.

[151]The compensating authority submitted that, taking interest into account, the claimant is worse off following the decision than it would have been if it had accepted the offer in 1994, and invested the money. This was because it could have achieved a better rate of interest than that which would be payable under the 1991 Act.

[152]In summary, it was submitted that the claimant should not benefit from presenting an exaggerated claim. The evidence of the respondent was almost entirely accepted and the decision of the Tribunal was within ‘a whisker’ of that which had been offered in 1994. Justice requires that the claimant should be ordered to pay the authority’s costs and there could be no realistic suggestion that the claimant should be entitled to its costs bearing in mind its unreasonable stance in relation to the claim.

[153]In response to the compensating authority’s submissions, the claimant said that it had never acknowledged that it could not recover the cost of the works without doing them. It could have recovered the cost as damages. The compensation payments that the authority had made in respect of the AGW and J.Pass Commercials premises were in respect of cost of works which were never carried out. The election to accept a depreciation payment, the claimant said, was to save time and costs. The adoption of incorrect procedures by the compensating authority in the early stages of the claim resulted in it not being initially clear to the claimant that it was entitled to depreciation.

[154]There was nothing to show that the compensating authority would have been prepared to increase its offer – indeed, the later reduced offer proved that it was not.

[155]The claimant has succeeded in the reference, having ‘beaten’ the offer, and the claimant said, it had gained from pursuing its claim. The argument relating to interest is not valid; the fact is the authority did not offer enough. The claimant is not seeking to benefit from making an exaggerated claim, merely from having obtained, in the award, more than it had been offered.

[156]Firstly, I deal with the conduct of the parties in relation to the claim as a whole. Although, as I indicated in para 6 of the decision, it became unnecessary to recite all the evidence relating to the legal issues presented during the first two days of the hearing, there can be no doubt, in my judgment, that the compensating authority adopted incorrect procedures during the early stages. This will inevitably have had the effect of drawing out and complicating the issues as far as the claimant is concerned. To me, the fact that two days of legal argument was required before the correct procedure could be pursued proves that point. However the claimant is also certainly not beyond criticism. The claim was, in my judgment, exaggerated and the attempts by the claimant’s valuation expert to justify, only at the commencement of the hearing, an increase in value of the claim to £1m was unnecessary and unfounded. The compensating authority also criticised the fact that it took the claimant two years and seven months from the date of the first offer to make a reference to the Lands Tribunal, but that criticism cannot be sustainable, as the authority was equally at liberty to make a reference, and to seek a determination through an early hearing. 35

[157]For these reasons, therefore, I attach little weight to the conduct arguments, each serving to balance out the other.

[158]As to this Tribunal’s approach on the award of costs, it is not bound by the Civil Procedure Rules, but the methods set out in them (and particularly rule 44.3) are strongly persuasive as to the way our discretion should be exercised. As was the case pre-CPR, the general rule is that the unsuccessful party will be ordered to pay the costs of the party who succeeded (rule 44.3(2)(a)), but a different order may be made (rule 44.3(2)(b)). In deciding what order to make, it is right, in my view, to take account the conduct of the parties before as well as during the hearing (which I have referred to above), and also whether a party has been wholly or partially successful and any admissible offer.

[159]Whilst the 1994 offer of £210,000 was an open offer, it was immediately rejected by the claimant. Nevertheless I think it would probably have remained open for acceptance up to the date of the revised without prejudice offer in April 2000, but that later offer would have superseded the original one and was time-limited. Thus, at the time of the hearing, there was no outstanding offer, and my award amounted to £63,000 more than the April 2000 offer. In any event, the 6 per cent difference between the original offer and my award cannot, in my judgment, be considered de minimis.

[160]Looking at the relative success of the parties in relation purely to the monetary aspects of the claim shows the award to be very much more in the compensating authority’s favour – all the more so due to the exaggeration referred to above. However, when considering the conduct of the claim as a whole, I do not think that this aspect is sufficient, on its own, to deprive the claimant of its costs. The claimant did succeed in obtaining more than had been offered and, in my view the argument on whether or not it would have been better off, taking into account interest, by taking the 1994 offer is not a factor that I should consider. Interest, on whatever basis it is paid, is to compensate the claimant for late payment of compensation, and I fail to see how it adds anything to the argument that the claimant should have accepted an earlier, inadequate offer.

[161]I therefore determine that costs should follow the event and award the claimant its costs in the reference (including the additional costs incurred in respect of the corrigendum), such costs if not agreed, to be taxed by the Registrar of the Lands Tribunal on the standard basis. Dated: 13 December 2000 (Signed) P R Francis FRICS 36 APPENDIX 1 Item Proposed Work Cost or Range of Costs DW £ Cost or Range of Costs BG £ Floors 1 Relay to satisfactory Specification 113,821 112,300 Steels 2(a) 2(b) Check joints and welds and Carry out necessary repairs 9,800 11,500 9,800 7,500 Roads and Hardstandings 3 Replace yellow area only 18,000 18,000 Office Building 4(a) Floors and walls to be rebuilt i.e. new rebuild above foundation level 126,668 93,650 Or 4(b) New floor laid on top and walls propped up with brick piers 19,556 19,556 Or 4(c) Burks Green “New Scheme” 63,000 to 83,000 (66,208) 36,800 Roofs & Cladding 5 Replace damaged panels 18,753 15,371 Drains 6 Repair only (as per Burks Green) 13,031 9,746 Remaining Works 7 Repair gates, brickwork and other undisputed items 6,000 6,000 Preliminaries 8 Allow for contingencies, supervision, etc(a) Contractors’ Prelims Add to Items 1 to 7 inclusive above 12.5% 12.5%

(b) Design/Construct Contingencies Add to Items 1 to 8(a) inclusive above 5% 5%

(d) Materials testing and Drain Tests Sum 900 900

(e) Local Authority Fees Sum 1,000 1,000

(f) Deduct for cost indices back to October 1994 Percentage adjustment -10.5% -10.5%