JOHN EDWARD ROBERTS First JOHN ROBERTS (BEXLEY) LTD Second v ASHFORD BOROUGH COUNCIL ACQ/100/2004

UPPER TRIBUNAL
LANDS CHAMBER
ACQ/100/2004Case No ACQ/100/2004
Between
JOHN EDWARD ROBERTS First JOHN ROBERTS (BEXLEY) LTD SecondApplicantASHFORD BOROUGH COUNCILRespondent
Before
The PresidentJacqueline Rubens (instructed by Saunders & Co for the first and second claimants P R Maude of Hammonds, solicitors of Leeds) for Acquiring AuthorityVenue Procession House, 110 New Bridge Street, London EC4V 6JLHearing 25 July 2005Property: Land at George Street, Ashford, KentCatchwords: COMPENSATION – compulsory purchase – preliminary issue – company owned and run by landowner carrying on business on land acquired – company closing business and ceasing occupation before vesting date – whether claim for disturbance in respect of company’s losses inadmissible – lifting the veil – Land Compensation Act 1973 s 37 – held company’s claim for compensation not inadmissible
[1]The first claimant in this case, Mr Roberts, was the freehold owner of land at George Street, Ashford Kent, that was acquired by the acquiring authority under the Ashford Borough Council (Victoria Road, Ashford) Compulsory Purchase Order 1999. The second claimant, a company formerly called Hire Easy Ltd, carried on a plant hire business at the premises. Mr Roberts owned 74,950 of the 75,000 shares issued by the company and was its managing director. Hire Easy ceased trading from the premises about 18 months before the land was vested in the acquiring authority pursuant to the CPO. Mr Roberts claims compensation for the value of his freehold interest and the second claimant claims compensation for disturbance in the sum of £358,710.[2]The disturbance claim was contained in a report dated 5 July 2004 by Geoffrey Dennis Smith FCA prepared in anticipation of these proceedings. Notice of reference to this Tribunal was given on 11 October 2004. The acquiring authority asserted that the claim for disturbance compensation was inadmissible because at the date of acquisition the second claimant had no interest in the land and was not in occupation of it, and on their application I ordered that the following issue be determined as a preliminary issue: Whether the claim by the second claimant for disturbance compensation is inadmissible. They also contend that there was no causative link between the CPO and any losses the second claimant may have incurred and that any such losses are too remote, and they do not, on any basis, accept the claimed quantification of the losses. In his skeleton argument Mr P R Maude for the acquiring authority advanced not only the assertion that had led to the preliminary issue being ordered but also contentions on lack of causation and remoteness. In view of this Mrs Jacqueline Rubens for the claimants called both Mr Roberts, who gave evidence about Hire Easy and its business and the effect of the CPO, and Mr Smith, whose report had concluded that Hire Easy’s business had suffered a marked deterioration in profitability as a result of the CPO. There was a short agreed statement of facts and agreed bundle of documents. Mr Maude called no evidence. I will say later to what extent I feel it appropriate in the context of the preliminary issue to reach a view on the questions of causation and remoteness.[3]The land that was compulsorily acquired consisted of premises comprising a building that contained a showroom, office and workshop and a large concreted yard. The building was 189 sq m (2032 sq ft) in area, and the yard was 1018 sq m (16,339 sq ft). The first claimant acquired the premises in August 1987 and retained the freehold until it was vested in the authority on 31 May 2001. The second claimant, formerly known as Hire Easy Limited, changed its name to John Roberts (Bexley) Limited on 14 April 2000. Its business was the hire and sale of items of building plant and machinery and the hiring out of portable lavatories or portaloos. Hire Easy leased the premises from Mr Roberts from February 1992 to December 1999 as a plant hire depot. It ceased trading for the hire of plant from the premises in February 1999 and sold all the plant that it had kept there, with the exception of the portaloos, in March 1999. It continued to use the site for the storage and servicing of portaloos until shortly before 28 January 2000.[4]The background to the making of the CPO and a description of the land to which it related is to be derived from the acquiring authority’s Statement of Reasons for making the 3 order. The order land comprised what was known as the Victoria Road project site. This land (about 2.5 ha in area as shown in the schedule to the CPO) extends between the main railway line to the north and the Great Stour River to the south. It is bounded on the east by Beaver Road. Ashford International Passenger Station lies immediately to the east of Beaver Road. The importance of the Victoria Road project site within the land use strategy for Ashford was identified in the Ashford Development Opportunities Study, which was published in 1996. It was the closest site to the station where development was possible within the short to medium term, and the Study concluded that it must be encouraged to come forward for development as soon as possible so as to be available to meet the development opportunity that would be created by the completion of the Channel Tunnel Rail Link. A mixed use development was envisaged, including a hotel, car parking, conference and associated leisure facilities and other uses that could include commercial or residential floorspace.[5]Victoria Road was a cul-de-sac extending west through the middle of the order land from Beaver Road. It gave access to a road loop to the south consisting of George Street, which ran north-south parallel with Beaver Road, and Victoria Crescent. A large part of the order land had been cleared. The area between Victoria Road and the railway had been cleared between 1985 and 1992. Along Beaver Road development comprised the Victoria Hotel, Butchers Commercial Hotel and 8 to 16 Beaver Road. Before the CPO was made a number of these properties had become derelict, and at the time of the CPO only the two hotels, a flat forming part of 8 Beaver Road and a retail unit and rooms forming part of number 14 were occupied. The subject land was on the east side of George Street and was separated from the Beaver Road properties by a cleared site.[6]The acquiring authority agreed the basis of the project on 1 October 1996 and they also agreed in principle to use their compulsory powers in the event that negotiations for purchase by agreement of the land required for the project should fail or prove difficult and protracted. On behalf of the authority Hillier Parker wrote on 7 July 1998 to Mr Roberts to open negotiations. No agreement was, however, reached. In November 1998 English Partnerships made a planning application for the Victoria Road project site. It sought permission for a mixed use development comprising a hotel, associated A3 and leisure uses, offices, housing and car parking and a new access road. The first and second claimants objected to the application in a letter dated 9 November 1998, but planning permission was granted on 15 March 1999. On 10 December 1998 the acquiring authority resolved to make the CPO. Following this, notice dated 19 January 1999 under section 330 of the Town and Country Planning Act 1990 was served on Mr Roberts by Hammond Suddards on behalf of the acquiring authority, requiring him to state the names of all those interested in the land and the nature of their interests to enable the authority to proceed with making the CPO. The CPO was made and notice of it was published on 4 May 1999. It was confirmed by the Secretary of State for the Environment, Transport and the Regions on 2 August 2000. The acquiring authority made a vesting declaration on 28 February 2001 and the land vested in them on 31 May 2001.[7]Hire Easy had premises at 151 and 153 Blendon Road, Bexley, which it used in addition to the Ashford depot for the purposes of the business, and it owned the freehold of these. They consisted of two shops with back gardens that were unsuitable for storage purposes, so that only the smaller items of plant were kept there. Hire Easy ceased to carry on business in 4 March 2000, after it had sold its hire plant, portaloos, motor vehicles, all fixed assets and goodwill to Speedy Hire Centres (Southern) Ltd and leased the Bexley premises to that company for a term of 10 years. It had ceased to use the Ashford premises for plant hire in February 1999, but it continued to use them for the storage of portaloos until shortly before 28 January 2000, when it leased the site to S & B Car Hire Limited. S & B paid £28,500 per annum and used the site to store cars and vans for rental.[8]In evidence Mr Roberts said that he had carried on business of hire in the building trade from the premises at Bexley and Ashford. In about 1981 he took a lease on 151 Blendon Road, Bexley, and about two years after that he purchased the freehold, and then, after about two more years, he purchased the freehold of 153 Blendon Road. In the late 1980s he decided to expand and he bought the freehold of George Street, Ashford, on 25 August 1987. Both George Street and Blendon Road were purchased in his own name, but when his business became incorporated Blendon Road was transferred into the company name on the advice of accountants. George Street always remained in his name. Larger equipment was stored at Ashford. In 1997, Mr Roberts said, he decided to branch out to include in the business the hire of portaloos. This part of the business was carried out from both sites but the portaloos were stored mainly at Ashford.[9]Mr Roberts said that towards the end of 1997 or the beginning of 1998 he received an approach from Speedy Hire, who enquired whether he would be interested in disposing of the whole business. He said that he was not interested but he mentioned a figure of around £1m. The business was going well until a press release in October 1998 gave publicity to the acquiring authority’s proposals to acquire the premises. Within a matter of two weeks, he said, Hire Easy suffered considerable loss of business. Calls were received from customers saying that they would not visit the site. People were convinced that the depot was closed for redevelopment. Buildings in Beaver Road had been boarded up. While the business of hiring out portaloos, which was done by telephone orders and delivery by the company, held up, plant hire custom plummeted. The losses were so serious as to be unsustainable, and Mr Roberts said he had no alternative but to mitigate the loss and auction the hire plant, which he did in March 1999. Later in 1999, after the CPO had been made, Speedy Hire approached him again, but this time to buy the Bexley business only. They would have bought the Ashford business as well had it not been for the CPO. The business was sold to Speedy Hire for £652,000. The acquiring authority’s surveyor had put forward a number of different sites for relocation of the Ashford business, but none of these were suitable. Mr Roberts said that he had not himself sought alternative premises.[10]On 3 March 1999 Mr Roberts had written a memorandum to the five employees at the Ashford depot telling them of the proposal to auction the remaining general hire equipment and warning that there would be substantial redundancies. It began:
“As you are all aware, since the press release in October 1998, the Ashford depot’s business has decreased dramatically. I imagine it has had the same effect on surrounding businesses.”
In addition to the evidence of Mr Roberts (and that of Mr Smith, to which I will refer) Mrs Rubens for the claimants placed reliance on a letter dated 25 May 2005, marked for the attention of the claimants’ solicitors, from Martin Amos, one of the employees to whom the 5 memorandum was addressed. Mr Amos wrote that prior to “the press release in October 1998” signs had been put up overnight in the Victoria Road and George Street area on lamp posts saying that the area was to be redeveloped. On the Monday following it was as if a gate had been put up in the road and the telephone had been cut off. The effect on the tool hire business was dramatic. There was a dramatic effect on activity in and around the depot, and people telephoned to check if the business was still open.[11]Mr Roberts produced a press cutting from a local newspaper of 15 October 1998, which, he said, was the press release to which he and Mr Amos had referred. Mr Maude pointed out to him, however, and he accepted, that the article related to the Channel Tunnel Rail Link proposal and not to the Victoria Road project site.[12]Mr Smith in his evidence said that he had been instructed by Mr Roberts in November 1998 for the purpose of preparing financial information so that Mr Roberts’s surveyor, Mr Swindale of Colyer Commercial, could pursue negotiations with the acquiring authority. In appendices to his report he had analysed the company’s monthly sales on the basis of un- audited management figures from July 1998 to June 1999, produced for him by Mr Roberts. These distinguished between the different components of the business and the two locations at which it was carried on and showed a rapid fall in hire and retail sales from George Street. He expressed his belief that the business of Hire Easy suffered a marked deterioration in its profitability and he said that there did not appear to be any credible reason for this other than the circumstances surrounding the making of the CPO. The council had not been able to find suitable alternative premises to enable the business to continue, and Mr Roberts for himself and Easy Hire appeared to have taken what reasonable action they could to minimise losses by disposing of the hire equipment at Ashford and ultimately disposing of the business at Bexley.[13]Mrs Rubens submitted that the second claimant was entitled to compensation for disturbance because it had been deprived of its business by the CPO. Although it was not in occupation at the date of vesting, the losses incurred prior to that date could be recoverable under rule (6) in section 5 of the Land Compensation Act 1961, and lack of occupation was no bar to a claim in an appropriate case. Further or alternatively, if occupation at the date of vesting was a prerequisite of disturbance compensation, the Tribunal should pierce the corporate veil and award disturbance compensation to the first claimant, Mr Roberts. In the event that it was held that there was no entitlement to compensation under rule (6) the second claimant was entitled to compensation under section 37 of the Land Compensation Act 1973. She put the case in these three alternative ways.[14]On the first of the ways in which Mrs Rubens put her case, she said that the Privy Council decision in Director of Buildings and Lands v Shun Fung Ironworks [1995] AC 111 established the principle that a person was entitled to claim for pre-acquisition losses and need not be in occupation or have an interest in land, provided that what he had done was caused by the CPO and the losses were not too remote. She referred to passages from the judgment delivered by Lord Nicholls of Birkenhead, in particular to the rejection at 136H-137A of the Crown’s contention that no pre-acquisition losses were recoverable and to the statement of the principle at 137H-138B, which was as follows: 6 “So where can the boundary be drawn sensibly? If the line contended by the Crown is rejected, as it must be for the reasons already spelled out, there is no sensible stopping place short of recognising that losses incurred in anticipation of resumption and because of the threat which resumption presented are to be regarded as losses caused by the resumption as much as losses arising after resumption. This involves giving the concept of causal connection an extended meaning, wide enough to embrace all such losses. To qualify for compensation a loss suffered post-resumption must satisfy the three conditions of being causally connected, not too remote, and not a loss which a reasonable person would have avoided. A loss sustained post-scheme and pre- resumption will not fail for lack of causal connection by reason only that the loss arose before resumption, provided it arose in anticipation of resumption and because of the threat which resumption presented.”[15]Mrs Rubens’s contention that Shun Fung effectively establishes a free-standing entitlement to disturbance compensation that applies even where no interest in land has been acquired from the claimant is, I have to say, plainly misconceived. In that case land was compulsorily acquired from the claimants, and their entitlement to compensation arose by virtue of that fact. Under section 10(1) of the Crown Lands Resumption Ordinance the Hong Kong Lands Tribunal was required to determine the compensation on the basis of the loss or damage suffered by the claimant due to the resumption of the land specified in the claim, and under subsection (2) such compensation was to be assessed on the basis of the value of the land resumed and also of the loss due to the removal of the business from that land as a result of the resumption (see at 124C-D). Thus the entitlement to compensation for disturbance was part of the compensation for the acquisition of the claimants’ interest. The position is the same under the Land Compensation Act 1961. Rule (6) entitles an owner to claim that the compensation to be paid for the land acquired from him should be increased on the ground that he has been disturbed: see Horn v Sunderland Corp [1941] 2 KB 26 at 34. The value of the land and the disturbance loss are no more than two inseparable elements of a single whole in that together they make up the value of the land to the owner: see Hughes v Doncaster Metropolitan Borough Council [1991] AC 382 at 392 per Lord Bridge of Harwich. Rule (6) does not confer a right to compensation on a person who has had no land compulsorily acquired even though he has been displaced by the acquisition; and indeed it was to fill what was seen as a gap in the compensation code that section 37 of the 1973 Act was enacted to confer the right to a disturbance payment on a person who is displaced from land in consequence of the acquisition of the land by an authority possessing compulsory purchase powers but has no interest in the land acquired entitling him to compensation.[16]The second way in which Mrs Rubens put her case was to say that Mr Roberts was entitled to disturbance compensation for the loss suffered by Hire Easy under the concept of piercing the corporate veil. She relied in particular on DHN Food Distribution Ltd v Tower Hamlets London Borough Council (1976) 32 P & CR 240. In that case there were two companies, both wholly owned subsidiaries of a third company and with the same directors. The first company owned the land that was compulsorily acquired and the second company occupied the land and carried on business there. They had no separate business operations. The Court of Appeal held that in the circumstances the corporate veil could be pierced so as to give rise to compensation for disturbance in respect of the loss suffered by the second company. Mr Maude said that he accepted that if Hire Easy had been trading from the land acquired at the date of vesting there would have been a claim for disturbance compensation on 7 the part of Mr Roberts for loss suffered by the company as a result of the acquisition. However, no claim could be made if the company was not in occupation at the date of vesting, and it would create difficulties for an acquiring authority in deciding what steps it should take in connection with the acquisition if a claim could be made in such circumstances.[17]Mr Maude was in my judgment right to accept that the relationship between Mr Roberts and Hire Easy was such that it could potentially have given rise to a claim for disturbance compensation on Mr Roberts’s part through lifting the corporate veil. Hire Easy was simply the company through which Mr Roberts carried on business. I cannot, however, see any reason why a claim for disturbance for loss suffered by the company is to be excluded for the reason that the company was no longer in occupation at the date of vesting. The purpose of lifting the veil is to reflect the reality of the situation – that the company’s losses are Mr Roberts’s losses – and I can see no reason why he should be deprived of compensation for loss suffered by the company in consequence of the acquisition in circumstances where, if the business had been in his name, he could have obtained compensation.[18]It does not seem to me, however, that any question of lifting the veil arises in the present case in view of the provisions as to disturbance payments in Part III of the 1973 Act. Section 37, as I have noted, provides for such a payment where a person is displaced from land in consequence of the acquisition of the land by an authority possessing compulsory purchase powers but has no interest in land for the acquisition of which he is otherwise entitled to compensation. Under section 38(1)(b) the amount of any disturbance payment, if the claimant was carrying on business on the land, will include the loss sustained by reason of disturbance of the business through his having to quit the land. Section 38(2) provides that in estimating any loss for the purposes of subsection (1)(b) regard shall be had to the period for which the land occupied by the claimant may reasonably have been expected to be available for the purpose of his business and to the availability of other land suitable for that purpose. There is no reason for thinking that the approach to pre-acquisition losses should be different under sections 37 and 38 from that laid down in Shun Fung. In particular the requirement in section 37 that the claimant should have been displaced from the land by reason of the acquisition does not, in my judgment, suggest a different approach to causation from that that applies for the purposes of disturbance under rule (6). This is borne out by Prasad v Wolverhampton Borough Council (1983) P & CR 252 (a Court of Appeal decision under section 37 which was approved in Shun Fung). At 270 Stephenson LJ, with whom Fox and Shaw LJJ agreed, said this:
“If the person threatened with inevitable dispossession, displacement, removal, having to quit the land – call it what you will – because of compulsory acquisition acts reasonably in moving to other accommodation before he is given notice to treat, or before his land is actually acquired by compulsory purchase, he is then displaced in consequence of the acquisition…”
[19]Mr Maude, however, contended that it was implicit in section 37(3) that losses prior to publication of notice of the making of the CPO were not recoverable. That subsection provides that no person is to be treated as displaced unless he was in lawful possession of the land at the date when notice of the making of the CPO was first published. (Here Hire Easy were in lawful possession of the land at that date, 4 May 1999, although the plant hire element of their business had by then ceased.) I do not think that any such implication is to be read into the 8 provisions, any more than that the identification of the interest to be acquired, and thus the entitlement to compensation for compulsory acquisition, by reference to the date of notice to treat excludes losses arising before that date.[20]The result, therefore, is that any claim for disturbance compensation in respect of Hire Easy’s losses would, in terms of entitlement and amount, be the same whether it was based on section 37 or on rule (6). If Hire Easy has suffered a compensatable loss it (or John Roberts (Bexley) Ltd as it is now called) can claim compensation for it under section 37 since no land has been acquired from it; and, since it can claim in this way, Mr Roberts will have suffered no loss in this respect that would require him to be compensated on the basis of lifting the veil. The corollary, however, is that, if Mr Maude is right in contending that losses arising before publication of the CPO are not recoverable under section 37, Mr Roberts would be able to claim for such losses under rule (6).[21]Reliance on section 37 was the third way in which Mrs Rubens put her case. It is, in my judgment, this provision which gives an entitlement to compensation for losses sustained by Hire Easy, if such losses can be shown to satisfy the tests identified in Shun Fung. Mr Maude put forward contentions on the tests of causation and remoteness. The conclusions he invited me to draw were that the second claimant had produced no evidence to support any causative link between the CPO and any losses it may have occurred or to show that the decision to sell the hire plant and the business prior to confirmation of the CPO was caused by the CPO. It is, in my view, undesirable in deciding this preliminary issue as to whether the claim of the second claimant is inadmissible to enter into matters that go to the substance of the claim. Those should be reserved for the substantive hearing. Nevertheless I can see no reason why I should not deal with the matters raised by Mr Maude in the way that he seeks to raise them – that is, by determining whether the claim should be excluded on the basis that there is no evidence to support it. I am satisfied in the light of the evidence adduced thus far by the claimants that the claim is not to be dismissed in this way.[22]Mr Roberts, and, in his recent letter, Mr Amos, said that there was a collapse in the plant hire business after a press release in October 1998. Mr Maude said that no press release or other document dated October 1998 had been produced to show that such publication had an impact on the claimants' business. The newspaper cutting that was produced did not relate to the project but to the Channel Tunnel Rail Link. The project had been in the public domain since 1996 and no event in October 1998 occurred to produce a rapid reduction in trade. However, the substance of what Mr Roberts was saying is not, in my judgment, to be dismissed so summarily. It is clear that at about the time referred to by Mr Roberts and Mr Amos the project was progressing with some speed, and in November the English Partnerships planning application was made. This would have required on-site advertisement, of the sort referred to by Mr Amos. I see no reason to reject Mr Roberts’s evidence that the appearance of Beaver Road, with properties boarded up and the publicity given to the development proposals, led at least some of his customers to question whether the plant hire business was still in existence. The un-audited figures in Appendix 3.2 to Mr Smith’s report show plant hire and retail receipts at Ashford falling from £9328 in October to £7332 in November to £3278 in December, and although in January 1999 the figure was up to £8050 that month, Mr Smith said would have been a 5-week month. There is thus some evidence of the decline to which Mr Roberts referred. 9[23]It is to be noted that the estimated Ashford receipts for July 1997 to June 1998 on page 114 of the bundle show monthly figures of between £13,311 (in December 1997) and £16,956 (in June 1998). The figure for July 1998 in Mr Smith Appendix 3.2 £8,229, and Mr Smith suggested that the decline in sales began in July 1998. The sudden drop that there appears to have been at that point is unexplained, but it does not, in my judgment, detract from the evidence of Mr Roberts about the fall from October onwards. Mr Smith’s evidence was that there was no credible reason for the fall other than the proposals for the project and that Mr Roberts and Hire Easy appeared to have taken what reasonable action they could to minimise losses. In the absence of any evidence as to other possible causes of the fall or as to other steps that might have been taken, I am not disposed to reject this view. The acquiring authority have a case to answer on causation and remoteness.[24]I therefore determine the preliminary issue in the claimants’ favour: the claim by the second claimant for disturbance compensation is not inadmissible. I will shortly make an order dealing with the procedure up to and including the substantive hearing. As to the costs of the preliminary issue, it would seem to me that these should be reserved, but if either party wishes to make submissions on this it should be done within the time referred to in the letter that accompanies this decision. 9 August 2005 George Bartlett QC, President 10 Addendum on costs[25]I have received submissions on costs. The claimants ask for their costs on the basis that costs should follow the event, and that they have been successful. They say also that additional costs were imposed on them by the acquiring authority proceeding with the argument on remoteness. The acquiring authority ask that costs be reserved. They say that the time taken on the preliminary issues would have been spent in the substantive hearing if there had not been a preliminary hearing; that the claimants failed on the first of their contentions; and that by raising at this stage the questions of reasonableness and remoteness the acquiring authority have helped to clarify matters and have not unreasonably prolonged them.[26]The acquiring authority have been unsuccessful on the preliminary issue in that I have determined that the claim of the second claimant for disturbance compensation is not inadmissible. There is no suggestion that the conduct of the claimants in relation to the preliminary issue has been unreasonable in any way. In these circumstances I can see no basis on which the acquiring authority could possibly be entitled to their costs of the preliminary issue. On the face of it the claimants should have their costs. However, it does seem to me appropriate that the outcome of the preliminary issue and the reasons for costs being incurred in relation to it should be set in the context of the proceedings as a whole. The order, therefore, is that the claimants’ costs of the preliminary issue are reserved. 23 August 2005 George Bartlett QC, President 11