Menzies Motors Ltd v Stirling District Council

Acquisition of motor workshop and garage at Stirling–Claim on alternative bases of development value and existing use value plus disturbance–Planning permission for supermarket held unlikely because of traffic problems–Disturbance claim for move to temporary and permanent premises–Allowed items include (a) heating of temporary premises, despite council’s ‘value for money’ argument; (b) adaptation of temporary premises on jobbing basis without detailed costs; (c) difference between statutory interest on unpaid compensation and overdraft interest due prior to payments to account by acquiring authority–Disallowed items include (i) overdraft interest on disturbance claim expenditure incurred after payments to account; (ii) architect’s fee for new building and costs of site investigation; (iii) surveyor’s fees for inspecting alternative premises before notice to treat–Existing use value plus disturbance ‘as high if not higher than development value’ Mr W L K Cowie QC and Mr P Fraser (instructed by J & R A Robertson, of Edinburgh) appeared for the claimants, and Mr D B Weir QC and Mr T C Dawson (instructed by Robson McLean & Paterson, of Edinburgh) represented the acquiring authority. Giving their decision, THE TRIBUNAL said: This reference arises from a dispute as to the compensation payable for a workshop and garage with land attached at Orchard Place, Stirling, known as Menzies Motors Ltd and extending to 0.76 of an acre (3,667 sq yds). The claimants are Menzies Motors Ltd, whose interest as owner-occupier was compulsorily acquired by the Royal Burgh of Stirling under the Burgh of Stirling (Comprehensive Development Area–No 1) Compulsory Purchase Order 1967 confirmed by the Secretary of State for Scotland on July 26 1971. Notice to treat was served on August 19 1971. It was agreed that July 9 1973 was the date of valuation. Buildings Demolished At the date of the hearing the buildings had been demolished. The buildings had been reconstructed in 1942 to accommodate a car showroom, petrol filling station and a workshop for repairs, service and maintenance. The buildings occupied the greater part of the site with a frontage to Orchard Place of 80 ft and to Thistle Street/Goosecroft Road of 365 ft. Part of the Goosecroft Road frontage was to an area of open land extending to 751 sq yds. This land was at a lower level than Orchard Place (about 12 ft) and was not normally used by the garage for parking of cars. The claim submitted was supported by evidence from Mr Henry J Crone FRICS FRTPI and was stated in alternative forms. Firstly, it was claimed that as the site was suitable for the erection of a supermarket the market value with that potential was £220,020, being 3,667 sq yds at £60 per sq yd, and, in addition, that the costs involved in moving to temporary premises should be paid as compensation. If it were held that a supermarket could not be established, it was claimed that the site was suitable for other developments, eg warehousing, in which case Mr Crone maintained that a rate of £60 per sq yd was still appropriate. Secondly and alternatively, the existing use value of £168,145 plus the disturbance claim should be determined. It was submitted that the higher figure of these alternatives should be determined as the compensation. The acquiring authority’s contention, supported by valuation evidence from Mr Alexander T S Cargill ARICS, senior valuer in the Inland Revenue Valuation Office in Stirling, was that the value of the site for development purposes was £73,340, being 3,667 sq yds at £20 per sq yd. The existing use value was £100,000 and in addition he was prepared to accept a disturbance claim of £10,000. As the £110,000 was higher than the value as a development site the £110,000 should be the compensation. In determining the development value of the site, the question of whether planning permission for a supermarket would be obtained was a fundamental issue. Planning permission, in turn, depended on whether vehicular traffic could enter or leave the site without creating a traffic hazard. Evidence from Mr Colin A J Beckett FRICS was led to establish that the site was a suitable commercial one for a supermarket. He visualised the design being such that there would be a basement area with a frontage to Goosecroft Road, which would be used jointly for customer car parking and service facilities. He had not, however, considered in any detail the solution to the traffic problems which Goosecroft Road entry and exit would cause. Mr Crone recognised that there would be traffic problems but considered that a solution to these would be a matter for the purchasers. He maintained that traffic engineers could, by the design of slip roads, solve any problem which might arise. Servicing of the site could take place from Orchard Place as an alternative. A contrary view was expressed by two witnesses for the acquiring authority. Traffic Problem Mr A F Goodwin MSc MICE, burgh surveyor at the time, said that his advice was sought as to the traffic problem if a supermarket were to replace the garage relative to the traffic conditions at July 1973. If there had been no comprehensive development of the area, he said, Thistle Street would have remained. The cost of altering the public services would be a strong argument for that decision. He said that if a plan demonstrating a method of entry and exit to and from the site had been produced with a planning application for a supermarket he would have had to consider it, but in regard to the standards laid down, he did not consider that a visi-168 bility attainment sufficient to allow approval could have been devised. This view was derived from the curve of Thistle Street, the habitual lane-changing by owners and the danger to pedestrian use which would result from the removal of a sufficient length of pavement to allow the formation of a slip lane in and out of the site. It was difficult, in his view, to visualise a scheme which would allow sight lines sufficient to achieve the requisite stopping distances. He was against Orchard Place being used as a service access. Mr G A McLennan, who is now depute director of planning, Clackmannan District Council, but was formerly with the Burgh of Stirling, stated that, in his view, planning permission for a supermarket would not have been approved of a part from the comprehensive development proposals. The main objection would be the question of access. His advice to the planning authority would be to refuse the application on traffic grounds. He agreed that permission had been given for a Littlewoods store and a Fine Fare supermarket with only a temporary solution to servicing access but that these permissions were in the context of the central area being comprehensively developed. Having regard to the apparent traffic difficulty in connection with use of the site and the conflicting views of the claimants and the acquiring authority on such a vital matter affecting the value, we consider that it is for the claimants to persuade us that the traffic problem can be solved. The claimants provided no plan to demonstrate that a solution could be reached, and in absence of such plan it is our view that it would be difficult, if not impossible, to provide a satisfactory access and exit for servicing a supermarket development to and from Goosecroft Road. We also consider that servicing from Orchard Place would not be satisfactory or acceptable because of the congested nature of this cul-de-sac. We cannot find, therefore, that it was likely that planning permission would have been obtained for the erection of a supermarket on this site. Mr Crone considered that even if a supermarket was not allowable, the site could be developed for offices or warehousing. Before dealing with the value of the site for such a purpose, we prefer to deal with the existing use value and disturbance and thereafter to test that figure against the development value of the site. Existing Use Value We firstly set out the conflicting values of Mr Crone and Mr Cargill adjusted to the agreed areas and related to capital rate 5 per sq ft. Mr Crone Mr Cargill sq ft @ @ (i) Showroom and offices 2,272 £10.50 £23,856 £5.50 £12,500 (ii) Upper floor 2,352 £2.60 £6,115 £1.50 £3,528 (iii) Garage 23,391 £5.25 £122,802 £2.75 £64,325 (iv) Forecourt (v) Pump-tanks 2,831 £2.60 £7,360 £2.58 £7,300 (vi) Land 751 sq yds £12.00 £9,012 £15.00 £11,265 £169,145 £98,918 Deduct  ground burdens of £30 x 10 YP £300 £98,618 £169,145 say £100,000 Mr Crone did not try to support his valuation by any comparable sales or lets and thought, in any event, that any comparisons would not be of much help in valuing the special property of Menzies Motors. Mr Cargill relied on the comparison of a sale of a central site garage in Stirling in April 1974. The garage at Allan Park, Stirling, together with four houses and an area of land was sold for £120,000 in a transaction between the owners and Stirling Town Council. It was said to be a market transaction and without compulsory powers. Mr Cargill’s analysis of this transaction is as follows: Showroom and offices 2,170 sq ft @ £10.00 £21,700 Garage–workshop 21,304 sq ft @ £3.00 £63,912 Forecourt (covered) including  lock-ups 5,602 sq ft @ £2.25 £12,604 Upper-floor office 400 sq ft @ £2.00 £800 £99,016 Add Four 3-apartment flats with vacant possession  £4,000 each £16,000 Ground 381 sq yds @ £15 £5,715 £21,715 £120,731 say £120,000 In arriving at the value of Allan Park, Mr Cargill had regard to his analysis of two sales in Bishopriggs and Airdrie in 1969 which, so far as the buildings were concerned, brought out rates, adjusted for the time factor, at £3 and £3.20 per sq ft overall. His analysis of an overall rate for the Allan Park buildings was £3.90 per sq ft and for Menzies Motors £2.90 per sq ft. We think the £3.90 is wrongly calculated and should be £3.67. Mr Crone said that his firm had valued Allan Park when it was on the market at £100,000. There appeared to be some doubt in his mind as to whether the houses had been rent restricted. In any event, he considered the ultimate sale price of £120,000 ‘was probably just about right.’ Neither valuer considered the throughput of petrol sufficiently high to value the forecourt on a throughput basis nor did they consider it necessary for a town centre garage to have land attached to it. This was in contrast to the valuation approach of the valuers in the recent tribunal case of Park Automobile Co Ltd v City of Glasgow District Council (1975) 235 EG 307, 385. Allan Park is the only comparable we have before us and we consider it as close a comparison as one may expect to have. The sale is about the same date. The property is in the town centre of Stirling and is about the same size. We therefore accept the sale as a comparison to be used in valuing Menzies Motors. Mr Cargill considered that the showroom and offices of Allan Park were superior in both standard and location to Menzies Motors. Mr Crone did not give an opinion on the differences between the two properties. Having inspected Allan Park we can see that there is a distinction in standard, but we are not convinced that so far as a car showroom is concerned the location would influence a purchaser, provided that it is reasonably central. The assessor has apparently placed a much higher gross annual value on Allan Park, but this may be due to his placing a shopping rate on the showroom consistent with the rates he has applied to adjacent shops. This analysis was not revealed to us. We consider that the differential determined by Mr Cargill is too large and determine a rate for the showroom of £7 per sq ft. He had made a slight distinction in the garage parts. We have inspected Allan Park and do not consider the distinction justified. As Menzies Motors has been demolished we cannot make a comparison by visual inspection. From the information available, however, we do not consider that the rate for the workshop should be less than £3 per sq ft. The upper-floor office at Allan Park appears superior and we determine the upper floor of Orchard Place at £1.50 per sq ft. The two valuations of the forecourt of Menzies Motors were about the same. Mr Cargill had placed a higher value on the vacant land than Mr Crone. 169 Our determination for the existing use value is therefore as follows: Showroom–offices 2,272 sq ft @ £7.00 £15,904 Garage 23,391 sq ft @ £3.00 £70,173 Upper-floor stores 2,352 sq ft @ £1.50 £3,528 Forecourt 2,831 sq ft @ £2.58 £7,300 Land 751 sq yds @ £15.00 £11,265 £108,170 Deduct  ground burdens of £30 x 10 YP £300 £107,870 say £108,000 Disturbance Claim We now deal with the disturbance claim. Mr Arthur Willcox-Jones, the managing director of Menzies Motors Ltd, explained that steps had been taken over a number of years since the compulsory purchase order was made to find suitable alternative premises. A permanent site in Goosecroft Road has been offered by the acquiring authority, and provided that suitable terms can be reached it is proposed, if financially viable, to erect new garage premises on it. He considered it essential to stay near the centre of Stirling to maintain his business. Pressure was put on him to vacate Orchard Place in July 1973 and he moved to temporary premises in Goosecroft Road made available by the town council. No financial terms were or are agreed so far for the use of these premises. The disturbance items relate to the temporary move and the permanent move as and when it takes place. A number of items have been agreed and amount to £3,174.63. The remaining items are in dispute and we shall refer to them by item numbers as shown in the claimant’s schedule. Items 11 and 12. These were for heating the temporary premises and consist, firstly, of the hire of heaters at £145.75 and, secondly, the installation of a more permanent heating installation by the gas board at a cost of £3,751, being £1,493 for the installation and £2,258 for the supply of the units. These items are not admitted by the acquiring authority, first as being extravagant and second as representing ‘value for money’ in that heating was included in the value of Orchard Place and that the rent for the temporary premises would reflect that they were unheated and the rental saving would cover the heating costs. The ‘value for money’ argument applies not only to this item but also to other items, so we shall deal with it first. We accept that heating has been included in the value of Orchard Place, and in the normal way if heating had to be provided in purchased premises or premises taken on lease, such expenditure, if it increased the value of the interest, would not be allowed. If a reduction in rent were given for a temporary let and that reduction equated with the costs involved, then these costs might not be allowed. In this case, however, we were not informed what the rent terms are and therefore cannot determine whether the costs will equate with any reduction in rent. It is clear, however, and accepted by Mr Cargill, that the expenditure has not increased the value of Menzies Motors’ interest in the temporary premises and that on removal the money spent will be lost. There was no indication that the owners will reimburse Menzies Motors for any expenditure on the premises. We do not consider the ‘value for money’ argument valid in this case. With regard to the charge of extravagance it appears to us that the hire of heaters was not unreasonable and that the sum of £145.75 should be accepted. The gas board account is more difficult. Mr Willcox-Jones himself expressed some dismay at the amount of the account. Owing to a misunderstanding it had been thought that a sum of £1,642.30 was involved compared with a tender for oilfired units at £1,139. The units can probably be reused in the final premises and therefore a credit against the total cost should be made for their value. We therefore allow the actual cost of the temporary installation amounting to £1,493 together with a sum of £1,250 for the units, a total of £2,743. Adaptation of Temporary Premises Item 13. The structural alterations, repairs and renovations were carried out on a jobbing basis costing £8,915.68. Details of the work proposed to be carried out were provided to us. No details of the work done or the detailed cost was supplied to us at the hearing. We accept that as the work was done on a jobbing basis it was difficult to provide the cost of each item. Again there is criticism of this item by the acquiring authority on the basis of ‘value for money’ and that more was done than was necessary for a temporary period. We have dealt with the ‘value for money’ argument in the previous item and consider that what we have said applies to this item as well. Mr Cargill made his own estimates against the various items which he was prepared to concede and proposed that £637 be paid under this heading. We have inspected the work carried out on the temporary premises. Our inspection revealed that the total cost included items which were not on the list given to us. In particular, a substantial amount of electrical work had been carried out. We did not find any signs of extravagant expenditure on the premises and it all appeared necessary to allow the business to continue and to meet the requirements of the appropriate authorities and in particular the fire officer. Some of the items such as lighting fittings may be able to be used in the permanent premises, but the value of these items could be offset by the cost of dismantling and removing. Counsel for the acquiring authority conceded that as no detailed costs had been provided by his witness, he was not challenging the claimants’ figure if we rejected his arguments on extravagance and value for money. We allow the cost of £8,915.68. Item 14. Architect’s fees for temporary accommodation at £1,950. This is accepted in principle by the acquiring authority, but the amount was rejected on the basis that the work on which the fee is based included items which were not admitted. As we have accepted that the work carried out on the temporary premises is allowable we shall allow the claim. We accept that the claimants were entitled to employ an architect to arrange and supervise the work. Item 15. Supplying and fitting compressor, steam cleaner and two hoists at £1,890.81. This item was criticised by the acquiring authority on the grounds that a new compressor was not necessary and that the hoists should have been removed from the old premises. The steam cleaner was accepted. Mr Willcox-Jones explained that the compressor was necessary for all air lines and that this together with the two hoists had to operate until removal. It was essential to have the hoists and compressor functioning at the temporary premises to continue the work. The compressor in Orchard Place was six/seven years old and worth £50/£60. He has this in his possession. The lifts in Orchard Place were fairly old and worth about £50; they had been left. We consider that the new compressor can be used in the new permanent premises and the reserve one used during the changeover. So far as the new lifts are concerned, we consider that these will be utilised in the new premises. We are prepared to allow the installation of the lifts at the temporary premises and the removal to the new premises. We shall allow the removal of the compressors. Taking into account the inconvenience during these changeovers we shall allow a sum of £900 to cover this item. Item 16. This is for resiting the lubricating equipment and is agreed at £362.76. 170 Overdraft Interest Item 17. This is a claim for overdraft interest on the amounts expended on the disturbance items. At the date of the hearing it had amounted to £3,132.71. This claim is rejected by the acquiring authority in view of the fact that two payments to account had been made, one of £50,000 on November 27 1973 and one of £53,500 on May 3 1974, which payments exceed the expenses incurred in removal. Interest will accrue on the total compensation figure from the date of entry at the statutory rate. The payments to account will be reflected in the calculation of interest. It was suggested by the claimants that the payments to account were for the property, but, as counsel for the acquiring authority pointed out, section 48 of the Land Compensation (Scotland) Act 1973, which authorises such payment to account, refers to ‘any compensation’ without specifying property or disturbance. We consider, therefore, that these payments to account cover the outlays which have been made and that no claim for overdraft interest for the period following the first payment to account can be allowed. Interest is, of course, still accruing on any balance of the final compensation as determined. There appears to be an overdraft interest amounting to just under £60 due prior to the first payment to account, but any claim can only be for the difference between the statutory rate of interest and the overdraft interest. We have no information as to what this amounts to, but assuming a 2 per cent difference and an overdraft interest rate of 14 per cent the amount involved is one-seventh of £60, say £9. We accordingly allow this £9. In effect, the cost of bridging finance is offset by the accrual of statutory interest. Items 18-19. Architect’s fees for new building and costs of site investigation amounting to £13,503.65. These are rejected by the acquiring authority as being a part of the cost of the new building. If the basis of compensation was the reasonable cost of equivalent reinstatement under section 12 (5) of the Land Compensation (Scotland) Act 1963, then these could be allowed. In the present case, however, where compensation is being assessed under section 12 (2), this is not so. Counsel for the acquiring authority further argued that if the claimants chose to spend their compensation on building new premises that was the claimant’s own decision. Accordingly the acquiring authority were not liable for any costs involved in a new building. We agree with this view and cannot allow the item. If the claimants were unable to re-establish themselves with the compensation for the property, it would have been open to them to pursue a claim for extinguishment of business as an alternative. No such claim was made. Surveyors’ Fees Item 20. This is Henry J Crone & Partners’ account for £4,693.33. Leaving out the scale 5 fee, which is calculated on the amount of the compensation, the net amount is £2,456.33. A substantial part of this amount is in connection with inspecting alternative premises, some of which inspections were done prior to the date of the notice to treat. These latter items were conceded by counsel for the claimants as being irrecoverable in law because they were incurred before August 19 1971, although a plea was made to us to include them in the special circumstances of this case. No legal basis, however, was argued before us to justify this and we are left having to exclude them. The acquiring authority admitted four items (it should be five) amounting to £890 and we accept that. A sum of £615 is charged for meetings and correspondence in connection with alternative sites. The acquiring authority consider this excessive and, in any event, state that some of this account is relative to work done prior to the notice to treat. They propose £300. We allow a sum of £400. A sum of £455 is claimed as the fee for negotiating the Goosecroft Road site. No details have been given to us about this negotiation. The acquiring authority say it is incompetent because no agreement has been reached. We cannot accept that, as it is an expense which the claimants will have to meet as a consequence of the compulsory purchase. If the claimants had purchased alternative premises, professional fees would have been reimbursed. No alternative figure has been put forward, so we accept the £455. Expenses amounting to £100.08 are also claimed. No reasons were given for challenging that amount and we allow it. The total under this item is accordingly £1,845.08. Expenses of Second Removal Items 21-30. These are the expenses involved in the final move and are a repeat of the earlier items. The same amounts have been put forward with an increase of 25 per cent, being the anticipated cost at the estimated time of removal. The acquiring authority have allowed most of the items in principle, although Mr Cargill has taken the same figure as the cost of the first removal on the basis that the projected cost would have to be deferred to take into account the accruing interest. Interest will accrue on the sums awarded from the date of entry and if we took the projected costs we would require to defer these back to July 9 1973 to take into account the interest accruing from that date. The position is complicated in this case by the payments to account, but on the whole we consider that the way Mr Cargill has dealt with it should be accepted. If we took the projected cost and did not defer, the claimant would get more than he is entitled to. Items 21-27 amount to £2,910.41 and on the basis stated above we allow that. Item 28 is rejected by the acquiring authority. This is a sum of £46.90 for fire appliances being removed and upgraded. It was, however, allowed in the first move. Mr Cargill said he had been generous in the first place and that servicing was a continuing process. Having accepted the principle for the first move, it is difficult to see how we can reject it in the second move. We accordingly allow it. Items 29-30. These are items involving the installation by the gas board of the units from the temporary premises and the architect’s and surveyor’s fees if the revised scheme is proceeded with. The acquiring authority reject these as incompetent. We consider the installation of heating into the new premises as part of the building costs and, therefore, as explained before, not allowable. We also accept that the architect’s fees are disallowable for the reasons set out previously in relation to the cost of a new building. The determination for the existing use value and disturbance is therefore as shown at the top of the next column. A calculation was made by Mr Cargill purporting to show the value as a going concern by analysing sales relative to turnover and there was then added disturbance items arising from extinguishment of the business. This produced a figure of £88,200, but it was not applied as his estimate of the compensation for the loss was £110,000. We do not therefore feel it is necessary to consider this analysis. We should say, however, that we consider it would be necessary to investigate the profit and loss accounts of the various transactions before accepting an analysis on turnover. We still have to consider whether the value of the site available for commercial development which creates no traffic problem is greater than the existing value plus disturbance stated above. Our determination of compensation of £130,857 relative to the site of 3,667 sq yds represents a rate of just over £35 per sq yd. Mr Crone’s £60 per sq yd was derived from two sales:171 (a)  Property £108.000 (b)  Disturbance Agreed items £3,174.63 Heating (temporary) 2,743.00 Adaptation of temporary property 8,915.68 Fees (architect) 1,950.00 Compressor etc 900.00 Lubrication 362.76 Overdraft interest   9.00 Fees (valuer) 1,845.08 Second removal 2,957.31 22,857.46 130,857.46 Add  surveyor’s fee–scale 5 of the RICS scale of charges 1,401.75 £132,259.21 (1)  A sale in 1970 to Fine Fare in Murray Place at a price of £85,050. This related to an area of 1,494 sq yds, representing about £57 per sq yd. This was for a supermarket, planning permission having been received and satisfactory arrangements made about servicing and parking. (2)  A sale of the Plaza Cinema in May 1973 to the Post Office at a price of £55,000 for a site of 571 sq yds: the rate per sq yd is about £96. Mr Crone had been of the opinion that the rate was £61.90 per sq yd, but he did not appear to dispute Mr Cargill’s information about the price or area. Mr Cargill’s £20 per sq yd was based on the following: (1)  The Picture House, Orchard Place (adjoining Menzies Motors) in August 1972 purchased by the acquiring authority for £27,500, representing a rate of about £25.50 for 1,077 sq yds. (2)  The TA Centre, Goosecroft Road purchased by Samuel Properties in July 1972 for £75,000–a rate of £16 per sq yd. (3)  The Gas Works site east of Goosecroft Road purchased by the acquiring authority in September 1973 for £40,000, representing a rate of £14 per sq yd. (4)  May Day Yard, Thistle Street, purchased by the acquiring authority from British Rail for £40,000 in May 1971, representing a rate of £6.57 per sq yd overall or £20 per sq yd for first 40-ft zone. There was an area of 1.258 acres. (5)  Area adjacent to Menzies Motors with various owners. The total cost was £54,950 and the price represented an overall rate of £10 per sq yd. (6)  Littlewoods purchased a site in September 1970 for £169,000 at the corner of Port Street and Dumbarton Road. The area was 2,253 sq yds and the price represents £75 per sq yd. Mr Cargill considered that, relative to 1973 values the price could be equivalent to £85/£90 per sq yd. (7)  If the sale of Allan Park garage is analysed as a development site it represents £25.30 per sq yd. We have considered all these transactions. The two highest sales have planning permission for intensive retail developments, and as we have determined that an intensive retail development would not be allowed on the Menzies Motors site we do not accept them as direct comparisons. The high rate brought out for the Plaza Cinema, which is not a prominent retail site, confirms the view expressed by Mr Cargill, and accepted in the record by the claimants, that the price paid was for its value as a bingo hall. The fact that the Post Office may use it for redevelopment purposes does not establish that the price is for a development site. Statutory authorities, for technical reasons, have often to purchase at values for existing use, including disturbance, which are more than the value as a cleared site available for development. The rates produced by Mr Cargill tend to support his £20 per sq yd and in any event do not justify a rate of more than £35 per sq yd. We therefore consider that the compensation of £130,857.46 is as high if not higher than the development value of the site and determine it at that figure. Including surveyor’s fees the sum is £132,259.21. We meantime reserve the question of expenses.