The claimant, Mrs Iris Blackadder, served a blight notice dated October 30 1987 upon the compensating authority, Grampian Regional Council, in respect of her interest in 12 Powis Terrace, Aberdeen — The authority did not serve a counternotice and were deemed to have acquired the claimant’s interest compulsorily — By section 185(2)(b) of the Town and Country Planning (Scotland) Act 1972 the date of the deemed notice to treat was January 1 1988 — The claimant sought £113,600 in compensation, including temporary loss of profits to her guest house business — The compensating authority contended that the proper sum was £71,845 disputing that the claimant ran any business from the heritager at the relevant time; they also made deductions from their value of the heritager to allow for essential repairs and vandalism — The heritager consisted of two flats — Between November 1987 and July 1988, when she finally left, the heritager was her sole residence
value of the heritager as at the agreed valuation date of March 12 1990 in
reasonably good condition was £93,000 — The scheme of the compensating
authority was responsible for increasing the risk of damage to the heritager —
However, the real reason for the damage which arose was the claimant leaving
the heritager before the authority took possession and accordingly she should
bear that loss — No compensation was payable for the loss of profits because
the value of letting rooms was embraced within the value of the heritager — The
evidence did not support the use of the heritager as a guest house — However,
the claimant was entitled to compensation for the loss of income due to the
blight created by the scheme
The following
cases are referred to in this report.
Arrow v Bexley London Borough (1977) 35 P&CR 237
Gateley v Central Lancashire New Town Development Corporation (1984)
48 P&CR 339; (1984) 270 EG 1197, [1984] 1 EGLR 195; [1984] RVR 196; [1984]
JPL 519
Lewars v Greater London Council (1981) 43 P&CR 129; [1981] EGD
577; 259 EG 500, [1981] 2 EGLR 178, LT
Otterspool
Investment Ltd v Merseyside County Council
(1984) 270 EG 46, [1984] 1 EGLR 190; [1984] RVR 99, LT
Pointe
Gourde Quarrying & Transport Co Ltd v Sub-Intendent
of Crown Lands [1947] AC 565, PC
West
Midland Baptist (Trust) Association (Inc) v Birmingham
Corporation [1970] AC 874; [1969] 3 WLR 389; [1969] 3 All ER 172, HL
J K Mundy
(instructed by Houghton Melvin & Co, of Aberdeen) appeared for the
claimant; M C N Scott QC (instructed by Grampian Regional Council) appeared for
the acquiring authority.
Giving their
opinion, THE TRIBUNAL said: This reference has been made under section 8 of the
Land Compensation (Scotland) Act 1963 to determine a claim for compensation for
the loss of an interest in land and for disturbance. It follows the service of
a blight notice on Grampian Regional Council requiring them to purchase
property at 12 Powis Terrace, Aberdeen, which was formerly owned and occupied
by Mrs Iris Blackadder. Grampian Regional Council are the appropriate authority
in terms of the Act, since the land in question was liable to be acquired by
them for the realignment and reconstruction of the Aberdeen-Inverness trunk
road. That is the specified description of the proposed development in terms of
section 181 (1)(c) of the Town and Country Planning (Scotland) Act 1972.
The blight
notice was dated October 30 1987. No counternotice was served by the council
and they are accordingly deemed to have been authorised to acquire Mrs
Blackadder’s interest compulsorily. It is agreed that in terms of section 185
(2) (b) of the 1972 Act the deemed date of the notice to treat was
January 1 1988. The date for the assessment of compensation is March 12 1990
and the amount of compensation falls to be determined under the statutory rules
contained in the 1963 Act.
Mrs
Blackadder’s claim for compensation is the sum of the value of the heritage
together with disturbance costs in respect of her removal and loss of profits
from her use of the heritage as a guest house. The claim for loss of profits is
in respect of temporary losses caused by blight owing to the acquiring
authority’s scheme and the loss caused by the permanent extinguishment of her
business. Her claim is made up as follows:
|
1. Heritable interest in 12 Powis Terrace |
|
£93,000 |
|
2. Disturbance in respect of removal (agreed) |
|
3,000 |
|
3. Temporary loss of profits due to blight |
|
10,000 |
|
4. Permanent loss of profits |
|
7,600 |
|
Total |
|
£113,600 |
The council dispute that at the relevant time a guest house business
was being conducted by Mrs Blackadder and they claim that she occupied the
house with her family as a dwelling. They do not, therefore, admit the claim
for loss of profits of such a business. They also dispute the value to be
placed on the heritage in the condition in which it was found to be when they
took possession in March 1990. The direct costs of removal are agreed to be
£3,000, including interest. The council’s calculation of the proper sum to be
awarded in compensation is as follows:
|
1. Heritable interest in 12 Powis Terrace |
|
£87,650 |
|
|
less: essential repairs |
£2,805 |
|
|
|
less: repairs for |
16,000 |
|
18,805 |
|
|
68,845 |
||
|
2. Disturbance in respect of removal (agreed) |
|
3,000 |
|
|
Total |
|
£71,845 |
Mr J Mundy, Advocate, appeared for Mrs Blackadder, and led as
witnesses Mrs Blackadder herself; her daughter, Shirley Ladwiniec; her son,
Paul Ladwiniec; Mr C Anderson ARICS, a partner in O’Neill, chartered surveyors;
and Mr D Forsyth, who gave evidence as Mrs Blackadder’s accountant.
Mr M Scott QC,
appeared for the council and led as witnesses Mr G S Morrison ARICS, of the
council’s estates department; Mr W Hatty, a clerk of works in the council’s
property department; Mr W Nicol CA, a partner in a firm of accountants; and Mr
C Nelson, a local officer with the Department of Social Security (DSS).
The heritage
which is the subject of the claim was a house, now demolished, which formerly
stood at 12 Powis Terrace, Aberdeen. It was located between the main arterial
route from Aberdeen to the north and a branch line from the Aberdeen-Inverness
railway line which passes to the rear of the property. The building was a
traditional granite-built cottage-style residence, with bay windows to the two
front ground-floor rooms and with dormer windows to the front at first-floor
level in the pitched and slated roof. The front of the property faced
south-west, and at its south-east gable it was attached to a similar residence
at 10 Powis Terrace. There was a small garden to the rear and a narrow strip of
garden to the front.
To the rear of
the main building was a small single-storey extension housing a kitchen. A
two-storey extension, built of concrete blocks harled externally, and with a
flat bitumen felt roof, was added in 1978 or 1979 after Mrs Blackadder bought
the property. As well as adding to the size of the building by constructing the
extension, Mrs Blackadder so arranged the accommodation, with a kitchen on each
floor and with a bathroom on the ground floor and a shower room on the first
floor, that the property effectively became two flats, which could be occupied
separately although they were not completely separated physically. The stairway
to the upper flat was enclosed and the flats had separate accesses. Mr
Anderson’s evidence was that the flats were separately wired. Mr Morrison did
not believe that there were separate circuits, but the evidence from Mrs
Blackadder’s audited accounts suggests that the two floors were separately
wired, since the tenants of the lower flat were said to be responsible for the
costs of their own heat and light.
The
ground-floor flat consisted of a living-room, bathroom, kitchen and four
bedrooms. It had a floor area of some 98m2. The first-floor flat
consisted of a living-room, kitchen dining room, shower room and three
bedrooms. It had a floor area of some 88m2.
Although the
property was subdivided into two flats, the evidence of Mrs Blackadder and her
family was that she ran it as a single house. She stated that she let rooms to
tenants for whom she provided materials such as bread and cornflakes so that
they could make their own breakfast. She provided clean linen but no services
of any other kind. She and members of her family lived there at various times
during her period of ownership of the property.
During that
period Mrs Blackadder also owned other properties. She bought a house in
Calsayseat Road in 1978. The house was only a short distance from the house at
12 Powis Terrace and it was occupied by Mrs Blackadder and her family until
about 1982 or 1983. She also owned a house in Dundee which she had bought in
1982 and which she sold in 1985. That house was used as a guest house. It was
sold as a going concern.
Mrs Blackadder
apparently lived at 12 Powis Terrace for a short time in 1979 after the
alterations were carried out. After that she lived with her three children at
Calsayseat Road and supervised 12 Powis Terrace from there. In 1982 she went to
Dundee, where she lived until 1984. Her daughter remained in Dundee until 1985.
Prior to 1985 it appears that Mrs Blackadder lived at Powis Terrace on a number
of occasions but not continuously. In 1984 or 1985 she sold her house at
Calsayseat Road. She occupied part of the ground floor at Powis Terrace during
1985-86 and part of the top floor from May 1986. From some time in the spring
of 1987 until November of that year she had stayed at the house of her deceased
mother at Craigie Street, Aberdeen. During that time her two sons continued to
live at Powis Terrace and there were lodgers in residence. After November 1987
the house at Powis Terrace was her sole residence until July 1988, when she
vacated the property. One of her sons, Michael, continued to live at Powis Terrace
until about March 1989. She did not advise the council that either she or her
son had left the property. When Mrs Blackadder vacated the house she took most
of the contents with her, but equipment such as the washing machine was left
there and continued to be used by her when she visited the property.
Since December
1990 Mrs Blackadder has lived in a local housing authority flat. During the
previous 18 months she had lived either with her daughter or in
bed-and-breakfast accommodation. Since this reference was made she has bought a
nine-roomed house at 54 Hamilton Place, Aberdeen, which she was due to move
into at about the time of the hearing in November 1991 and which she intends to
run as a guest houe. This house has been purchased for £130,000 (plus fees and
stamp duty) and she intends to spend £10,000 on necessary repairs.
When Mrs
Blackadder finally removed from 12 Powis Terrace her neighbour, Mrs Duncan, of
10 Powis Terrace, was still living there, although she left in July 1989. The
council, who had acquired most of the other properties, continued to let
accommodation to students at 6/6a Powis Terrace until June 1989 and at 14 Powis
Terrace until July 1989. Mrs Blackadder’s evidence was that the local
environment had become unsuitable for her type of business from about 1987.
Until then she had been able to let individual rooms to what she considered to
be respectable people. From 1987 such people could not be attracted in the
prevailing conditions and she let the ground floor as a whole flat to students.
Her evidence was that this was a change in the business and that the change was
a consequence of the blighting effect of the scheme. However, after they, too,
had left, there were only two persons other than members of the family
occupying rooms in the house. Her son Michael was the last person to live in
the house before he, too, left in about March 1989.
Neighbouring
properties on that side of Powis Terrace and also on the line of the proposed
trunk road were also being acquired. These had been bought by the council by
agreement since the early 1980s, and were then let, in pursuit of their policy
that, wherever possible, vacant properties in council ownership should be kept
occupied in order to reduce blight and damage by intruders. For the same reason
the boarding-up of vacant properties was delayed as long as possible because it
was seen as an encouragement to wrongdoers to break into them and to steal or
cause damage.
By 1989 some
houses in Powis Terrace remained to be acquired, including no 12, the house
next door and two houses at the end of the terrace. In cross-examination, Mr
Morrison agreed that the area within which the properties that were being
acquired lay was prone to damage by intruders and that houses in the council’s
ownership which were no longer occupied were boarded up. Indeed, latterly,
because of complaints from local residents the council were trying to buy up
the remaining houses in order to demolish all of that part of Powis Terrace.
The last house to be acquired, other than 12 Powis Terrace, was purchased in
late 1989.
Before Mrs
Blackadder left her house she had become subject to harassment by strangers.
Mice had also started to invade the house. After she had left, but while one of
her sons was still living there, thieves entered the house and took personal
property. On occasions people tried to force entry to the house even though it
was still occupied. They broke the glass in the main door. Mrs Blackadder’s two
sons had to lock their bedroom doors to deter intruders. The house was
seriously damaged by intruders in the summer of 1989. Mrs Blackadder had the
house boarded up in October of that year, but early in 1990 it was stripped of
electrical, central heating and sanitary fittings. Those not taken were broken
and the house was flooded. Damage was also caused to the fabric of floors,
ceilings and internal walls.
In 1983 the
solicitors then acting for Mrs Blackadder had made tentative approaches to the
council to determine whether or not they would be interested in acquiring the
property. Negotiations on price were conducted with her then surveyors, but
agreement could not be reached. There the matter rested until 1987, when the
property was advertised, apparently unsuccessfully, and the blight notice was
served on October 30 of that year.
At that time
Mrs Blackadder’s estimate of the value of her house was £75,000, while the
council estimated it to be worth £61,000. In May 1988 authority was sought from
the council’s Transportation and Roads Committee for approval of an advance payment
of 90% of the latter estimate, that is £54,900, pending an agreed settlement.
Such an advance payment may be made under section 48 of the Land Compensation
(Scotland) Act 1973. However, on May 24 1988, before the June meeting of the
committee, Mrs Blackadder intimated to the council through her surveyor that
she did not want to receive an advance payment and that she was taking the
matter to the tribunal. An application for determination of a question of
disputed compensation was received by the tribunal on July 3 1989.
In September
1989, following further negotiations between Mr Morrison and Mr Anderson, who
was now acting for Mrs Blackadder, an amended advance payment was approved by
the council’s committee in the sum of £58,500, being 90% of £65,000. The offer
actually made by the council, however, was of only £54,000, being 90% of
£60,000. That offer was made on December 7 1989. Before that was paid it was
found that the property had been subject to serious theft and damage. As a
consequence, the council amended their offer of an advance payment to £44,100,
being 90% of £49,000, which is £60,000 less £11,000. That was paid on March 16
1990. Until the hearing the council maintained an offer based on a value for
the heritage of £65,000, but at the hearing Mr Anderson amended his valuation
to £87,650.
Submissions
On Mrs
Blackadder’s behalf it was submitted that Mr Anderson’s valuation should be
preferred. No deduction should be made for repairs. The need for repairs owing
to wet rot and to tie in the rear extension had not been averred in the
pleadings and the cost had not been adequately vouched. Furthermore, part at
least of that cost might have been included in the estimate of the cost of
repairs owing to vandalism. With regard to those repairs, there had been no
adequate description of the damage, and the cost was based on a broad
assessment which could not be regarded as accurate.
In any event,
it was submitted, the damage which had been done by vandalism was due to the
scheme underlying the acquisition and in assessing compensation the cost of
repairing it should therefore be disregarded. In Pointe Gourde Quarrying
& Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565,
it had been stated by Lord MacDermott, at p 572:
It is well
settled that compensation for the compulsory acquisition of land
underlying the acquisition.
That, it was
said, must apply equally to a depreciation in value because of the scheme: see Gateley
v Central Lancashire New Town Development Corporation (1984) 48 P&CR
339, where the situation was very similar to that in the present case. In Gateley,
applying the Pointe Gourde principle, that part of the diminution in
value of the property which was due to vandalism resulting from the scheme was
disregarded when assessing compensation.
In this case
the only possible conclusion on the evidence was that the damage to Mrs
Blackadder’s property by vandalism was a result of the scheme. It would have
occurred whatever precautions she had taken. It had been conceded by Mr
Morrison that boarding up a house attracted vandals, and Mrs Blackadder could
not, therefore, be faulted for not having her house boarded up sooner. After
she had vacated the property she had visited it regularly and she had in no
sense abandoned it. It would have been unreasonable to expect her to continue
to live there in the situation which had developed. Furthermore, she had taken
all reasonable steps to settle the matter of compensation with the council. Had
a more realistic offer been made at an earlier stage the vandalism brought
about by the delay in the council’s taking possession would have been avoided.
With regard to
the claim for loss of profit, it was submitted that the evidence showed that
Mrs Blackadder was carrying on a business at the property and that the business
had made a profit in each year from 1985 to 1989. After 1984, however, there
had been a downturn in profits, and it was clear that the cause of the downturn
was the blight of the surrounding area. Inevitably, a guest house in such a
situation would become progressively less attractive to lodgers and there was
ample evidence that, as the blight developed, a decent clientele became
increasingly difficult to attract.
It was
submitted that compensation for the permanent loss of profits should be £7,600,
based on a weighted average figure of £3,040 for net annual profit multiplied
by 2.5 years’ purchase. That was at the lower end of the scale normally applied.
In the case of a small owner-occupied business the cost of the owner’s labour
should not be deducted in order to arrive at net profit. It was conceded that
Mrs Blackadder’s figures could be criticised for not making a deduction for
rent from the turnover. On the other hand, no factor for inflation had been
applied to the capitalised rent, although that had been based on an average of
earlier years’ figures. Arithmetically, the one factor would cancel out the
other. If, however, the tribunal decided that deductions should be made from
the net profit, the number of years’ purchase should be increased to 3.5.
On behalf of
the council it was submitted that Mr Morrison’s figure for the open market
value of the heritage should be preferred. His valuation was based on
comparisons with properties in better locations and in better condition which
had been sold at the valuation date, and in the rates which he had analysed and
used to value the subjects he had included sales figures which were higher than
could have been expected for such properties. That being so, his valuation was,
if anything, too generous to Mrs Blackadder.
Mr Anderson’s
approach, on the other hand, had been more speculative and he had failed to
take into account that, if the property was to be valued as two flats, an
allowance must be made for the cost of completely separating them physically.
Mr Anderson, it was submitted, had also erred in making no adjustments to allow
for the cost of repairs, whether these were necessary because of vandalism or
for other reasons. He had agreed that they were necessary, and he had accepted
that £10,000 would have been an appropriate estimate for making good damage
caused by vandalism as at the valuation date, although there had in fact been
additional damage between his last inspection of the property in September 1989
and the valuation date of March 12 1990.
As a matter of
principle such deductions must be made in respect of all damage suffered before
that date, since the risk remained with the owner until possession was taken.
Until then it was the owner’s duty to preserve the property: see West
Midland Baptist (Trust) Association Inc v Birmingham Corporation
[1970] AC 874. That rule applied to damage because of vandalism: see Arrow
v London Borough of Bexley (1977) 35 P&CR 237 and Lewars v Greater
London Council (1981) 259 EG 500, [1981] 2 EGLR 178. For depreciation
caused by vandalism to be disregarded in the assessment of compensation, the
vandalism must have been, in Lord MacDermott’s words, ‘entirely due to the
scheme underlying the acquisition’: see Pointe Gourde, at p 572. It was
not enough that it was associated with the scheme. There was accordingly no
place for apportionment even where the scheme was a factor contributing to the
vandalism. In Gateley the acquiring authority had conceded that the
vandalism suffered by the property was partly due to its scheme. Nevertheless,
it was submitted, in so far as responsibility for the diminution in value
because of vandalism was apportioned between the scheme and the owner of the
property, the decision was not in accordance with the principle in Pointe
Gourde.
In any event,
it was submitted, there was in the present case no basis for such an
apportionment of responsibility. As had been observed in Otterspool Investments
Ltd v Merseyside County Council (1984) 270 EG 46, [1984] 1 EGLR 190,
until the owner of property relinquished possession it was in his own interests
to continue to maintain it. He could always protect himself by relinquishing
possession at the earliest date, leaving the matter of compensation to be
settled thereafter by the tribunal. It was clear from the evidence that Mrs
Blackadder remained in full control of the property; that she could have lived
there had she wished; that she could have let accommodation to students as the
council had done in neighbouring properties; that she could have insured the
property and recovered her loss, and that she could have surrendered possession
to the council in 1988 before damage was caused.
In 1988 Mr
Morrison had agreed with Mrs Blackadder’s surveyor on a figure for an interim
payment. She had decided, however, not to give up possession until a final
figure had been agreed. That was not a reasonable decision when the property
was one of the last to be acquired in that street. She had no good reason for
refusing to allow the council to take possession and with it the risk of any
damage resulting from vandalism. Until the property was transferred to them the
council were powerless to do anything to protect it. Mrs Blackadder’s attitude
to these negotiations had nothing to do with the scheme underlying the
acquisition. Having served a blight notice on the acquiring authority there had
come a point when it would be reasonable to give up possession to that
authority especially when it was in her own interests to do so. It appeared
that her reluctance to give up possession was because she wished to take
advantage of rising house prices, yet she now sought to burden the council with
the risk of damage to property which for so long she would not give up. In the
end she had voluntarily abandoned the property and she had failed even to
inform the council that she had done so. Accordingly, it was submitted, the
reduction of £16,000 from the market value to allow for the costs of repair
should be made in full.
With regard to
the alleged loss of profit, it was submitted that it was doubtful whether there
had been any loss of profit at all. The pattern of profits was erratic. Mrs
Blackadder had been absent in Dundee in 1984 and 1985 and had been living at
Craigie Street in 1987. Her input to the business had been minimal. There were
no accounts for 1988 and 1989, when it was alleged that profits had suffered,
but the evidence showed that property there could then have been let to students.
There might, therefore, have been factors other than blight which could have
contributed to any loss of profits. Among these were a lack of willingness and
energy in the owner, changes in benefit regulations and a failure to advertise
sufficiently. Mrs Blackadder’s health and other reasons might also have been
factors. While neighbouring houses were still being let, it should not be held
that these subjects could not also have been let.
Furthermore,
it was submitted, the projection of profits which had been made was unreliable
and speculative and took no account of the fluctuations in such a business.
There could be no justification for assuming a cessation of the business, and a
consequent loss of goodwill, when Mrs Blackadder’s evidence was that she
intended to let accommodation at Hamilton Place to professional people, so that
the business would continue in those new subjects and would not be
extinguished. In any event, the evidence was that a business such as this did
not attract goodwill. The only asset of the business was therefore the heritage
itself. Mr Anderson had himself stated that it was impossible to split the
heritable interest and the going concern valuation. The blight had not forced
Mrs Blackadder to give up the business. If she had given up possession of the
house, she could have continued to carry on business elsewhere. The claims for
loss of profit and loss of goodwill were therefore inconsistent and should not
be allowed.
Decision
The first
matter to be dealt with is the value of the heritable interest in 12 Powis
Terrace. Mr Anderson and Mr Morrison were agreed that
planning permission granted when Mrs Blackadder carried out her alterations. It
is not in dispute that the relevant date for valuing the property is March 12
1990, and Mr Morrison has used the same comparisons as those proposed by Mr
Anderson. However, there is a difference in their approaches to the valuation,
with the result that Mr Anderson estimates the open market value of the whole
property to be £93,000, while Mr Morrison estimates it to be £87,650. Each
valuation, and either its devaluation or derivation, is shown below. Neither
surveyor attaches practical significance to the small differences in internal
floor area in these calculations.
|
Claimant |
Respondents |
|
||
|
GF flat |
£48,000 = |
(98.3m2 @ £488/m2) |
97.5m2 @ £472/m2 = |
£46,020 |
|
FF flat |
45,000 = |
(87.2m2 @ £516/m2) |
88.2m2 @ £472/m2 = |
41,630 |
|
Total |
£93,000 |
|
||
|
£87,650 |
These figures are very close, being only about 6% apart from each
other. That is within the normal tolerance of accuracy which might be expected
for a residential open market valuation. The difference arises because Mr
Anderson has used a judgmental approach when considering the comparisons, and
has taken into account as variables age, construction, location, type of
residence, accommodation, layout and condition, while Mr Morrison starts with
an assumption of similarity between the comparisons, in that they are all flats
of the same age and character and with approximately the same floorspace and
accommodation. Using sales figures from the seven comparisons outside the
affected section of Powis Terrace, and therefore in quieter streets, he derives
an average gross internal area of 100.3m2, which the tribunal
calculates to be 102m2, and an average selling rate of £472 per m2.
The
comparisons used by Mr Anderson to derive his rate per square metre are as
listed:
|
Address |
Selling Area (m2) |
Rate (£/m2) |
||
|
|
price (£) |
|
||
|
3 Powis Terrace |
35,000 |
96.4 |
363.07 |
|
|
13 Calsayseat Road |
46,000 |
118.5 |
388.19 |
|
|
24 Calsayseat Road |
55,055 |
113.0 |
487.21 |
|
|
17 Elmfield Avenue |
43,177 |
107.2 |
402.77 |
|
|
27 Elmfield Avenue |
40,000 |
117.0 |
341.88 |
|
|
47 Elmfield Avenue |
62,060 |
88.3 |
702.83 |
|
|
48 Elmfield Avenue |
45,500 |
73.5 |
619.05 |
|
|
Average |
46,684 |
101.99 |
472.14 |
|
There is a considerable difference in the areas of the flats
comprising the comparisons, with a range between them of 45m2, from
73.5m2 to 118.5m2. The assumption of comparable size is
not therefore well founded. The linear correlation between the area of the
flats and the rate derived from selling price is negative, with a co-efficient
of – 0.73, so that the smaller the area the higher the rate which should be
applied. This is what would be expected, that smaller houses were more valuable
relative to their area than larger houses. In his evidence Mr Morrison pointed
out that one of the sales produced a noticeably higher rate per square metre
and, indeed, if that comparison (47 Elmfield Avenue) is stripped out, the
average gross internal area becomes 104.3m2 and the average selling
rate becomes £434. This would produce a total value for Mrs Blackadder’s two
flats of £79,000. However, on the same data, the rates for an area of 88.2m2
or 93.4m2 would be £506 and £483 respectively, giving a total of
£90,000. This appears to be more consistent with Mr Anderson’s valuation,
although the sample size and degree of that correlation do not allow for an
accurate prediction. There is seen also to be justification in Mr Anderson’s
arriving at a value for the first-floor flat which devalues at a higher rate
per square metre than the ground-floor flat, because it is smaller.
A more finely
tuned statistical analysis of the comparables, with the erractically high sale
price removed, produces a figure more in line with a judgmental valuation. The
tribunal prefers the judgmental valuation to the statistical one, which can be
used either as a starting point or as a check on a valuation, but which may be
limited in its application where a relatively large number of variable factors
may have to be considered and where the rate to be applied to an area is itself
a variable and not a constant.
The tribunal
therefore accepts the valuation of the heritage in the sum of £93,000 as
representing the open market value of 12 Powis Terrace as at March 12 1990 on
the assumption that it was then in a reasonably good state of repair.
Regarding the
deduction made from the open market value for repairs, other than repairs made
necessary by what was described, loosely, as vandalism, Mr Morrison agreed in
cross-examination that the repairs specified would not be such as to prevent a
mortgage being taken out on the property. Mr Anderson had also found the
condition of the house to be fair. There is some uncertainty as to whether
certain of the works were necessary, such as electrical wiring, and no clear
evidence as to whether any remedial work was necessary beyond normal
maintenance. In the absence of such evidence the tribunal takes the view that
any minor items of repair would be reflected in the open market value. However,
since that value is comprised of the aggregated values of the flats, themselves
greater in total than the value of the house as a single entity, according to
Mr Anderson’s evidence, the tribunal agrees that an amount should properly be
deducted for the formation of a vestibule to separate the two flats completely.
For this purpose Mr Morrison’s figure of £550 is accepted.
With regard to
the cost of repairing the damage done by intruders, it is not in dispute that,
when land is compulsorily acquired, compensation must be calculated without
taking account of either an increase or a decrease in value which results from
the scheme. On behalf of the council it was submitted that, when what was being
considered was an alleged decrease in value, that could be left out of account
only if it were entirely due to the scheme. In the present case, it was
submitted, the evidence did not justify the conclusion that that was so.
The submission
that any depreciation must be shown to have been entirely due to the scheme was
based on the statement in the speech of Lord MacDermott in Pointe Gourde
that ‘compensation for the compulsory acquisition of land cannot include an
increase in value which is entirely due to the scheme’. However, that statement
implies that, where an increase in value is partly due to the scheme and partly
due to other factors, compensation can include that part of the increase which
is due to those other factors. It is only where it is entirely due to the
scheme that the increase in value is to be excluded from compensation.
Similarly, it is only where a decrease in value is entirely due to the scheme
that no account is to be taken of it in the assessment of compensation. Where a
decrease in value is due partly to the scheme and partly to another factor, the
part which is due to the other factor must be taken into account so as to
reduce the compensation payable, but there is no reason why, at the same time,
the part which is due to the scheme should not be ignored.
To distinguish
between what was to be taken into account and what was to be ignored would be
simple in the case where the value of property had been reduced by two separate
factors, one due to the scheme and the other not. Here there is only the one
factor, the damage done by intruders, and it was submitted that in such a case
there could be no apportionment. It could only be if that damage were entirely
due to the scheme that one might ignore the depreciation caused by it.
We can see no
reason why that should be so, and why it should not be legitimate to ignore the
decrease in value to the extent that the damage which caused it was due to the
scheme, making a deduction only to the extent that it was not due to the
scheme. That was the course followed by the Lands Tribunal in England in Gateley
and in that respect the decision was, in our opinion, soundly based. It would
be inequitable that, where causes of depreciation were entirely separate,
compensation should be given without any deduction for that part of the
depreciation which was due to the scheme, the only deduction being in respect
of that part which was not due to the scheme, whereas if depreciation were caused
by two factors acting together, only one of which was due to the scheme, the
full amount of that depreciation would have to be deducted from the
compensation which would otherwise be due.
The purpose of
statutory compensation is to leave the owner no better and no worse off as a
result of the acquisition than he was before it, in so far as that can be
achieved by the payment of money. If an item in an owner’s loss is partly, but
not entirely, due to the acquisition, it offends against the principle of equivalence
that that item of loss should be wholly excluded from compensation.
The question,
then, is whether the loss occasioned to Mrs Blackadder as a result of the
damage done by intruders was to any extent due to the scheme. When considering
that, it should be noted that, while the damage done was generally referred to,
for brevity, as vandalism, it was in fact damage resulting from the
depredations of intruders who had broken into the house to steal such things as
bathroom, kitchen and electrical fittings and copper piping, and so on. It was
stated that even such things as plaster mouldings had been prised off and
removed. That is the kind of crime which is normally committed only when
property is left empty over a considerable period in such circumstances that it
is regarded as abandoned. It must also be kept in mind that until an acquiring
authority take possession, or until the date of determination of compensation,
if that should be earlier, the risk of destruction of, or damage to, property
remains with the owner. It is for the owner to take whatever steps may be
necessary to safeguard it and to preserve its value. In Gateley the
tribunal held that to some extent the loss due to vandalism could be attributed
to the scheme, because the way in which the scheme was implemented was
conducive to vandalism and increased the risk to be borne by the owner, so that
the loss due to vandalism was greater than it would otherwise have been. The
tribunal held that the manner in which a scheme is implemented is itself part
of the scheme and with that we agree.
In the present
case the physical area affected by blight is a triangular island of property
formerly occupied by the houses numbered 2 to 20 Powis Terrace and 90 to 96
Powis Place. Powis Place runs south-east from Powis Terrace, and the houses
properties on the north-east side of Powis Place were demolished to make way
for a section of dual-carriageway as part of the council’s scheme of
development. That section of dual-carriageway was constructed in 1984 or 1985.
From the time that it was completed it should have been obvious to anyone that
the property contained in the triangle of land at Powis Terrace stood in the
path of the dual-carriageway and would have to be demolished if the
dual-carriageway were to be extended northwards. The evidence of Mr Morrison
was that the project to double the carriageway from the Inner Ring Road in the
centre of Aberdeen, along its whole length within the built-up area, was a
longstanding one, much of which had already been implemented. Although the
actual alignment along the stretch including Powis Terrace had not yet been
agreed, and its implementation was therefore some time away, there was no doubt
on the part of the council that it would be carried out.
The council
had been acquiring properties in the triangle since 1975. Properties acquired
earlier had been let on a temporary basis. The upper flat at 16 Powis Terrace,
for example, was bought in 1982 and let until the end of June 1989. No 6/6A
Powis Terrace was acquired in July 1988 and let on a temporary basis until the
end of July 1989. Other properties, after being acquired, remained vacant, and
some were boarded up from about 1984-85. By 1987 only four houses, including
Mrs Blackadder’s house, remained to be acquired. Apart from the houses which
were let, all the remaining properties in the council’s ownership were boarded
up. Damage and theft were common and, since the properties were being acquired
for demolition, the council were not undertaking repairs.
By the date of
the blight notice in October 1987 the group of buildings within the triangle
had become one characterised by vacancy and increasing dereliction, with overt
signs of a last-ditch defence against intruders by the extensive boarding-up of
properties. The evidence and the tribunal’s own site inspection showed that
outside this triangle the surrounding residential areas have the normal
characteristics of inner-urban housing areas, with no obvious signs of wilful
damage. That includes the houses on the other side of Powis Terrace.
The tribunal
are satisfied, therefore, that prior to the date of valuation in March 1990 the
scheme was responsible for increasing the risk of damage being done to the
subjects at 12 Powis Terrace.
The questions
remain whether the damage and theft and the consequent loss in the value of the
property were nevertheless avoidable. Neither Mrs Blackadder nor the council
were in any way directly responsible for the damage. The council certainly
could take no pre-emptive action prior to the date of taking possession. The
question, therefore, is whether Mrs Blackadder herself had taken sufficient
precautions to eliminate or reduce the incidence of damage.
It was
suggested that she could have continued to live there herself or could have let
accommodation to students. However, the evidence was that intruders were
entering the house even while it was still occupied. Furthermore, the council’s
last remaining tenants were moved out of the other houses in the street at
about the same time as the first serious incident of damage in June 1989. By
that time the tribunal accepts that it would have been unreasonable to expect
anyone to continue to occupy the property. Although the next-door neighbour,
Mrs Duncan, herself persevered until July 1989, even she left about then.
It was
suggested that, if the house had been boarded up at an earlier date, damage by
intruders would have been inhibited, but in fact more serious damage was done
after the property was boarded up than before. The evidence of Mr Morrison was
that boarding-up had no practical effect, and it can be accepted that
boarding-up is in itself an invitation to break in to steal, since it
advertises the fact that the premises are empty and unused.
It was
suggested that Mrs Blackadder could have insured the property and by that means
could have indemnified herself against loss caused by such damage. However, her
evidence was that her insurance company would not provide cover against such
risks, since they considered the property to be derelict. The tribunal accepts
that, in the circumstances then obtaining, to get comprehensive cover would
have been impossible or very expensive. In the council’s submission, such an
expense should have been borne by Mrs Blackadder, although any premium above a
normal household premium would have been caused by the additional risk
introduced by the scheme.
However,
although it may be that it would have been difficult for Mrs Blackadder to take
more effective precautions against damage caused by intruders, or to provide
herself with an indemnity against such damage, during the period when she
retained possession of the property but left it lying empty, she could have
avoided the loss entirely by surrendering the property to the council within a
reasonable time after the blight notice had been accepted. She was
professionally advised, and she was aware that accepting an advance payment of
90% of the council’s estimate of the amount of compensation due would not
prejudice the amount of a final settlement. Her evidence was that she was
concerned at the low level of value being suggested by the council, but that is
not of itself a sufficient reason for a claimant not to give up possession.
Furthermore, it is clear from Mrs Blackadder’s evidence that she knew that a
delay in giving up possession would be to her advantage in a rising market and
there can be little doubt that that consideration also played a part in her
decisions.
Another reason
given for her reluctance to proceed on the basis of an interim settlement was
that she would then have insufficient funds to purchase another property from
which she could make an income by letting rooms. Having no income other than
from paying guests, she could not raise a mortgage on a house and would need
cash for the purchase. However, she clearly had capital available, perhaps from
the disposal of her houses in Dundee and Calsayseat Road and from an
inheritance from her mother. She stated that she was also able to borrow money
from one of her daughters to put towards the purchase price and to obtain a
bridging loan. With these resources she has purchased a house for £130,000, to
use as a guest house, at Hamilton Place in Aberdeen, and she has done so before
a settlement has been reached in this matter and with an advance payment from
the council of only £44,100. In these circumstances, it is difficult for the
tribunal to accept that she would not have been able to purchase suitable
premises at an earlier date if she had wished.
In summary,
therefore, although eventually the scheme underlying the compulsory acquisition
was a factor contributing to the risk of damage being done by intruders at 12
Powis Terrace, the real reason for the house being damaged in the way that it
was damaged was that Mrs Blackadder had left it lying empty in such
circumstances that it might well be regarded as abandoned and derelict, and so
as fair game for those who are prepared to strip such properties of anything of
value, heedless of the damage which they may cause. She had refused to accept
an advance payment and to give up possession, although that would have been
without prejudice to a final settlement, and when it would have avoided any
loss to her because of the damage to her property. The effect of that was to
prevent the council from taking possession, and until they did so they could
not take steps to safeguard the property. In the circumstances, the tribunal is
of the opinion that Mrs Blackadder must bear the loss due to the damage done to
her property.
Finally, the
question of the quantum of the loss has to be determined. Following the damage
done in the summer of 1989 Mr Anderson accepted a figure of £10,000 as being an
appropriate estimate. After the second incident in 1990 the council’s
approximate figure for the cost of carrying out remedial work, replacement of
fittings and restoration of the property was £16,000. Neither of these amounts
has been estimated in detail. The amount of £10,000 which Mr Anderson believes
he agreed with Mr Morrison may be taken to be a minimum. The £16,000 estimated
by the works department of a local authority may be taken to be more than might
necessarily be
location, may consider replacement with secondhand rather than new, a standard
of finish less than the highest and the possibility of doing some of the work
himself. There is also the possibility that the council’s estimate of repairs
made necessary by the damage done by intruders may include repairs properly
attributable to the property as it has been before, but which were not strictly
necessary. The tribunal therefore selects a figure of £12,000 as being an
appropriate approximation, so that the heritable value of 12 Powis Terrace will
be reduced by that amount.
So far as loss
of profit arising from the compulsory acquisition is concerned, the tribunal
accepts that Mrs Blackadder received an income from letting rooms in 12 Powis
Terrace. Mr Anderson and Mr Nelson made observations about the nature of the
clientele catered for in the establishment, but there is no dispute that
clients were provided with accommodation. The tribunal also accepts that the
accounts prepared by her accountants for the negotiation and settlement with
the Inland Revenue of her tax liability establish that an income was realised
from the activity of letting accommodation.
However, the
tribunal rejects the submission that the business represented a tangible asset
for which goodwill would be paid. Goodwill is defined by Cripps as ‘the
probability of the continuance of a business connection’: see Cripps on
Compulsory Acquisition of Land (11th ed), para 4-234. Where such a
probability exists, it may command a market value. Goodwill is often acquired,
where a business is transferred, at a sum additional to the value of the
premises from which the business is operated. The probability of there being
any market value in the goodwill will depend upon the personal qualities of the
owner and his or her contribution to the business, on the reputation of the
business and, where applicable, on the location of the business. If the
goodwill is personal and does not pass with the land, it may be compensatable
as a loss to the owner not based directly on the value of the land. But if the
value of any goodwill is embraced within the value of the heritage, no
additional compensation should be paid to the owner. Otherwise, an acquiring
authority would be paying for it twice. Whether personal goodwill, which is
marketable and the loss of which represents a personal loss, exists or not will
depend upon the circumstances of the case.
The evidence
was that the house at 12 Powis Terrace was used for letting rooms rather than
for providing the level of service which may be expected in a ‘guest house’.
Cooked meals were not provided. Mrs Blackadder said that breakfast was not
prepared for clients. Materials for a cold breakfast were left on the premises
and prior to 1987 the value of these varied from about 50p a day to about £1 a
day for all the lodgers in the house. The only other service was the provision
of linen. Communal kitchen and toilet facilities were available to the lodgers,
but there were no lounges or dining areas available for their use. Lodgers were
allocated a room for which they paid rent. Mrs Blackadder was absent from the
premises for prolonged periods even when she lived in Aberdeen. It was only for
a relatively short time during her total period of ownership that she actually
resided on the premises. Very little was spent on advertising the facilities
available at Powis Terrace and there was no evidence that there was a sign
situated on the property to advertise them. The property was registered as a
guest house with Aberdeen District Council and Mr Anderson’s evidence was that
it was entered in the valuation roll in 1985 as a guest house. But these two
items of evidence are not conclusive as to the actual conditions obtaining at
12 Powis Terrace. In any event, the entry in the valuation roll subsequently
described the heritage as a dwelling-house.
The evidence
is conflicting as to the quality of lodger who used the establishment during
Mrs Blackadder’s period of ownership. Mrs Blackadder and her daughter claimed
that the residents were respectable people until the mid-1980s, when the effect
of blight meant, initially, that a less desirable clientele was attracted and,
latterly, that the accommodation could be let only as a flat to students. Mr
Nelson’s evidence was that on the occasions when he had visited the house, over
a period of many years, he had not been impressed with the facilities, and he
had formed the view that most of the occupants were in receipt of social
security payments. Indeed, it was in connection with social security claims
made by the occupants that he visited the premises.
Mr Forsyth
pointed out that the amount allowed for depreciation in the accounts agreed
with the Inland Revenue was at about the level allowed by them for wear and
tear on furnishings where property was let as furnished accommodation. That is
consistent with the income from the property being taxed under Schedule D, Case
VI, as income from furnished letting rather than as income from a guest house,
which would be taxed under Case 1. The tribunal notes also that, at 9% of
income, the depreciation allowed for in the accounts is just within the conventional
allowance of 10% of rent less tenant’s outgoings.
It should also
be noted that the income received in the financial year ending April 5 1987, at
£5,480, was the highest achieved by Mrs Blackadder, and was attributable
entirely to rent for furnished accommodation when the part of the top floor
which she herself did not occupy was let out at £30 per week and the ground
floor was let out at £80 per week, with the tenants there paying for their own
heat and light. That was her most profitable year. The accounts for 1986 and
1987 also show that overheads such as rates, energy, insurance and telephone
were divided between Mrs Blackadder, as owner of the property and occupier of
part of it, and the remainder of the accommodation which was then available to
let.
The tribunal
is therefore satisfied that, at the date of the notice to treat, the property
was used for the purpose of letting furnished accommodation and was not run as
a guest house. The tribunal does not find it proved that at any earlier time
the property was run in the manner of a conventional guest house. Neither does
it accept that any personal goodwill existed outside the value of the heritage.
In any event, Mrs Blackadder has herself claimed for compensation for the loss
of heritage not for a single guest house but for the higher value attributable
to the division of the property into two flats, neither of which could
individually be considered as a guest house, and which have been valued as if
they were in the market as separate family homes.
That being so,
there can be no additional claim for disturbance attributable to the loss of
goodwill. In any event, the tribunal could not accept that there would have
been permanent loss of goodwill. Mrs Blackadder’s own evidence was that she had
bought another house in Aberdeen and that she intended to let accommodation
there. It has not been suggested that the level of profit which she might enjoy
there will be less than that which she would have enjoyed at 12 Powis Terrace
but for the compulsory acquisition.
As to
temporary loss of profits between her dispossession and her entry into 54
Hamilton Place, the tribunal is of the opinion that she herself failed to
mitigate any loss. Her own delay in vacating 12 Powis Terrace gave her
additional time to buy another property. Any inability to do so was not
apparently caused by lack of finance, since she was able to buy the house at 54
Hamilton Place without having to wait until she received full compensation for
the acquired subjects. From the tribunal’s inspection of Hamilton Place it is
apparent that it is a normal residential street, and not one characterised by
the presence of boarding-houses, and the tribunal does not accept that it would
have been unusually difficult to buy an ordinary residential house in Aberdeen
at any given time. Furthermore, Mrs Blackadder was under a duty to mitigate her
loss and to find suitable alternative accommodation as quickly as possible.
Although the
tribunal rejects the existence of personal goodwill outside the value of the
heritage and, therefore, the possibility of any market value for goodwill, it
recognises that Mrs Blackadder may have suffered from disturbance in the form
of loss of income in the later years of her possession of the subjects because
of the blight created as a consequence of the scheme underlying the
acquisition. That might be so even if the income which she received was not
itself marketable and, if it were so, it would be compensatable as a personal
loss owing to the effect of the scheme. If the right to receive the income were
marketable, the tribunal agrees with the council that deductions from net
profit in respect of notional rent would have to be made, but the loss to be
considered here is the loss to the owner. In this case the loss would be in respect
of income which she would have received as a return on the capital invested in
her property had it not been for the blight caused by the scheme.
However, the
onus of proof is on Mrs Blackadder, and the tribunal does not consider that
there is sufficient evidence to prove that any failure of the letting of
accommodation to improve prior to 1987 was attributable to the scheme. In 1983
and in 1985 there were substantial reductions in profit, while in 1984 and 1987
there were substantial increases. No clear pattern emerges of a growing
business or even of a business which had been in a steady state entering a
period of actual decline. Although there are no accounts for 1988 and 1989
before the tribunal, the evidence about the physical conditions, and the
incidence of deprivation and resultant crime in the vicinity in these years, is
sufficient to enable the tribunal to conclude that there would
could not be attributed to other factors.
Mr Anderson
suggested a figure of £3,040 as a total loss in each of these years based on
the trading results of 1981, 1982 and 1984. The council have not suggested any
figures in the event that the tribunal finds that there was a temporary loss of
profits. Mr Anderson’s figures are historic and may therefore be low. They
ignore the low level of profits in 1983 and 1985. They also assume that the
loss was totally attributable to the scheme and that no income at all was
received in these years. The claimant has not vouched her actual income, but
there was evidence that there were clients in residence during part of that
two-year period. There was also evidence that properties nearby were let by the
council until 1989, although only a small part of the council’s total property
holdings in the area were still let by that time. The tribunal therefore makes
the assumption that Mrs Blackadder’s profit in these two final years would be
one-third of that which had been normal prior to 1988, and that her measure of
loss would be two-third of that normal expectation of profit.
The financial
years ending in 1986 and 1987 have audited accounts prepared on the basis of
letting furnished accommodation, while retaining space for personal occupation,
and show a turnover in each year of around £5,400 with an average net profit in
these two years of about £3,300. The tribunal therefore proposes that the
amount of loss suffered by Mrs Blackadder in the two final years taken together
should be two-thirds of £6,600, to give a total loss of £4,400.
The tribunal’s
award of compensation to Mrs Blackadder under the 1963 Act for the compulsory
acquisition of 12 Powis Terrace, Aberdeen, is therefore in the sum of £87,850,
made up as follows:
|
1. Value of the heritage |
|
|
£93,000 |
|
Less: cost of making two |
£550 |
|
|
|
cost of repairs for damage by |
12,000 |
|
12,550 |
|
|
|
80,450 |
|
|
2. Disturbance in respect of removal |
|
|
3,000 |
|
3. Temporary loss of profit due to blight |
|
|
4,400 |
|
4. Permanent loss of profits |
|
|
0 |
|
Total |
|
87,850 |
The respondents have made an advance payment of £44,100, leaving a
balance of £43,750 to be paid. It is agreed between the parties that the £3,000
payable in respect of removal includes interest from the date of valuation.
Outstanding interest from that date will therefore be payable only on the sum
of £40,750.
