Land – Compulsory purchase – Compensation – Claimant lessees permitting companies of which they were directors to conduct scrap metal businesses from land – Land compulsorily acquired for Crossrail project – Claimants seeking compensation for loss of personal remuneration for unexpired term of lease – Whether claimants suffering loss – Claim dismissed
The claimants carried on business from land known as Bishop’s Yard at Lake Avenue in Slough adjacent to the main Great Western railway line. The family business focussed on dealing in scrap metal and was conducted through a number of companies. The greater part of the land, extending to about 1.15 acres (“the reference land”) was held under a series of leases from Network Rail and its predecessors. The last such lease was for a term expiring on 22 December 2031 at an open market rent to be reviewed at five yearly intervals.
On 4 February 2014 the reference land was compulsorily acquired by the defendant under powers conferred by section 6 of the Crossrail Act 2008. A company of which the claimants were directors and which had traded from the reference land, did not relocate to other premises but discontinued its business within three months of receiving the defendant’s notice of entry. The company subsequently went into liquidation with substantial unpaid debts.
The claimants sought compensation totalling £4,177,782, principally representing the remuneration which they said they would otherwise have received from the company in the period from their quitting the reference land on 13 September 2013 until the expiry of their lease in 2031. The defendant took the view that the claimants were entitled to no compensation because they could not show that, had the reference land not been taken, the company would have generated profits sufficient to pay them the income they claimed to have lost, or any income at all, except at the expense of their creditors.
Held: The claim was dismissed.
(1) There was no dispute over the claimants’ entitlement in principle to make a claim in their own right for the value of future remuneration which they would not receive because the land from which they had hoped their company would conduct a profitable business had been taken from them. The more reliable basis on which to compensate them for the income they could realistically have expected to derive from a business carried on from a leasehold site with the benefit of planning permission for use as a scrap yard would have been to ascertain the value of the lease itself, including any element of key money. A conventional open market valuation on that basis would have taken into account all of the many contingencies to which the receipt of such an income would be vulnerable, but in this case no valuation evidence was relied on by either party and the defendant did not challenge the manner in which the claim was formulated. It was agreed that a claim for lost remuneration might be brought under rule 6 in section 5 of the Land Compensation Act 1961, which permitted compensation to be paid “for disturbance or any other matter not directly based on the value of land: Wrexham Maelor Borough Council v MacDougall [1993] 2 EGLR 23 applied.
(2) To succeed, the claimants had to satisfy the tribunal that the loss for which compensation was claimed was causally connected to the relevant acquisition of land, it was not too remote and the claimant must have taken such steps as a reasonable person in the same position would have done to eliminate or reduce the loss. The principal disagreement between the parties was whether, at the date of acquisition of the reference land, there was any sustainable business capable of supporting the payment of a continuing income to the claimants. On the evidence, the very substantial remuneration which the claimants had drawn from their failed business was at the expense of the creditors and no credible evidence had been provided to explain how any business conducted from the Yard could have continued to sustain those drawings. As the tribunal was satisfied that the claimants could not have continued to authorise payments to be made to themselves for longer than they actually did without being in breach of their duties as directors, fair compensation for their loss of remuneration would be assessed at nil. The loss was not caused by the acquisition of the reference land and their business was both unprofitable and unsustainable long before the notice of entry was given: Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 1 EGLR 19 applied.
(3) On balance the tribunal was prepared to accept that the expenditure of £39,013 (plus VAT) said to have been incurred in clearing and vacating the reference land had been met by the claimants and that element of the claim would be allowed.
(4) The claimants were not entitled to the sum of £17,500 plus VAT in respect of the quarter’s rent which fell due pursuant to the lease in September 2013. That was a personal liability of the claimants who were not in a position to make any beneficial use of the site after the discontinuance of the company’s business. Possession was not finally taken by the defendant until February 2014. The company’s business would have failed in any event, and losses which were the consequence of that failure were not caused by the compulsory acquisition. The company was not in a position to reimburse the claimants’ expenditure on rent and the fact that the continuing liability was brought to an end by the defendant’s subsequent entry did not mean that the loss represented by that expenditure was caused by the entry.
(5) The claimants had failed to establish any loss arising from the sale of plant and machinery. It had not been established that any of those assets belonged to the claimants or that they were sold at a loss. The sale had not been forced by the need to vacate the yard (so as to result in a diminished price) and there was no reason to believe that either of the claimants sustained any loss under that head of claim.
Mark Warwick QC (instructed by Gordon Dadds LLP) appeared for the claimants; Guy Williams (instructed by Pinsent Masons LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Bishop and another v Transport for London
