Compulsory purchase : compensation for disturbance

Citation

(1998), "Compulsory purchase : compensation for disturbance", Property Management, Vol. 16 No. 3. https://doi.org/10.1108/pm.1998.11316cab.030

Compulsory purchase : compensation for disturbance

Compulsory purchase : compensation for disturbance

Shelvin v. Trafford Park Development Corporation [1998] 08 EG 161

In this case, the Lands Tribunal had to assess the amount of compensation payable for disturbance (including loss of goodwill) on the total extinguishment of the business. The landowner was claiming some £250,000 for loss on the forced sale of plan and machinery, whereas the acquiring authority had offered approximately £93,000, based on its interpretation of the "value to business" approach in the RICS Appraisal and Valuation Manual (the "Red Book"). In addition, the claimant was seeking some £27,500 for loss of goodwill and £1,250 for accountants' fees. There was therefore a considerable gap between the two sides, the claimant seeking in all some £280,000 and the acquiring authority having originally looked to offer something in the region of £120,000. The matter was referred to the Lands Tribunal and two days before the hearing the acquiring authority made an unconditional offer of £145,000 plus reasonable legal, accountancy and surveyor's fees, but not including the cost of the reference to the Lands Tribunal which the claimant's solicitors put at £16,000.

In the event, the Lands Tribunal made an award of approximately £135,000 plus accountant's fees of £1,250, the figures listed as having been agreed by the parties or determined by the Lands Tribunal being quite close to those originally put forward by the acquiring authority.

In the course of making the award, the Tribunal commented on the use of the Red Book. While its use was not mandatory in this type of situation there was no reason for it not to be used: " The Red Book is intended to embody 'best practice' even though it may not be mandatory. The valuer for the acquiring authority was correct to base his valuations on the best practice for the valuations of plant and machinery as set out in the Red Book ...".

As regards payment of costs, the unconditional offer of £145,000 had only arrived at the claimant's solicitors' office two days before the date fixed for the hearing. This was too close to the hearing for it to be given proper and detailed consideration. Moreover, if the sum of £16,000 (the claimant's costs of the reference) was deducted, this would put the amount of the offer below the amount of the award. In the circumstances, the acquiring authority should pay the claimant's costs.

Halstead v. Manchester City Council [1998] 06 EG 143

This case is concerned with the question of whether interest is payable on the cost of "equivalent reinstatement" under the provision of s.5(5) of the Land Compensation Act 1961.

The premises in question were two Methodist churches in a slum clearance area of Manchester ("site B" and "site C") and it was agreed between the trustees and the council that they would be replaced by a single new church building to be erected on "site C". Entry to the land was effected in April 1974, work started on the construction of the new church in December 1980, and the trustees took possession of the new building in October 1982. Stage payments relating to the cost of the building works were made between April 1980 and November 1986. In November 1985, the council had written to the trustees setting out the final total of compensation which had been agreed. The question of whether or not interest should be paid on this sum, or on any part of it, and if so from what date(s) had never been resolved, and in May 1990, the trustees issued a writ claiming interest on the cost of equivalent reinstatement, (with credit being given as appropriate for the various stage payments) from April 1974, up to the date of the last stage payment, and thereafter to the date of payment of such interest.

Successfully, in broad terms, at least. The council had argued that no interest was payable as this would amount to a "windfall" benefit for the trustees; alternatively, that if any such claim should arise, it should run only up until October 1982, the date of effective reinstatement; alternatively (or in addition) that since the writ had not been issued until May 1990, that the trustees were statute-barred from pursuing any claim.

The court did not accept these arguments: s.11(1) of the 1961 Act provides that interest continues to accrue until the compensation is actually paid, and not simply until the date of reinstatement; there was no "windfall element" because from 1974 until the last of the stage payments had been made, the council had the use of the money, and the trustees had not; and finally, the trustees were not statute-barred because their cause of action did not arise until the amount of compensation had been finally agreed or determined, which in this case was 25 November 1985, the date of the letter from the council. Interest up to the date of the writ totalled some £784,000. Rather more than the cost of the building works; considerably more than the £8,000 or so which had been the estimated market value of the properties in question back in 1974!