Harrison and Hetherington Ltd v Cumbria County Council

Compensation for compulsory acquisition of livestock market premises — Agreement for acquisition by local authority on basis of compulsory purchase price — Construction and application of rule (5) in section 5 of Land Compensation Act 1961 (equivalent reinstatement basis) — Appeal from decision of Lands Tribunal — There was no dispute as to reinstatement being bona fide intended or as to continued devotion to the purpose of a livestock market — The issue was as to whether there was ‘no general demand or market for land’ for that purpose — The evidence showed a decline in the number of operating livestock markets but that if a market became available for disposal there would be a demand for it unless the vendor intended to set up a competing market — It was rare to find two operators in competition in the same town — The Lands Tribunal member held that the evidence did not satisfy him that the essential condition for the application of rule (5) was present, namely, that there was no general demand or market for land for the purpose of use as a livestock market — On appeal by case stated this decision was challenged by the market owners — It was submitted on their behalf that the Lands Tribunal was wrong in inferring the existence of a latent demand which could amount to a general demand or market — It was argued that a demand which would only arise if the vendor undertook not to open a rival market in the vicinity was a demand arising only in special circumstances and so was not a general demand within rule (5) — These submissions were rejected by the Court of Appeal — The general demand must be understood to be simply such demand as might be sufficiently general to stimulate a competitive bid or bids for land with the use in question, if offered for sale — The fact that the demand might be reduced, or even destroyed, if the vendor intended to open a rival market in the vicinity was irrelevant — Held, therefore, that the Lands Tribunal was fully entitled to infer a latent demand which could amount to a general demand or market — Some judicial observations on the equivalent reinstatement rule — The word ‘general’ qualifies only the word ‘demand’, not ‘market’ in the rule — Appeal dismissed This was an appeal by case stated by the appellants, Harrison & Hetherington Ltd, who owned the livestock auction market at Botchergate, Carlisle, from the decision of the Lands Tribunal (V G Wellings QC) on the question whether rule (5) in section 5 of the Land Compensation Act 1961 (the equivalent reinstatement rule) applied to the assessment of compensation for the acquisition by the respondents, Cumbria County Council, of the appellants’ freehold interest in the market. W J Glover QC and Miss Susan Hamilton (instructed by Cartmell Mawson & Main, of Carlisle) appeared on behalf of the appellants; M F C Fitzgerald QC and G R G Roots (instructed by the County Solicitor, Cumbria County Council) represented the respondents. Giving the first judgment at the invitation of the Master of the Rolls, ROBERT GOFF LJ said: There is before the court a case stated by the Lands Tribunal. The case raises for decision a question of construction of rule (5) of section 5 of the Land Compensation Act 1961, which turns to a considerable extent upon the wording of the rule as set in its context with the other rules of the section. An agreement was reached on June 9 1980 between the appellants, Harrison & Hetherington Ltd, and the respondent council, the Cumbria County Council, under which the council agreed to acquire the appellants’ freehold interest in a livestock auction market at Botchergate in Carlisle. Under the agreement, it was provided that the price was to be the compensation which would, on a compulsory purchase of the premises, in certain specified circumstances, fall to be assessed in accordance with the provisions of the Land Compensation Act 1961. However, there arose a dispute between the parties as to whether rule (5) of the rules under section 5 of the Act was applicable in the present case. Section 5 provides that compensation in respect of a compulsory acquisition shall be assessed in accordance with the rules set out in the section. The general principle is to be found in rule (2), which provides as follows: The value of land shall, subject as hereinafter provided, be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise. It is to be observed that that rule is expressed to be ‘subject as hereinafter provided’; and, since rule (6) provides that the provisions of rule (2) shall not affect the assessment of compensation for disturbance or any other matter not directly based on the value of land, it follows that such compensation may be added to the market value of the land assessed under rule (2). However, rules (3), (4) and (5) provide for more specific matters. We are here concerned, as I have indicated, with rule (5), which gives the Lands Tribunal a discretionary power, in the circumstances specified in the rule, to assess compensation on a different basis from that provided for under rule (2). Rule (5) provides as follows: Where land is, and but for the compulsory acquisition would continue to be, devoted to a purpose of such a nature that there is no general demand or market for land for that purpose, the compensation may, if the Lands Tribunal is satisfied that reinstatement in some other place is bona fide intended, be assessed on the basis of the reasonable cost of equivalent reinstatement. It was the contention of the appellants that rule (5) applied in the circumstances of the present case. The President of the Lands Tribunal directed that there should be a preliminary hearing to determine whether rule (5) was applicable. The matter was referred to a member of the Lands Tribunal, Mr V G Wellings QC, who on January 29 1982 made an interim decision on the point, holding that, on the evidence before him, rule (5) was not applicable. He was, however, asked by the appellants to state a case for the decision of this court on the point, and duly did so. The question posed by the member for the decision of the court is as follows: (a)  Whether I misdirected myself in law as to the true meaning and effect of the words ‘general demand or market’ in rule (5) of section 5 of the Land Compensation Act 1961; (b)  Whether there was any evidence on which I could infer a latent demand which could amount to a general demand or market; (c)  Whether the only conclusion on the evidence was that there was no general demand or market for land used for the purposes of a cattle market. Before the member there was an agreed statement of facts; and, though evidence was called by both parties, there was substantial agreement on the material facts. It appears that the appellants carried on the business of livestock auctioneers at the Botchergate Market until 1974, the buildings at the market comprising (inter alia) offices, sale rings, unloading bays, weighbridges and so forth, and the market having its own access road and car park. The appellants ceased to trade there in 1974, and in August of that year began trading from the Borderway Mart, which they had themselves built, which is situated on the east side of Carlisle close to junction 43 on the M6 motorway. With regard to the applicability of rule (5) it was, however, agreed between the parties that the Botchergate Market was land which was, and but for the compulsory purchase would have continued to be, devoted to the purpose of a livestock market; and it was conceded by the council that reinstatement in some other place was bona fide intended. There was also some agreement on the figures. It was agreed that, in the event of it being determined that compensation should be assessed in accordance with rules (2) and (6) of section 5, the amount payable to the appellants, excluding fees, was £390,000 (£380,000 under rule(2) and £10,000 under rule(6)); if, however, rule (5) was applicable, the appellants contended for an assessment in the sum of £893,721, whereas the council contended for a sum of £550,000, subject in each case to the addition of interest on certain capital expenditure (if allowable). However, before the member, the dispute was very largely confined to the question whether the appellants were able to establish, for the purposes of bringing the case within rule (5), that there was no general demand or market for land for the purposes of a livestock market. Evidence was called on behalf of the appellants directed to that issue. This showed that, although most substantial county towns have a cattle market, provided that the stock-rearing area which it serves is of sufficient acreage, very few towns have two livestock markets, and it is even more rare to find two operators in competition in the same town. There has, since 1974, been only one livestock market at Carlisle, which is Borderway Mart; and the tendency is for the number of markets naturally to diminish. In 1939 there had been 1,014 markets and fairs in England and Wales; by 1969 that figure had fallen to 543; and it appeared that by 1971 there were only 375 markets, and that by the date of the hearing only about 318. An agreed schedule showed that there had been only 19 transactions relating to 16 markets over a period of 25 years. Of these, two were for the purposes of redevelopment; seven were sales of existing businesses including goodwill as going concerns; and three transactions were of premises without any established goodwill. There was evidence (which does not appear to have been disputed) that, if a prospective purchaser knew that the vendor operator intended to set up another livestock market in the same town, he would not bid. There was also evidence that the chances of new markets being opened in England and Wales in the future was very small, unless a market closed; indeed, the district valuer knew of no sale of virgin land for a new market which was not a replacement for an existing market. However, if any market became available for disposal, it would be taken up very quickly; the vacuum would be rapidly filled. So, if the appellants ceased to operate at Carlisle, there would be a demand for a market there because it was a natural centre for a market. But, if the appellants ceased to operate at Botchergate but intended to compete at, for example, Borderway, no one would bid for Botchergate. In his evidence (as summarised by the member) the district valuer said: If a mart were for sale it would be as a going concern. If a mart became available and was capable of producing profit, it would sell. If Botchergate were offered on the market as a going concern, with no prospect of competition in Carlisle, it would have sold. That would be true of any other market in a similar situation. That evidence appears to have been uncontroversial. It was against the background of these facts that the member considered the question whether the appellants had established whether there was ‘no general demand or market for land’ for the purpose of use as a livestock market, which was the crucial requirement which they had to establish if rule (5) was to be applicable. The member considered that they had not discharged that burden. He expressed himself as follows: I have not been satisfied that no such general demand or market exists. Of course I accept that the few transactions in livestock markets which are known to have occurred and are described in Appendix 1 are not sufficient in themselves to prove that a general demand or market exists. It is right nevertheless to infer that there is a latent demand for land for the purpose of a livestock market. That latent demand does not become apparent unless and until the opportunity presents itself to make a bid, that is to say, when land devoted or intended to be devoted to the purpose of a livestock market is offered for sale. That event rarely occurs and one reason why it may be so rare is that, although livestock markets tend to diminish in number, those that survive, if one is to judge by the circumstances of the Botchergate Market, tend to be profitable. I agree with the district valuer that, if a livestock market becomes available and is capable of producing profit, it will sell. I agree with him also that the demand would come from auctioneers or other persons engaged in or connected with agriculture in Cumbria or the north-west of England. It does not appear essential that the general demand or market should be national. Demand limited to an area may yet be ‘general’. I31 appreciate the difference between a general demand or market for land devoted to a particular purpose and a general demand or market for a business as a going concern, but a general demand or market for the latter may indicate a general demand or market for the former. Of course, if a vendor who operated successfully a livestock market were intending to compete with his purchaser by opening a new livestock market in the same town, he might receive no bid or might receive a bid of an amount less than it might otherwise be or he might be expected by the purchaser to give a covenant not to compete locally. However, I see no reason to assume that such a vendor, at all events if he hoped to receive ‘a fair price’ would intend to compete locally with his purchaser. The fact that the parties appear to have no difficulty in agreeing the amount of compensation in the event of it being determined that compensation should be assessed under rule (2) does not suggest that there is no general demand or market for land for the purpose of a livestock market. For these reasons, I am not satisfied that there is no general demand or market for land devoted to such a purpose. Accordingly, I hold that the purchase price for the interest acquired is not to be assessed under rule (5) but is to be assessed under rule (2). Before this court Mr Glover, for the appellants, submitted that there was no evidence on which the member of the tribunal could infer a latent demand which could amount to a general demand or market; he further submitted that the only conclusion which was open on the evidence was that there was no general demand or market for land used for the purpose of a livestock market. He submitted in particular that a demand arising only in special circumstances is not a general demand within rule (5). Here, he said, the demand would arise only in special circumstances. For, on the evidence, a demand would arise for land used for the purpose of a livestock market only if the vendor decided not to open another rival market in the vicinity, and those circumstances would occur very rarely indeed. Now this submission I am unable to accept. I approach the matter as follows. First of all, rule (2) (coupled, of course, where appropriate with rule (6)) sets out the general rule for assessment of compensation. So the general rule of assessment is to ascertain the value of the land if sold on the open market. I agree with Mr Fitzgerald, who appeared for the council, that the mere fact that the valuation may be difficult, or that there is no evidence of any direct market transaction, does not prevent such a valuation from being made. I also agree with him that, if the land is at the relevant time devoted to a use which enhances its market value as land, that must be taken into account in making the valuation. So, if the land is devoted to the use of a livestock market, with such installations as there may be for that purpose and with such locational advantages as the land may have for that purpose, then an enhancement in its market value as land by reason of such use must be taken into account. However, there may be cases where a market valuation of this kind is not appropriate for the assessment of compensation. For such a case, rule (5) makes provision. The criterion for the application of rule (5) is contained in the opening words of the rule. This is that the land in question is, and but for compulsory acquisition would continue to be, devoted to ‘a purpose of such a nature that there is no general demand or market for land for that purpose’. In such a case, an open market valuation might not do justice to the owner, because the purpose to which the land was so devoted would be of such a nature that, however valuable to the owner, its value could not be reflected in an open market valuation. If, for example, land is devoted to the purpose of providing a church, there may well not be a general demand or market for land for that purpose, and so the devotion of the land to that purpose would not result in any enhancement of the value of the land if simply valued on the basis of an open market valuation. So, in a case of this kind, rule (5) gives the Lands Tribunal a discretion to assess compensation on a different basis, viz on the basis of the reasonable cost of equivalent reinstatement, provided, of course, that reinstatement in some other place is bona fide intended. Now, in the present case, having regard to the evident purpose of rule (5), a question arises as to the meaning of the words ‘no general demand or market for land for that purpose’. In my judgment, the word ‘general’ qualifies only the word ‘demand’. If there is a general demand for land for the purpose in question, or there is a market for land for that purpose, then the valuer, doing his best in the circumstances, can make an open market valuation which provides a fair basis of assessment for compensation to the owner in that, in particular, it takes account of the enhancement in the value of the land arising from its devotion to that purpose; where there is no such general demand-or market, an open market valuation may not provide a fair basis for assessment. So the general demand must be understood simply to be such demand as may be sufficiently general to stimulate a competitive bid or bids for land with the use in question, if offered for sale. It is, moreover, plain that, as was, I understand, accepted on both sides in argument before us, the word ‘land’ in the phrase ‘no general demand or market for land for that purpose’ does not refer to the particular land in question. Even so, as I read the rule, it is enough for the owner to show that there is no general demand for land for the purpose in question in the relevant area. Taking again the example of a church, let it be supposed that, whereas in many areas (including the area where the land in question lies) there is no general demand or market for churches, whereas in other areas they are readily bought and sold, for example for conversion into mosques or youth clubs; in such circumstances, the owner could, I think, still show that there was no general demand or market for a church in his area, so demonstrating that an open market valuation would not necessarily provide a fair basis for assessment of compensation. This accords with the view expressed by Templeman LJ and Sir David Cairns in Wilkinson v Middlesbrough Borough Council (1981) 45 P & C R 142 at pp 153 and 154,1 when they proceeded on the basis of a test adopted by the Lands Tribunal in Manchester Homoeopathic Clinic v Manchester Corporation (1971) 22 P & C R 241 at p 252,2 viz: Assume . . . that the premises were on the market for use for a purpose of the kind already discussed [in that case a clinic] and assume that that purpose was to be continued, then the real question was: would the vendor say to himself that he could reasonably expect to find a purchaser of the premises for the purpose at a fair price? 1Editor’s note: Also reported at (1981) 261 EG 673, [1982] 1 EGLR 23; [1982] EGD 655 2Editor’s note: Also reported at (1970) 215 EG 1033 at p 1039; [1970] EGD 680 at p 694 Applying these principles to the present case, I am unable to accept Mr Glover’s submission. The mere fact that the demand for land for the purpose of a market may be reduced, or even destroyed, if the vendor intends to open a rival market in the vicinity is, as I see it, irrelevant. It does not alter the fact that, on the evidence, there was a general demand for land for the purpose of a market, in Carlisle as elsewhere, so that compensation on the basis of an open market valuation to land devoted to that purpose would be entirely appropriate and fair to the owner. It would, no doubt, be different if the owner could show that the nature of the use, ie use of land for a market, was such that an offer for sale of land for a market would not excite any interest, even among a limited clientele. However, in the present case, the evidence before the tribunal was to the opposite effect. For it appears that offers for the sale of land for the purpose of a market, on the rare occasions when it is available, do indeed excite a general interest, though, of course, only among those people who would be interested in buying such land; and there is nothing to suggest that this evidence was not as applicable to land in Carlisle as it was to land elsewhere in England and Wales. It follows, in my judgment, that the member was fully entitled to infer from the evidence before him that there was a latent demand for land for the purpose of a livestock market, ie that, if such land did become available, its appearance on the market would generate a general demand for it. A similar conclusion was reached by the majority of the Court of Appeal in Wilkinson’s case, which was concerned with premises used by a multi-principal veterinary surgeon’s practice. The evidence before the member in that case was that multi-principal veterinary practices were not sold on the open market, the custom being rather that partners were taken into a firm. It was, of course, accepted that veterinary practices were sold by sole proprietors to other sole proprietors, and that the premises in question might, if put on the market, be attractive to a veterinary practice. The majority of the Court of Appeal held that, in these circumstances, there was evidence from which the member could properly conclude that the owner had failed to show that there was no general demand for premises for the purpose of carrying on the practice of veterinary surgeons in partnership. The court in that case, like the member in the present case, appears to have had regard to the circumstances of the case and to have inferred a general demand. Sir David Cairns said (at pp 154-5): It was clear from the evidence that people did from time to time take up the practice of veterinary surgery in partnership with others. I do not consider that the fact that no evidence was given of a firm of veterinary surgeons acquiring premises in which to practise showed that there was no demand for land for such a purpose. Clearly veterinary surgeons can find work in32 Cleveland. Clearly it is not unusual for them to do such work in partnership. There must, therefore, be a demand for land for that purpose. Whether the demand takes the form of several partners seeking premises to move into together or of one veterinary surgeon seeking premises where others will later join him is irrelevant.3 3(1981) 261 EG 673 at p 677, [1982] 1 EGLR 23 For these reasons, I am satisfied that the member in the present case correctly directed himself in law as to the true meaning and effect of the words ‘general demand or market’ in rule (5). I would therefore dismiss the appeal, and I would answer the three questions posed by the member for the decision of this court as follows — (a) no, (b) yes, and (c) no. Agreeing, SIR JOHN DONALDSON MR said: I only add a postscript in deference to the argument of Mr Glover. Rules (2) and (5) of section 5 of the Land Compensation Act 1961 have to be read together. Rule (2), which is the general rule, requires land to be valued by reference to a notional sale on the open market. ‘Open market’ in this context clearly contemplates a sale without regard to the existing user of the land, but taking account of the nature of the land itself and any buildings or other fixtures on the land and also of what other use would be open to a purchaser. That there was such a market for Botchergate is not in dispute. Rule (5), which, subject to certain preconditions, can be applied at the discretion of the Lands Tribunal in the interests of securing fair compensation to the compulsorily dispossessed landowner, abandons the open market value basis and substitutes the reasonable cost of reinstatement. It can be applied if the dispossessed landowner intends to reinstate ‘in some other place’, which might or might not be in the immediate vicinity of the compulsorily purchased land and if one other and crucial condition is fulfilled. This condition is that ‘there is no general demand or market for land for that purpose’, ie the purpose for which the land had been used and would, but for the compulsory purchase, have continued to be used. Read in this context, it seems to me that Parliament, in using the words ‘general demand or market’ was seeking to convey the idea of an open market for land subject to a use restriction and that the draftsman only eschewed the words ‘open market’, preferring to use the words ‘general demand or market’, in the belief that to do so would constitute a contradiction in terms. Commonsense or, if this phraseology be preferred, necessary implication dictates that this general demand or market must be for land in the same general locality as the compulsorily purchased land. Accordingly, I asked myself whether, on the findings of the tribunal, there was a general demand or market for land for use as a livestock market in Carlisle. The answer must be ‘Yes’. The answer is ‘No’ only if one asks a different question and one which is not propounded by the rule, namely, ‘Was there a general demand or market for two or more parcels of land for use as competing livestock markets?’  I agree with Robert Goff LJ that ‘general’ governs ‘demand’ and not ‘market’ and think that generality of demand is constituted by a plurality of prospective purchasers for a single unidentified piece of land and does not call for a plurality of demand for land. OLIVER LJ agreed that the appeal should be dismissed for the reasons given by Robert Goff LJ and the Master of the Rolls. The appeal was dismissed with costs. Leave to appeal to the House of Lords was refused. 33