J Bibby & Sons Ltd and others v Merseyside County Council

Compensation for compulsory acquisition–Appeal from decision of Lands Tribunal–Acquisition of premises used as head office of food manufacturers–Dispute as to certain items in disturbance claim–Before Court of Appeal disputed matters restricted to increases in operating costs consequent on move to new premises–Lands Tribunal rejected claim in respect of increased costs on ground that the taking of two floors in new building would have been reasonable and a direct and natural consequence of acquisition, but taking of whole of building was not–Held by Court of Appeal that increased operating costs were a possible head of claim but only where there was no alternative to incurring them and no benefit was derived which made it worth while to do so–Tribunal had found that claimants had got value for extra expenditure and suffered no loss–Tribunal entitled to reach their conclusion and to disallow this part of the claim–Questions of law in case stated not happily framed–Appeal dismissed This was an appeal by the Bibby group of companies by case stated from a decision of the Lands Tribunal rejecting part of the claim under the heading of disturbance arising from the compulsory acquisition of the group’s head office premises by the Merseyside County Council under the Liverpool Corporation Act 1966. The premises acquired were situated a short distance north of the Liver Building in Liverpool. The new building to which the claimants moved was a new leasehold office building nearby known as Richmond House. The decision of the Lands Tribunal (W H Rees FRICS) was reported at (1977) 243 EG 467, [1977] 2 EGLR 154. This report set out in detail appendices A and B to the tribunal’s decision which are referred to in the judgment of Brandon LJ. William Glover QC and Michael Fitzgerald (instructed by Dodds, Ashcroft, of Liverpool) appeared on behalf of the appellant companies; R Bruce Martin QC and Frederic Reynold (instructed by K M Egan, City Solicitor, Liverpool, agent for C K Wilson, County Solicitor and Secretary, Merseyside County Council) represented the respondent authority. Giving the first judgment at the invitation of Megaw LJ, BRANDON LJ said: This is a case stated by the Lands Tribunal in relation to the assessment of compensation payable upon a compulsory purchase. The parties concerned are on the one side a number of companies in what may conveniently be called the Bibby Group (to which I shall refer collectively as ‘Bibby’) and on the other side the Merseyside County Council, the authority concerned in the compulsory purchase (which I shall call ‘the authority’). The case stated contains two questions of law for the opinion of the court, to which I shall refer later. It has annexed to it the decision of the Lands Tribunal, given by a member of that tribunal, W H Rees FRICS, on March 31 1977. In order to consider the questions of law raised, it is necessary to look at the decision for the facts found. Bibby are manufacturers and distributors of foods and associated products. The property which was compulsorily acquired by the authority consisted of office premises, which they had occupied as a head office. These premises were compulsorily acquired by the authority under powers conferred on them by the Liverpool Corporation Act 1966. As a result of that compulsory acquisition, Bibby became entitled to compensation. Compensation for Bibby’s freehold interest in the offices acquired was agreed in September 1969 at £345,000. That sum is not in dispute. After the old offices had been acquired, Bibby moved to new offices in a new building nearby called Richmond House. They acquired a lease of that building and they have carried on the business of their head office in that building since they obtained the use of it. Following their move to that new building, they put forward a claim for additional compensation in respect of disturbance. Part of their claim was agreed by the authority. The items contained in that part are set out in appendix ‘A’ to the decision; and the figure agreed for those items was £104,000. The items concerned relate to expenses incurred in adapting the new building and in preparing it for use by Bibby as a new head office, various removal expenses, and other similar items. Bibby sought to recover a further sum of compensation, amounting to £375,403, in respect of increased operating costs at the new offices, and, in addition to that, £47,799.93 in respect of fees and legal costs as set out in appendix ‘B’ to the decision. We have not had placed before us any schedule of the increased operating costs claimed by Bibby, and the only account of these which we have is the summary contained in the decision. That claim is said there to comprise: ‘(1) contents (carpets, curtains, furniture, shelving, light fittings, kitchen equipment and partitions); (2) rent of premises (the loss on subletting in early years and profit in later years being taken into account)’–the explanation of that will appear a little later–‘(3) rates; (4) internal telephone system; (5) capital expenditure in respect of the building and fees; (6) rent and rates on the car park in the basement.’  The decision also contains a summary of the basis on which these items were calculated; but I do not think it is necessary for me to repeat that here. Of these items, (4), internal telephone system, was agreed at £816.22 1/2, and that fades out of the picture. The dispute was as to the other items. As regards the supplementary claim for fees, the details of that are, as I have said, set out in appendix ‘B.’  The items are: (1) landlords’ legal costs for the lease of the new offices, Richmond House; (2) lessees’ legal costs of the agreement for the lease; (3) architects’ fees; (4) acoustic engineers’ fees; (5) surveyors’ fees; (6) office planning consultants’ fees: totalling, as I have said, £47,799.93. Of those items, (4) and (6) were disallowed, and parts of items (1), (2), (3) and (5) were allowed. So far as the present proceedings are concerned, the court is not concerned with any dispute about the items in appendix ‘B,’ although the way they were dealt with has been said to have some bearing on other matters. The court is concerned with the increased operating costs, to which I referred earlier. The facts as found by the tribunal appear in the decision. The member states: The old offices were built in 1910 and included a canteen, laboratories and rooms used to house a computer as well as offices: there were two open car parks close by, owned and occupied by the claimants. About 426 mainly office staff were accommodated in the old offices which had been extended just after the last war by converting adjoining warehouse space to office accommodation. There were other warehouses close by. . . . Had the old offices not been acquired it is unlikely that the claimants would have moved their offices. Customers do not resort to the head offices of the group. Richmond House was on offer as a whole at £200,000 per annum or in parts at a somewhat higher rent per square foot. The claimants took a lease of the whole at this rent for a term of 99 years from January 13 1970 and the lease provided for the rent to be reviewed (upwards only) every 21 years to the then current rental value. The claimants sublet the accommodation which they did not require for their own occupation, the subleases containing rent reviews at seven-or five-yearly intervals, but subtenants were not found immediately so the claimants had to wait about four years to come into overall profit in respect of the parts sublet. The landlords of Richmond House allowed the claimants £25,000 towards the costs of making the building suitable for occupation, a factor which would have arisen whoever the occupier might have been: the claimants spent other money on items to the same end, but rented carpets, furniture and fittings. It was agreed that the claimants would make some car-parking spaces in Richmond House available to the public, this being a condition of the planning permission. The claimants employed their own architect in connection with the works done to Richmond House to make it suitable for their occupation, and office planning consultants who called in acoustic engineers. The consultants advised the claimants on the ‘land-scaping’ of the office accommodation which they occupied. The move was made in three days to minimise disturbance to the group’s administration. By the date of the hearing . . . the claimants’ leasehold interest in Richmond House had a substantial value (the acquiring authority’s valuer put it at something over £1,000,000 but the claimants’ between £300,000 and £500,000: I need not determine the amount). The decision goes on: It is not in dispute that a move to Richmond House was reasonable although the claimants had other alternatives open to them. It is also not disputed that the terms agreed for the new offices were the market value at the relevant time. I further find that, had the claimants sought only the same floor space in Richmond House as they had had in their old offices (47,500 square feet), it would have been reasonable for them to have taken two whole floors (51,000 square feet) and not one floor and some 85 per cent of another. I note that the value of the furniture in the old offices was agreed at £32,000: it was sold by the claimants for about £7,000 and compensation equal to the difference (about £25,000) is included in the £104,000 agreed, being the loss on forced sale. Included in the £345,000 agreed as the value of the freehold interest in the old offices were inter alia the central heating installation, extract ducting, toilets, partitions, and fixed kitchen equipment. Those were the findings in the decision about the history of the matter. The decision then goes on to cite a good deal of the evidence given in the matter on either side, which I need not read. On p 471, after a consideration of certain authorities, the decision continues in this way: On the evidence before me, with the exception of the agreed item of £816,225, I reject the claimants’ contention that any further sum is due to them in respect of increased costs. To admit that claim, anyway in full, would, it seems to me, give ‘an almost punitive measure of damages’ . . . . In their new offices the claimants are in a better position than they were previously and their position is very similar to that of the claimants in Greenberg v Grimsby Corporation (1961) 12 P & CR 212. . . . What has to be done is to pay the owner ‘neither less nor more than his loss’ . . . . Having received their compensation for the value of the land and for the agreed items of disturbance, the claimants were at liberty to do what they wished and they chose to put their money into a new building, albeit a leasehold one but one which is, anyway at the moment, a substantial asset: they could have taken other courses. The claimants’ circumstances seem to be similar to those of the claimant in Powner & Powner v Leeds Corporation (1953) 4 P & CR 167. . . . At p 175 the tribunal there said: ‘With regard to item 4 (loss on replacement of the existing premises by a comparable factory) we could only entertain a claim of this nature if owing to the exigencies of the market on the material date it proved impossible to find other premises where the claimants could enjoy equal facilities for manufacture.’ Other offices were available in this instance. I am in no doubt (and it is not disputed) that a move to Richmond House was reasonable and a direct and natural consequence of the acquisition, but I accept the evidence of the acquiring authority’s valuer that such a move should have been to two floors. Taking three floors, and, more so, a lease of the whole building, can in my view be termed neither ‘reasonable’ nor a direct result of the acquisition. It is probable that the idea that it would be to the claimants’ advantage to take a lease of the whole was put into their minds by the enforced move but they were not compelled to do so. They could have taken two floors only and to have done so would have been reasonable in the circumstances prevailing. A little later on the decision continues: In the event of my not allowing all the items of the increased costs, counsel for the claimants invited me to decide that some of them, particularly those relating to money spent on the new offices, should rank for compensation but I see no difference in principle between any of the items of increased costs. He also suggested that I might in the alternative take a percentage of the figures submitted, but having reached the above conclusion I do not need to consider these alternatives. The member then went on to consider questions of assessment if the items were in principle allowable and said that, since he did not regard them as allowable, it was unnecessary to go into those problems. In the upshot, the member awarded Bibby by way of compensation a total of £115,845.31 1/2. This figure included the agreed amount that I have mentioned of items in appendix ‘A,’ £104,000: the agreed amount for telephones, £816.22 1/2; part of the claim for fees in appendix ‘B’ amounting to £11,019.09; and an architect’s fee, £500. The questions of law which are set out in the special case are these: (i)  Whether, having found that a move to two floors at Richmond House would have been a reasonable and a direct consequence of the acquisition, I was right in disallowing a claim for compensation in respect of any of the increased operating costs. (ii)  Whether I was right in holding on the facts as found in my decision that the move in taking the whole of Richmond House was not a reasonable or direct result of the acquisition. While listening to the argument in this case, I have felt that these questions are not happily framed in order to raise the points which counsel for Bibby desired to argue. It has occurred to me that it might have been helpful if they had been amended. But no application to amend them was made, and the court has to take them as it finds them. So far as the first question is concerned, it does not seem to me that the words in the question, ‘having found that a move to two floors at Richmond House would have been a reasonable and a direct consequence of the acquisition,’ really add anything to the question. The question is whether the tribunal was right in disallowing altogether a claim for compensation in respect of increased operating costs; and that is the question which I shall endeavour to answer. In answering that question, it seems to me necessary to consider three points. The first point is whether, as a matter of law, it can ever be right to award compensation to an applicant in respect of increased operating costs. The second question is: if so, in what circumstances would it be right to do so?  The third question is: do those circumstances exist in the present case? As regards the first question, it was, as I understood it, conceded by Mr Martin, for the authority, that there could be cases in which it would in principle be right to award com- pensation in respect of extra operating costs. It would only be right in certain circumstances; but it was impossible to say that it would never be right. In my judgment, that concession was rightly made. I pass, therefore, to the second question, namely, in what circumstances would it be right to award compensation in respect of such items?  It seems to me that it would be right to award compensation in respect of such items if it were shown, firstly, that the applicant, as a result of the compulsory purchase, had no alternative but to incur the increased operating costs concerned, and, secondly, that he had had no benefit as a result of the extra operating costs which would make the incurring of them worth while. I pass to the third question, which is whether it was shown in this case that the circumstances which I have mentioned existed. This must depend upon the findings of fact made by the tribunal. The tribunal took the view, as is evident from the passages in the decision which I have read, that, while it was not reasonable for Bibby to lease and occupy the whole of Richmond House, it would have been reasonable for them to lease and occupy the two floors where they in fact carried on their previous business; and the case was dealt with on that footing. If one is looking at the case on the notional footing of Bibby having leased and occupied two floors, then it seems to me that on that notional basis the requirement that they had no alternative may have been satisfied, on the findings of the tribunal. The tribunal did not find that these were the only premises that Bibby could have leased. On the contrary, it found that there were others; but it certainly did not find that they could have leased others any cheaper; and I think the inference is that the incurring of the extra costs of these premises was a consequence of the need to move. I shall assume, at any rate, in favour of Bibby that there is a finding, by implication at least, that they had no alternative but to incur whatever extra operating costs would have been involved in the lease and occupation of two floors only. That, however, is not enough. Bibby also need a finding that they have had no worth-while benefit from the extra operating costs so incurred. It seems to me that it is at that point, on the findings of the tribunal, that Bibby run into difficulty. I read earlier the findings of fact on p 10 of the decision. It seems to me that what the member was there saying was this: ‘Certainly Bibby have had to pay out more in respect of the various operating costs in dispute’–that is, items (1), (2), (3), (5) and (6)–‘but as a result of laying out that expenditure they are in a better position than they were before: they have had the benefit of that expenditure, and therefore they have suffered no loss.’ It was argued by Mr Glover on behalf of Bibby that what was said in the decision in this respect did not amount to a clear finding of fact to the effect I have stated. With great respect, I have come to the conclusion that the passage to which I have referred can only be interpreted in the way I have suggested it should be interpreted. The essential thing for Bibby to show is, first of all, that they have suffered a loss; and then, if they can show that, that the loss was consequential upon the compulsory acquisition. But if they do not succeed in the first stage, they never get to the second stage. It seems to me that there is here a finding of fact against them made by the tribunal which is charged with determining the facts in cases of this kind that they did not, in the upshot, suffer any loss in respect of these items. They paid them out; they got value for them; they have, therefore, suffered no loss. Whether that finding of fact was or was not the sort of finding at which the members of this court would have arrived if they had been sitting as judges in the Lands Tribunal is neither here nor there. Nor is any question raised as to whether there was evidence upon which the tribunal could properly make that finding. The finding is there, and this court has to accept it. On that finding it seems to me, for the reasons which I have given, that the first question can only be answered ‘Yes.’  If there was no loss, then the tribunal was right in disallowing a claim for compensation in respect of what has been found not to be a loss. I pass to the second question in the special case. It seems to me that, once the first question is answered in the affirmative, as I think it ought to be, the second question is really irrelevant. Once it is settled that there is no entitlement to compensation at all, then the question whether Bibby acted reasonably in taking a lease of the whole of Richmond House, or whether their taking a lease of the whole of Richmond House was a reasonable and direct result of the compulsory purchase, does not seem to me to matter. But, since the court has been asked to express an opinion on the question, I propose to do so. It seems to me that the question what is a reasonable and direct result of a compulsory purchase is largely a question of fact. It may not be wholly a question of fact. It may be to some extent a question of law; but it is largely a question of fact. In this case the tribunal of fact has come to the conclusion, as appears from the passages I read earlier, that it would have been the reasonable and direct consequence of the compulsory purchase for Bibby to lease and occupy two floors; but, equally, that it was not the reasonable and direct result of the compulsory acquisition that they should lease and occupy five floors. So long as there was material upon which the tribunal could come to that conclusion of fact, I do not see how this court could possibly interfere with it. So far as I can judge from the recital of evidence in the decision and the facts found in the decision, there was certainly material upon which such a tribunal could properly come to that conclusion. I would, therefore, not think it right to interfere with it in any way. It follows that I would also answer question (ii) in the affirmative and hold that the tribunal was right in the decision it reached on that question. I think there has, perhaps, in this case been some confusion between two different questions. One question is whether it was the reasonable and direct result of the compulsory acquisition that Bibby acquired the whole of Richmond House. I have dealt with that question. The other question is whether, if it were necessary to assess compensation in respect of extra operating costs (which it is not), the assessment should be made on a notional basis, as if Bibby had only leased and occupied two floors, or whether it should be made on the basis of the actual costs incurred as a result of what Bibby in fact did, namely, taking a lease and occupying the whole of Richmond House but then subletting part of it to sub-tenants and thereby making a compensating profit. That second question does not arise on the view I take of the answers which should be given to the two questions raised in the special case. But, if it did arise, I should not like it to be thought that I regarded the answer to question (ii) in the special case as in any way decisive of it. It may well be that, if extra operating costs were in principle allowable, then, if Bibby have in fact reduced their loss by leasing the whole of the building instead of only two floors, the amount of their loss should be assessed on the basis of what they have actually done in that way. I express no concluded opinion on the matter. It simply does not arise. It is right that, before I conclude my judgment, I should deal with certain criticisms of the decision which were made on behalf of Bibby by Mr Glover. One criticism was that there were contradictory approaches in the decision. It was said that it was illogical to disallow altogether the extra operating costs while allowing a part of the legal and other professional fees in appendix ‘B’ and also while allowing one of the so-called extra operating costs, namely the costs in relation to the telephone. In my view there is no such inconsistency in these two approaches. It is quite clear that the tribunal found that in respect of the items allowed there had been a loss; there had been no compensating benefit; and the loss resulted from the compulsory acquisition: accordingly the tribunal allowed those items, either in whole or in part. Whereas, in regard to the other operating costs, the tribunal came to the conclusion that there had been no loss, and accordingly it disallowed the items. Then it was said by Mr Glover that the tribunal had gone wrong because it treated Bibby as being deprived of any right to compensation simply on the ground that they had exercised a choice. I do not read the decision as disallowing the extra operating costs upon the ground I read the decision as disallowing the extra operating costs upon the ground I have stated, namely, that in the upshot there was no loss. Then complaint was made that, on a proper interpretation of the decision, the tribunal was saying that, since a claim could not properly be put forward on a five-year basis, then Bibby should recover nothing, whereas the tribunal should have said: ‘If Bibby cannot recover on a five-floor basis then they should be allowed to recover on a two-floor basis.’  Here again I cannot accept the interpretation of the decision which this argument involves. I do not think the tribunal were saying that, because it would be wrong to treat the occupation of the whole of Richmond House as consequential, Bibby could not recover on the notional basis that they occupied two floors only. I understand the tribunal as saying that no extra operating costs were allowable on any basis, but, if they were, then a five-floor basis would not be a correct basis. Finally, Mr Glover contended that the decision did not contain sufficiently clear or detailed findings of fact, or sufficiently clear or detailed reasons. In this respect, I think his point was that, in so far as there was a finding (on p 10 of the decision) that Bibby had suffered no loss in respect of the extra operating costs, it was a mere statement to that effect without any supporting reasons or any analysis of the matter. Mr Glover said that, before the tribunal could find that there was no loss, it should first of all have quantified the expenditure and then have quantified the benefit and seen whether they were equal or not and, if they were not equal, should have allowed part of the extra operating expenses. It would, no doubt, have been helpful if the member had stated more fully and in greater detail the basis upon which he came to the conclusion that there was no loss. But I do not know of any principle which requires a tribunal charged with finding essential facts to do more than make the essential findings. It is not necessary for such a tribunal to give the basis of its findings or the reasons for its findings, although it is very often helpful and convenient if it does so. The member who gave the decision was an experienced surveyor. Questions of valuation and assessment come naturally to a person who is experienced in that way. I can only conclude that, having looked at the matter from a practical surveyor’s point of view, he came to the conclusion that Bibby had had value for the extra expenditure. That was a conclusion to which an experienced tribunal of that kind was entitled to come, and I do not see how this court can do other than accept that finding as an unassailable finding of fact. For these reasons I would answer both the questions stated in the case in the affirmative; and the result of that would be that the decision of the Lands Tribunal would stand. Agreeing that the appeal should be dismissed, EVELEIGH LJ said: The first question in the stated case reads: ‘Whether, having found that a move to two floors at Richmond House would have been a reasonable and a direct consequence of the acquisition, I was right in disallowing a claim for compensation in respect of any of the increased operating costs.’  I take that to mean: ‘Was I right, none the less, having made that finding?–was I right, bearing in mind all the facts found in the case?’. Those facts in the case that were found included the finding that, although these premises cost more, they were better premises, and they were not forced upon Bibby’s. They included the finding that Bibby’s went to those premises as the result of a deliberate commercial decision, which included the intention to take a stake in the property market. I do not find it necessary to reach a conclusion as to what the position would be if there had been a finding that Bibby’s had no alternative. I am inclined to think that the answer, on the facts of this case, would have been the same, but it is not necessary to come to a firm conclusion on that matter. Indeed, I would not wish to express a view as to whether or not improved or better premises will prevent a claim for disturbance if they have been forced upon a claimant at greater cost. That is not the situation here, as I read the decision. The decision says: ‘In their new offices the claimants are in a better position than they were previously and their position is very similar to that of the claimants in Greenberg v Grimsby Corporation.’  The member goes on to quote Mr Fennell at p 216 in the report of that case: ”I can appreciate the claimant’s reluctance to leave old and familiar premises and to undertake the increased financial liabilities attached to the new shop, but I think that immediate financial disadvantage would be offset by the greater efficiency, attraction, and life of modern premises.”  From that, it seems to me that the member was adopting those words for his own decision and finding that the increased cost was indeed offset by the resultant advantages. In so far as question (ii) is concerned, I agree with what my Lord has said, that it is largely a question of fact. My answer to the question would be ‘Yes,’ because there is no indication, as I read the decision, that the member applied a wrong test in coming to the conclusion in that connection that he did. It was not, as I read it, a reasonable or direct result, because there was here a novus actus that was a deliberate commercial decision and it was one that was arrived at with complete freedom of choice. The second question, as I understand it, has relevance in the determination of this case because a claim was made for fees involved in the acquisition of the new premises. Prima facie, those fees would be recoverable; and the question that arose in this case was whether they should be reduced because they referred to the acquisition of five floors and not to the acquisition of two floors. From the point of view of recovering compensation, the member concluded that there should be an apportionment of fees in the appropriate proportions. Bearing in mind that that was the matter that he was considering and to which, as I see it, this second question is relevant, the fact that he found that a move to Richmond House for two floors would be reasonable does not preclude the conclusion that a move to the whole building was not a reasonable or direct result of the acquisition, in the context in which he was considering that matter. I, therefore, as I say, would answer the second question ‘Yes’; and I agree that this appeal should be dismissed. Also agreeing, MEGAW LJ said: There is one matter, which I think is perhaps not of great significance in the end, but which arose in the course of the argument before us. There was, I think, a measure of confusion or misunderstanding, which perhaps emerges also in the decision of the member of the tribunal, as to the word ‘reasonable,’ in the sort of context in which it has been used here. In the passage in the judgment of Romer LJ in Harvey v Crawley Development Corporation [1957] 1 QB 485, at p 494, which is quoted in the member’s decision, there occurs this passage: ‘. . . provided, first, that it is not too remote, and, secondly, that it is the natural and reasonable consequence of the dispossession of the owner.’  I do not find it necessary to pause here to consider whether there are, as the law has now developed, separate considerations relating to being ‘too remote’ on the one hand and being not ‘the natural and reasonable consequence’ on the other hand. It may be that those two have now merged. But the phrase to which I call attention is the phrase ‘the natural and reasonable consequence of the dispossession of the owner.’  In this case there have been references to the question whether the claimants did or did not act reasonably: for example, did they act reasonably in taking the lease of the five-storey Richmond House?  If they15 had acted unreasonably in that respect, it may well be that the answer, applying Romer LJ’s test, would be that it could not be the natural and reasonable consequence of the dispossession. But suppose that their action in so doing was entirely reasonable, as in the circumstances here it appears to have been: it by no means necessarily follows that it would be ‘the natural and reasonable consequence of the dispossession of the owner.’  The two considerations may be entirely different. I agree with what Eveleigh LJ has said as to the position which might arise if, on the facts, it appeared that Bibby’s had had no choice: that is to say, if the position had been that, if they were to continue in business, the only way they could so continue would have been by taking the whole of Richmond House, or, perhaps, taking the two floors which they did use, with no alternative. I do not think that arises on the facts here. I would not wish to commit myself to any firm conclusion, supposing that that question had arisen. I also agree with what Eveleigh LJ has said as to the revelance of the second question of law stated for the opinion of the court. I agree with the answers which Brandon LJ and Eveleigh LJ have proposed to both the questions of law which were stated for us to answer. I share the difficulty which Brandon LJ has expressed as to the way in which some of the issues which it was sought to argue before us are said to arise out of the questions of law. We are confined to the questions of law as stated. The appeal was dismissed with costs.