Ryde International plc v London Regional Transport

Appellant developing land for housing — Respondent compulsorily purchasing land — Manner in which compensation falling to be assessed under rr (2) and (6) of section 5 of Land Compensation Act 1961 — Appeal dismissed In 1989, the appellant developer constructed a number of flats and bungalows to be sold as sheltered housing. In 1997, the respondent compulsorily purchased and subsequently demolished the development as part of a transport scheme. Under r (2) of section 5 of the Land Compensation Act 1961, the land’s value was to be based upon a willing sale on the open market, but, under r (6), such valuation had to make provision to the seller for “disturbance loss”. The appellant assessed its claim on the basis that it would have sold each of the flats individually over a period of some months, retaining the profits, whereas the respondent valued the properties as if they were to be sold to a third-party entrepreneur as a single lot on the date of valuation. Since a third-party entrepreneur would have expected to negotiate a price that allowed him to make a profit on the resale, the respondent’s valuation incorporated a deduction for profits. The Lands Tribunal upheld the respondent’s valuation, and the appellant appealed. The question for the court was whether the lost potential profits should have been included in the valuation as “disturbance loss” under r (6). Held: The appeal was dismissed. For the purposes of assessing compensation, it was irrelevant that, in the “real world”, the appellant could have marketed the individual properties over an extended period. Although it was to be assumed that a vendor would market the property in a manner calculated to achieve its best price, that price was predicated on the condition of the property at the time of acquisition. It was common ground, in the instant case, that, in order to achieve the ultimate price, expenditure would have been incurred in refurbishing the properties. That figure was fairly taken into account in assuming that a third-party entrepreneur would have carried out the same refurbishment project. The purpose of compensation was to put the appellant in the position that it would have been in at the valuation date had the land not been compulsorily purchased. The payment of compensation was predicated on the basis that the appellant could use the money invested in the property as at that time in order to reinvest it in an alternative profit-making venture. In Mallick v Liverpool City Council [1999] 2 EGLR 7, the claimant had advanced a claim for compensation for the loss of rents between the date of possession and the full payment for the property. In that case, it appeared that the loss of rents had been treated as the loss of the claimant’s business on the principles established in Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 1 EGLR 19. However, r (6) applied to a claimant who had incurred costs and losses as a result of being forced to relocate a business, and could not apply to a business that simply let parts of the property, because the potential rent would be taken into account in the market value of the property under r (2). Since r (6) specifically excluded compensation for any matter directly based upon the value of the land, it would therefore exclude any profit that had arisen from marketing the flats and bungalows separately. Christopher Katkowski QC and Timothy Mould (instructed by asb law, of Maidstone) appeared for the appellant; Joseph Harper QC (instructed by the solicitor to Transport for London) appeared for the respondent. Vivienne Lane, barrister