Wakerley and others v St Edmundsbury Borough Council

Appeal from Lands Tribunal on reference by consent–Compensation payable on surrender of yearly agricultural tenancy to acquiring authority–Terms of surrender agreement–Express incorporation of section 48 of Land Compensation Act 1973 and implied incorporation of normal statutory basis of compensation, but additional provision that tenants were to be granted a gratuitous licence for three years and three months to farm part of land surrendered–Main question whether benefit of licence should be set off against compensation or whether tenants should retain benefit–A difference between £14,425 and £24,005–Held by majority of the Court of Appeal, reversing decision of Lands Tribunal, that value of licence should not be deducted from the tenants’ compensation This was an appeal from a decision of the Lands Tribunal, reported at (1977) 241 EG 921, in a reference by consent as to the amount of compensation payable to Joseph Wakerley and the personal representative of his father, the late Arthur Wakerley, in respect of the acquisition by St Edmundsbury Borough Council of the appellants’ interest in part of Eldo House Farm, near Bury St Edmunds. The main issue in the appeal was whether the value of a gratuitous licence to farm, granted to the tenants as part of the surrender arrangements, should be set off against the compensation due to them. The licence, for three years and three months, was granted in order to prevent the land from lying idle until it was needed by the council for a town development scheme. The Minister of Agriculture had given his consent to the licence under the provisions of section 2(1) of the Agricultural Holdings Act 1948, thus ensuring that it did not take effect as a tenancy from year to year. L Read QC and J Denbin (instructed by Ellis & Fairbairn) appeared on behalf of the appellants; A Fletcher (instructed by the solicitor to the St Edmundsbury Borough Council) represented the respondent council. Giving the first judgment at the invitation of Roskill LJ, GEOFFREY LANE LJ said: This is an appeal from a decision of the Lands Tribunal (R C Walmsley FRICS) dated January 28 1977. The tribunal in a reference by consent were charged with the task of assessing the amount of compensation properly due to the appellants (hereinafter called the tenants) from the compensating authority, the St Edmundsbury Borough Council (hereinafter called the council) in respect of the acquisition of the tenants’ yearly tenancy of part of a farm. The tribunal judged that the proper sum was £14,525. This sum was made up of the figure of £14,425, being the capitalised value of the farming land the tenants had lost by the acquisition less a deduction for profits earned from it since acquisition, together with a nominal sum of £100 in respect of the open-market value of the tenants’ interest in the land. The farm in question is Eldo House Farm close to Bury St Edmunds. It comprised 600 acres and was at all material times owned by the Orttewell Estate. From 1941 it was farmed by Arthur Wakerley. He was joined in 1953 by his son, Joseph (hereinafter called Mr Wakerley). From April 26 1954 these two held a joint yearly October tenancy in pursuance of a written agreement. The agreement contained the following provision in clause 34: That it shall be lawful for the landlords at any time or times upon giving four calendar months’ notice in writing, to enter upon . . . and to resume possession of . . . any part or parts of the farm . . . for purposes of building . . . or for any other purpose not being the use of the land for any agriculture. Arthur retired in 1958 but the joint tenancy continued. He died in May 1976 after proceedings had started. They continued thereafter in the names of Mr Wakerley and of Arthur’s personal representatives. In 1971 the council’s predecessors in title (the Borough Council of Bury St Edmunds), decided to buy certain land which was shown as a town development area in the development plan in accordance with the provisions of the Town Development Act 1952. This area included 155 of the 600 acres of Eldo House Farm. There were two phases. We are concerned here only with the second. This involved 126.6 acres of the farm. The remainder of the farm, that is to say, some 445 acres, is still held and farmed by Mr Wakerley. It was in January 1973 that the council bought the freehold of the 155 acres (subject to the tenants’ tenancy) by private treaty from the estate. Thereafter negotiations were put in hand with a view to the council acquiring the tenants’ interest in the land. There seemed to be no reason why matters should not proceed expeditiously, and the original plan was that the yearly tenancy should be surrendered in January 1973. However, delay was caused by local opposition to the council’s plans, and it was not until July 14 1973 that surrender finally took place. The agreement was very largely negotiated between two valuers engaged respectively by the council and tenants. They were Mr H O Wilkin for the council and Mr F A Laws for the tenants. Each was widely experienced and highly regarded. Their task was to some extent complicated by two events. It was not envisaged that all the 126.6 acres would be required at once, and it was therefore necessary for special provisions to be included in the agreement to ensure that good agricultural land was not left idle for longer than necessary. In order to meet that difficulty the agreement embodied provisions whereby upon surrender of the yearly tenancy the council would grant to the tenants a licence in respect of the 126.6 acres for 3 years and 3 months, that is, until October 1976, which would cover the period up to the 1976 harvest. The council reserved the right to enter upon any part of the land on 10 days’ notice. They were obliged to pay compensation in respect of any loss of crops in 1973 and 1974, but the tenants had to crop during 1975 and 1976 at their own risk. As far as compensation was concerned, it seems to have20 been originally agreed as part of the negotiations between valuers that the sum should be computed on what up to that time had been the statutory basis under section 20 of the Compulsory Purchase Act 1965 and sections 9 and 12 of the Agriculture (Miscellaneous Provisions) Act 1968 for land compulsorily acquired. The effect of these provisions was to provide compensation for the value of the unexpired term and also for any loss or injury sustained, the loss in the present case being five times the annual rent to which the landlord would be entitled, in this case agreed at a notional £12 per acre, making in all a sum of £60 per acre. However, before a binding agreement had been reached, there was a change in the law. On February 23 1973 there was introduced into the House of Commons the Land Compensation Bill, which was to become law on May 23 of that year. This had the effect of altering the basis of compensation and increasing in certain respects the rights of dispossessed occupiers, as will hereafter appear. The two valuers realised that the new Act would affect the situation which they were handling, and would require to be mentioned in the eventual form of agreement between the parties. They were ad idem as to the basis of the agreement (or at least they thought they were) and the deed was eventually drawn in its present form by a solicitor instructed jointly by both parties. The deed was executed on March 26 1974, a few days before, under the reorganisation of local government, the present council took over the powers and duties of the Mayor, Aldermen and Burgesses of the Borough of Bury St Edmunds. The deed contained inter alia, the following provisions: 1.     In consideration of the Covenants to be observed and performed the Tenants hereby acknowledge to the Council as follows: (i)    That they will surrender to the Council their tenancy of the land described in the First and Second Schedule hereto with effect from the 14th day of July One Thousand Nine Hundred and Seventy Three. (ii)   That all claims to compensation which might otherwise have been made by either the Council or themselves are replaced by this Deed and Agreements marked ‘A’ and ‘B’ attached and that the Tenants have no further claim against the Council in respect of any statutory or Common Law Provisions arising out of their surrender of the land set out in the First and Second Schedule hereto or otherwise. 2.     In consideration of the Tenants surrendering their tenancy of the said land conveyed to the Council as described in the First and Second Schedule hereto the Council hereby covenant that they will: (a)    Forthwith pay to the Tenants the compensation to which they may be entitled under the provisions of section 48 of the Land Compensation Act 1973 or the sum of Sixty Pounds (£60) per acre whichever shall be the greater in respect of the land hereinafter described in the First Schedule hereto together with interest at the rate of 15 per cent per annum from the fourteenth day of July One Thousand Nine Hundred and Seventy Three until paid or from the first day of January One Thousand Nine Hundred and Seventy Three in the event of the Tenants not being entitled to compensation under the provisions of the said Section 48 of the Land Compensation Act 1973 . . . (g)    As from the fourteenth day of July One Thousand Nine Hundred and Seventy Three grant to Joseph Arthur Wakerley in accordance with the approval of the Minister of Agriculture a Gratuitous Licence to farm the land set out in the first Schedule hereto in the form of the Agreement attached hereto and marked ‘A.’ The licence and tenancy agreements referred to in the main deed were duly executed as therein provided. The minister’s consent was obtained under the provisions of section 2(1) of the Agricultural Holdings Act 1948. This had the effect of preventing the licence taking effect as a tenancy. The licence was expressed to run from July 14 1973 to October 11 1976. The tenancy agreement is not material to the matters in issue; it relates solely to the ‘phase 1′ land, with which we are not concerned. There remained what may well then have seemed to be the formality of the two valuers agreeing the proper figure which the council should pay to the tenants by way of compensation under the terms of the agreement. Some of the items were agreed at the outset, some have since ceased to be in issue but there is still a broad area of disagreement. Before turning to those matters, the situation now that the licence has expired is that, as a practical arrangement, Mr Wakerley has agreed to act as caretaker on behalf of the council of such of the 126.6 acres as remain capable of being farmed. The council pay him compensation for cultivating and reimburse him for any expenditure he may make on seeds and fertiliser. The council have offered him a fresh licence from October 11 1976 to October 10 1979 at £15.50 per acre per annum, which he has declined for reasons which will become apparent. The following matters are agreed between the parties: (1)  That had the council not acquired his interest in the land Mr Wakerley could have expected to farm the land for the rest of his life, and that that expectancy has been destroyed by the acquisition. (2)  That Mr Wakerley was at the material times a man of 38 years of age with a life expectancy of 33.5 years. (3)  That the net profit per acre per annum over the material period was £38. (4)  That the tenants are not entitled to the equivalent of one year’s rent for disturbance. (5)  That the tenants do not have to bring into account as a set-off against any compensation to which they may be entitled the value of the fresh licence which they have declined to accept. These last three matters were all in dispute before the tribunal but the parties have accepted the tribunal’s findings in relation to them. The issues argued before this court were as follows: (1)  What is the correct number of years’ purchase to be applied by way of multiplier to the annual profit of £38 per acre so as to capitalise that profit?  Put in another way, what risk rate is properly applicable to a man in Mr Wakerley’s position?  Is it 15 per cent as the tenants, or 20 per cent as the council, maintain?  The tribunal decided that 20 per cent was the appropriate figure, giving a multiplier of 4.989 and a capitalised loss of £24,003 against the tenants’ rival contention of £30,808. (2)  Was the tribunal right in deducting from the tenants’ loss as capitalised the capital value at July 14 1973 of the profit earned by the tenants from 1974 through 1976 as a result of the farming of the land under the licence? This was the main point of the appeal, the tenants’ contention being that on a true construction of the agreement nothing fell to be deducted from the capitalised loss, whatever that might be. The tribunal held that the value of the licence must be set off. That value the tribunal assessed at £9,581. The resulting net figure for compensation was therefore £14,422, which was rounded up to £14,425. (3)  There was a further subsidiary matter argued before us, namely whether the tribunal, assuming that they were correct in making any deduction at all in respect of the value of the licence, were right to deduct the gross profit before tax rather than the net profit after tax. As to the question whether the proper discount was 15 per cent or 20 per cent, this is eminently a matter for the tribunal,21 and it cannot be suggested that there was anything wrong in principle or in law in selecting the higher of the two figures. As to the question whether any deduction in respect of profit should be made gross or net of tax there are two answers, both fatal to the tenants’ proposition. First, the profit itself was calculated on a ‘gross’ basis before tax and accordingly the deduction must, one would have thought, be on the same basis. Secondly, no evidence was called by the tenants before the tribunal as to the incidence of tax and it would accordingly be impossible for this matter to be determined without sending the case back to the tribunal. I can see no justification for taking such a course in the circumstances. That brings one to the main problem in the case, namely what do the words of the deed mean, and in particular the words in clause 2 (a) and 2 (g) of the deed as expanded in the supplemental deed?  What is the compensation to which the tenants ‘may be entitled’ under section 48 of the Land Compensation Act 1973? That section (so far as material) runs as follows: Compensation in respect of agricultural holdings 48.–(1)  This section has effect where in pursuance of any enactment providing for the acquisition or taking of possession of land compulsorily an acquiring authority– (a)   acquire the interest of the landlord in an agricultural holding or any part of it; or (b)   acquire the interest of the tenant in, or take possession of, an agricultural holding or any part of it. (2)  In assessing the compensation payable by the acquiring authority to the landlord in connection with any such acquisition of an interest as is mentioned in subsection (1)(a) above– (a)   there shall be disregarded any right of the landlord to serve a notice to quit, and any notice to quit already served by the landlord, which would not be or would not have been effective if– (i)    in section 24(2)(b) of the Agricultural Holdings Act 1948 (land required for non-agricultural use for which planning permission has been granted etc) the reference to the land being required did not include a reference to its being required by an acquiring authority; and (ii)   in section 25(1)(e) of that Act (proposed termination of tenancy for purpose of land’s being used for non-agricultural use not falling within section 24(2)(b)) the reference to the land’s being used did not include a reference to its being used by an acquiring authority; and (b)   if the tenant has quitted the holding or any part of it by reason of a notice to quit which is to be so disregarded, it shall be assumed that he has not done so. (3)  In assessing the compensation payable by the acquiring authority to the tenant in connection with any such acquisition of an interest or taking of possession of land as is mentioned in subsection (1)(b) above (hereafter referred to as ‘the tenant’s compensation’), there shall be disregarded any right of the landlord to serve a notice to quit, and any notice to quit already served by the landlord, which would not be or would not have been effective if the said sections 24(2)(b) and 25(1)(e) were construed in accordance with subsection (2)(a)(i) and (ii) above. (4)  Section 42 of the Agriculture (Miscellaneous Provisions) Act 1968 (tenant’s compensation to be assessed without regard to his prospects of remaining in possession after contractual date) and section 15(1) of that Act (effect on tenant’s compensation of provision enabling landlord to resume possession for non-agricultural use) shall cease to have effect. It is apparent from its terms that section 48 does not entitle a tenant to compensation as clause 2 of the deed suggests. It is designed to prevent the tenants’ rights to compensation being diminished in certain respects. Its effect is first to deprive the landlords of the advantages given to them by section 42 of the Agriculture (Miscellaneous Provisions) Act 1968, which provided that in cases of compulsory acquisition of land which was an agricultural holding the tenants’ compensation was to be assessed ‘without regard to the tenants’ prospects, if any, of remaining in possession of the holding after the relevant date,’ and, secondly, to alter the ruling of the House of Lords in Rugby Joint Water Board v Foottit [1973] AC 202. That decision enabled a landlord to take advantage of the provisions of section 24(2)(b) of the Agricultural Holdings Act 1948 (that is to say to give a valid notice to quit if the land is required for certain non-agricultural purposes) even though the person so requiring the land was not the landlord himself but an authority with compulsory purchase powers. The landlords’ compensation is therefore to be calculated in disregard of any right in him to serve a notice to quit on the strength of the council’s intention to use the land for building purposes. The tenants’ compensation in its turn is to be calculated on the same basis and with the further protection provided by subsection (3). Clause 2(a) only makes sense if it is construed as importing the whole statutory method of assessing an agricultural tenant’s compensation for compulsory purchase of his interest, including the provisions of section 48. Mr Read suggested the following paraphrase as fulfilling what the parties really meant by the compressed phraseology of the clause: forthwith to pay to the tenants the compensation to which they might have been entitled if the council had acquired the yearly tenancy or taken possession of the land in pursuance of any enactment providing for the acquisition or taking of land compulsorily and there was disregarded any right of the council to serve a notice to quit which would not be effective if sections 24(1)(b) and section 25(1)(e) of the 1948 Act were construed so that the reference to land being required for a non-agricultural use did not include a reference to its being required by an acquiring authority. That paraphrase seems to me to reflect accurately what the parties must have intended. It makes it clear that the relevant statutory enactments prior to 1973 are necessarily incorporated and that effect is to be given to section 48 of the 1973 Act. Indeed there is little if any dispute between the parties on this aspect of the case. That interpretation of this clause does not help to solve the problem of whether or not the profit from the licence has to be taken into account. Thus the area of dispute is small. The proper figure for compensation calculated according to the various statutory enactments is, if to be taken gross, £24,003 (rounded up to £24,005): if net after the deduction of the value of the licence (£9,581) the sum is £14,422 (rounded up to £14,425). Which figure is correct depends on the meaning of clause 2 of the deed. If 2(a) had stood on its own unqualified by the remaining subclauses then without doubt, on the authorities, the tenants would have had to deduct any profit made under the licence from their compensation. But enough has already been said about clause 2 to show that on any view it does not mean what it says, and it is both permissible and desirable to examine in more detail the factual background against which it came to be drawn. The two valuers had reached agreement in principle on the proper basis for compensation; hence the jointly instructed solicitor. The tribunal accepted as accurate the evidence of Mr Laws, the tenants’ valuer, on this aspect. He described how in the back-end of 1972 and the early part of 1973 the council were anxious to expedite their development scheme. There was then a property boom. Everyone thought that by about 1975 there would be little of the 126.6 acres left to farm. Mr Laws said that no suggestion had been made by anyone until recently about setting off the farming profits against compensation, and that such a suggestion was a major departure from the whole basis upon which his negotiations with Mr Wilkin had been conducted. If he had had any suspicion of such a possibility he would have never allowed his clients to accept the licence at all. It is true (as the council are not slow to point out) that what was passing through Mr Laws’ mind is not a relevant consideration, and that the jointly-instructed solicitor may nevertheless by his choice of words have succeeded in22 producing the unforeseen result found by the tribunal. It is true that if he has that is the tenants’ misfortune. The extent of their misfortune is clear. By their hard work and farming skill they have succeeded in reducing the council’s liability to them by £9,581, a figure which might have been substantially increased if the council had persisted in their claim that the notional value of the fresh licence, offered by the council, but refused by the tenants, should also be set off. So, if the council’s interpretation of clause 2 is correct, they have received surprising benefits from the agreement. They have been relieved of the burden of expensive and time-consuming compulsory purchase proceedings and of the risk that such proceedings might in the end be unsuccessful. They have avoided the expense of farming the land themselves or alternatively the possibility of public criticism for failing to make proper use of good farming land not immediately required for building. Have they had to pay for those advantages?  No, they have not. If the tribunal was correct they have got them for nothing. That is a surprising result. I do not believe that that is the meaning of clause 2. The clause is expressed to contain the various things which the council are promising to do for the benefit of the tenants as a reward for the voluntary surrender of their tenancy and for abandoning any claims they might have against the council as a result of that surrender. That being so it is plain that clause 2(g) is intended to convey a benefit and not a detriment. The only way in which it can convey the intended benefit is if it read as giving to the tenants and not to the council any profit which may accrue from the farming activities under the licence. That I believe to be the intention and effect of the clause. I would allow the appeal and increase the tenants’ compensation to £24,005. Dissenting on the main issue before the court, SIR DAVID CAIRNS said: In this judgment my references to ‘the claimant’ mean Mr J A Wakerley or both him and his father as may be appropriate in the context. The claimant’s right to compensation is a contractual right. The amount to which he is entitled depends on how clause 2(a) of the main deed of March 26 1974 is to be construed and whether its express terms are to be supplemented by any implied term. It has not been suggested that clause 1(b) of the other deed of the same date adds to or detracts from what the former clause provides. It is common ground that the words ‘the compensation to which they may be entitled under the provisions of section 48 of the Land Compensation Act 1973’ cannot be taken literally. The section does not create an entitlement to compensation; it merely lays down some fresh rules to be applied in assessing the compensation to which a landlord or tenant is entitled under other statutes. There is no dispute that the intention was that the claimant should have such compensation as he would be entitled under what has been called ‘the compensation code.’  The specific reference to section 48 of the Act of 1973 is easy to understand. It made a great difference to the scale of compensation payable and was in the forefront of the minds of the valuers who were negotiating about the compensation. The main bone of contention is whether the licence granted on the same day as the deeds were executed is an element to be taken into account in assessing the compensation payable or whether it is to be treated as a separate transaction giving the claimant rights additional to his right to compensation. The compensation payable to the tenant of an agricultural holding when an authority compulsorily acquires his interest or takes possession of the holding or part of it consists of various elements derived from a succession of statutes. It is necessary to refer first to the Agricultural Holdings Act 1948. Section 24(1) of that Act imposed restrictions on the operation of a notice to quit given by the landlord of an agricultural holding to his tenant. Section 24(2), however, provided that the restrictions should not apply when the land was required for use other than agriculture for which planning permission had been given, and that fact was stated in the notice. Section 34 provided for compensation for disturbance when the tenant of such a holding left it in consequence of a notice to quit. The compensation was to be the cost of removal etc but not less than one year’s rent. The general rules as to the assessment of compensation for compulsory acquisition are contained in section 5 of the Land Compensation Act 1961 and the relevant rules are as follows: (2)  The value of land shall . . . be taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise. . . . (6)  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. Section 20(1) of the Compulsory Purchase Act 1965 provided that if a tenant from year to year of land the subject of compulsory purchase was required to give up possession before his term expired he should be entitled to compensation for the value of the unexpired term and for ‘any loss or injury he may sustain.’  Section 20(2) provided that if any part of his land was taken he was to be entitled also to damage for severance or other injurious affection. Section 9 of the Agriculture (Miscellaneous Provisions) Act 1968 provided for an agricultural tenant who was entitled under the 1948 Act to compensation for disturbance to have in addition a sum to assist him in the reorganisation of his affairs: the sum was to be four times the annual rent or, if only a part of his holding was taken, the appropriate fraction of the rent. Section 12 provided that section 9 was to apply to compulsory acquisitions or taking possession as if the acquiring authority were the landlord and compensation for disturbance were payable to the tenant. Section 15(1) provided that when there was an early resumption clause in the contract of tenancy of an agricultural holding (such as clause 34 of the claimant’s tenancy agreement) it should be treated, in the case of acquisition, as if it provided for resumption of possession at the expiration of 12 months from the end of the year of the tenancy current at the date of the service of the notice to quit and, in the case of taking possession, should be disregarded. Section 48 of the Land Compensation Act 1973, in relation to tenants, provided, by subsection (3), that in assessing the compensation payable to a tenant in connection with compulsory acquisition or taking possession any right of a landlord to give notice to quit was to be disregarded in cases where the notice would not be effective if section 24(2)(b) and section 25(1)(e) of the Agriculture Holdings Act 1948 were construed in accordance with section 48(2)(a) of the 1973 Act. By subsection (4), section 15(1) of the 1968 Act was repealed. By subsection (5) the tenant’s compensation was to be reduced by the amount which the acquiring authority was liable to pay under section 12 of the 1968 Act. But by subsection (6) if the effect of subsections (3) to (5) was to reduce the compensation then it was to be increased by the amount of the deficiency. The effect of all these statutory provisions in relation to the present case was, in my view, accurately summarised by the tribunal as follows: Under the general compensation code the compensation in the present case falls, as I understand it, under three heads, viz: 1. An amount equal to five years’ rent, under section 12 of the Act of 1968, equating to four years’ rent under section 9 of the Act of 1968 and importing one year’s rent from section 34 of the Act of 1948. 2. The value of the ‘unexpired term or interest in the land,’ under section 20 of the Compulsory Purchase Act 1965, assessed in accordance with rule (2) of section 5 of the Land Compensation Act 1961 at open market value. 23 3. ‘Disturbance or any other matter not directly based on the value of land,’ assessed as referred to in rule 6 of the Act of 1961. As to the first head above, section 48(5) of the Act of 1973 requires the amount payable to be deducted from the total amount payable under the last two heads, in order to avoid a double payment. The third head might also have referred to the words ‘any loss or injury he may sustain’ in section 20(1) of the Act of 1965. It is to be noted that whereas before the passing of the 1973 Act compensation for a yearly tenant of an agricultural holding containing an early resumption clause was assessable on the basis that the tenant had security of tenure for not less than two years; the effect of the 1973 Act was that the right of the landlord to serve a notice to quit, under that clause or otherwise, was to be disregarded in certain circumstances. The result was to enable the tenant to receive compensation based on his expectation of continuing to work for the farm for a longer period, in this case 33 1/2 years. A logical approach to the assessment of compensation in this case would have been to calculate the appropriate figures under each of the three heads and then to assess the compensation as the sum of that due under heads 2 and 3. Assuming that this would exceed the amount due under head 1, that head could be disregarded. The two valuers in this case did not assess any value for the interest in the land. They both simply worked out a figure intended to measure the total loss or injury which the claimant would have sustained if there had been a compulsory purchase of his interest. The tribunal took the view that, as no evidence had been given of the value of the claimant’s interest in the land, that value should be assessed at the nominal figure of £100. The tribunal added ‘The whole of the claim as presented falls to be looked at under the heading of disturbance.’  That was an accurate statement on the basis that ‘disturbance’ is here taken to include ‘any other matter not based directly on the value of the land.’  The claimant’s valuer had included in his valuation one year’s rent for disturbance, using the word ‘disturbance’ in the sense in which it is used in section 34 of the Act of 1948. That was disallowed by the tribunal and has noxt been pursued on the appeal. I see no objection to assessing the compensation in the way the valuers and the tribunal adopted. If a separate substantial figure had been calculated for the value of the interest in the land it would merely have split the total compensation into two parts. In capitalising the loss of profit the claimant’s valuer took a risk rate of 15 per cent whereas the local authority’s valuer took 20 per cent. The tribunal accepted the latter figure. Mr Read sought to persuade us that the tribunal erred in law in adopting 20 per cent. He accepted that all the matters in addition to year to year farming risks which the tribunal took into account in reaching the rate of 20 per cent were properly taken into account but he contended that the tribunal attached too much weight to them. In my view no question of law was involved here but only a question of valuation, to be decided in the light of the evidence given. The tribunal accepted the evidence of the local authority’s valuer and in my opinion it is impossible for this court to say that he was wrong to do so. No further issue remains about the capitalised loss of profit, assessed at £24,003. But from that figure the tribunal deducted £9,581, being the value of the licence for rather more than three years from July 14 1973. The last-mentioned sum was based on an assessment of the capitalised gross profits for the term of the licence. The issues that arise are whether any deduction should be made in respect of the licence and, if it should, whether it should be based on gross profits or on the profits after deduction of tax. It was contended for the claimant that the meaning of clause 2(a) is that compensation is to be assessed as if the claimant’s interest in the 126.6 acres had been acquired on July 14 1973 and he had then ceased to farm that part of his land. The licence is not referred to in clause 2(a). ‘It is referred to in clause 2(g) as being an additional part of the consideration for which the claimant surrendered his tenancy of the 126.6 acres. If this compensation is reduced by reason of the licence the licence was valueless to him–he was farming this land for three years for the benefit of the local authority. Indeed, if his compensation has to be reduced by his gross profits made under the licence there was a detriment and not a benefit to him from the grant of the licence. Mr Read made calculations to show how unprofitable the licence was to the claimant. Using the same basis as that applied by the tribunal he calculated that if the claimant had farmed the whole 126.6 acres under that licence for three years the deduction would have been over £14,000. If he had accepted a licence for a further three years and farmed the whole acreage throughout, the total deduction would have been near to £23,000. Thus in the latter case his compensation would have been reduced to a little over £1,000, though he would have been deprived of the opportunity to farm the land for another 27 years, the capitalised profits from which could be estimated at nearly £24,000. Mr Read further calculated that the claimant’s tax liability for the three years 1974-76 in respect of the 126.6 acres, or the part of it which he still retained during the last two years, was equivalent to a capital sum of £5,567. Thus the result of the tribunal’s decision was to cause him a loss of that magnitude. Mr Read further argued that if the licence was to be taken into account then the compensation should be treated as compensation for dispossession. Then the proper basis of assessment would be that the claimant should have taken the capitalised value of the profits from 58 acres (taken over in 1975) for 31.5 years plus the capitalised value of the profit from the remaining 68.6 acres (taken over in 1977) for 29 1/2 years, which would come to a total of nearly £24,000. (There would, however, have to be a discount for payment in 1973.) For the local authority it was contended that clause 2(a) means that the compensation code was to be applied in all respects as if there had been a compulsory purchase on July 14 1973. If there had been such a compulsory purchase the compensation which the claimant could have claimed for his loss of profit would have been his net loss after taking into account the profits he made while operating under the licence. If the premises in which a person carries on business are compulsorily purchased and he moves into other premises and carries on business there his compensation for loss of profit will be measured by the diminution, if any, in profits, resulting from the change of premises. There is no reason for any difference if the business continues in the same premises under licence. And if gross figures are used for the profits lost then gross figures should be used for the profits which mitigate the loss. So, says the local authority, it is the clear intention of clause 2(a) that the compensation should be calculated in that way. Mr Fletcher did not accept the relevance of any calculation based on taking possession. As the payment was to be in consideration of the surrender of the tenancy and the surrender was deemed to take effect on July 14 1973 the compensation envisaged by clause 2(a) was clearly compensation for the acquisition of the claimant’s interest in the land, as if such acquisition had taken place at that date, together with the loss or injury he thereby sustained. If the compensation could have been assessed on July 14 1973, or on March 26 1974, it would have had to take account of the expectation of profits under the licence. Once it is known what actual profits accrued then it is the actual profits that have to be considered. As Lord Denning MR said in Bailey v Derby24 Corporation [1965] 1 WLR 213: ‘Next you must ascertain the compensation for disturbance as it is called. That must be ascertained by looking at what has in fact happened since the notice to treat.’  So also in London County Council v Tobin [1959] 1 WLR 354. Wynn-Parry J said: ‘Had (the tribunal) been hearing the case at the time any figure at which they arrived would have been wholly an estimated figure. In fact they were sitting nearly two years after the move. In those circumstances they were bound to have regard to what had actually happened in the interval.’  In support of that proposition Wynn-Parry J cited from the speeches of Lord Macnaghten and Lord Robertson in Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426. Next Mr Fletcher pointed out that the effect of the deduction is to reduce the compensation by a little over one third. This is not unreasonable since profits made during the first three years after acquisition carry more weight in reaching the capitalised figure than the prospects of profits in later years. It cannot therefore be said that the parties would have agreed, if the matter had been raised when the transaction was entered into in March 1974, that the licence was to be disregarded in assessing the payment. The claimant got the benefit of a rent-free licence and there could be no implication that this considerable benefit was to be disregarded in assessing the payment. As to tax, Mr Fletcher pointed out that tax was not deducted in assessing the capital value of the profits which would have been made if his tenancy had continued. It was necessary to treat the profits made during the licence period in the same way. In both cases the risk rate adopted was appropriate to gross profits and not to profits after tax. No evidence was adduced before the tribunal as to the amount of tax which the claimant in fact had to pay. If the claimant made a bad bargain by accepting the licence, it was not for the tribunal nor for this court to relieve him of the effects of his bargain. I accept Mr Fletcher’s contentions. I am of opinion that clause 2(a) means that the payment is to be calculated as if there had been a compulsory acquisition on July 14 1973, taking into account the whole of the provisions of the main deed, which by clause 2(g) provides for it to be granted and by clause 3(a) for it to be accepted. I find it impossible to imply a term that the licence was to be disregarded. It may be that the claimant, even if he had realised that he would have deducted from his compensation the value of any profits he made under the licence, would have still considered it worth while, for the convenient working of his farm, to retain the use of as much of his land as possible for as long as possible. It may be that the local authority, if the claimant had not been willing to accept the licence, would have deferred the date for acceptance of a surrender. These are matters of speculation. I can find no firm basis for implying that the claimant was accepting the licence only on the understanding that he was entitled to make under it a profit which would not be taken into account in assessing his compensation. As to tax, I am quite unable to see how it could be right for the deduction to be calculated net of tax while the loss of profits which would have accrued under the continuing tenancy agreement were not to be so calculated. If a person carrying on business had his premises purchased compulsorily and then proceeded to carry on the same business in another place, earning the same annual profit, it would be absurd to say that he had lost his gross profits from his original premises but mitigated his loss only to the extent of his taxed profits at the new premises. So here I consider that the tribunal was quite right to make the deduction on the basis of gross profits earned. For these reasons, I am of opinion that the tribunal’s decision was not in any way erroneous in law and I would dismiss the appeal. Agreeing with Geoffrey Lane LJ in allowing the appeal, ROSKILL LJ said: In my view the solution to the principal problem we have to decide turns upon a very short, but to my mind difficult, question of construction of the deed entered into on March 26 1974. Does clause 2 of that deed upon its true construction provide that the benefits derived by the tenant under the licence which the council agrees to grant under clause 2(g) and which the tenant agrees to accept under clause 3(a) shall enure solely to the benefit of the tenant, or is the effect of clause 2 that what the tenant receives from those benefits shall operate to reduce the council’s liability to pay compensation due under clause 2(a)?  To put the same point in other and shorter words–if the sum payable under clause 2(a) is £X and the benefits derived from the licence are £Y, does the council upon the true construction of the deed pay to the tenant £X minus £Y or does the tenant receive from the council £X and retain £Y and of course any other sums which clause 2 provides shall be paid by the council to him? I unreservedly accept that clause 2(a) is compressed in its drafting and that is language, though clear, requires to be expanded as proposed by Mr Read and accepted by Geoffrey Lane LJ in his judgment. I further accept–indeed the contrary was not argued before us–that if clause 2(a) had stood alone, then in the case of compulsory purchase the relevant statutory compensation for disturbance must be calculated by reference to what the tenant proves that he has lost when the compensation falls to be assessed by the relevant tribunal, and that if between the date of the compulsory acquisition and that assessment of compensation some new benefit has accrued to the tenant which operates to reduce his loss caused by disturbance, the quantum of compensation payable under the relevant statutory provision must be pro tanto reduced. If, therefore, clause 2(a) stood alone, the tenant would clearly have to bring into account any benefit that he had received after the date of the surrender of his tenancy which operated to reduce his loss by disturbance. But what is the effect of adding subclause (g) in clause 2?  All the covenants in clause 2 are expressed to be covenants by the council in consideration of the tenant surrendering his tenancy. The consideration moving from the promisee–that is the tenant–is that surrender. The clause provides that in return for that consideration the council–the promisor–will confer what are plainly benefits of various kinds upon the tenant, that is to say, payments of cash, payments of compensation for fertiliser and lime, forbearance to claim dilapidations and the grant of the licence in question. As Mr Read pointed out, the council derived not inconsiderable benefits from this arrangement by way of voluntary surrender. The council were saved the necessity of seeking a compulsory purchase order with all the possible delay, expense and uncertainty involved. By getting the tenant to agree to surrender the land and then to farm the land for the next three years under licence, they were saved having to take possession sooner than they required and then either risking the opprobrium of leaving valuable farming land unhusbanded or of making other arrangements at their own expense for the husbanding of this land until such time as the council’s development plans came to fruition–a course for which they would have had to expended public money. If the contention of the council and the decision of the Lands Tribunal be right, this agreement upon its true construction saved the council all this and more; the council could delay taking possession; the land would be properly farmed at no cost to themselves; there would be no risk of opprobrium for wasting valuable farmland and the tenant was not only to do all this for the council for nothing, but the council’s liability for compensation under clause 2(a) would ultimately be pro tanto reduced. Small wonder that Mr Laws, the tenant’s valuer, expressed himself in evidence25 which the member accepted, saying, as Geoffrey Lane LJ has pointed out, that if he had realised that this position might materialise, he would never have allowed the licence for the years 1974 to 1976 to be taken up. That last point must, however, be irrelevant to the question of construction. Agreements are sometimes incautiously entered into which produce unforeseen, unexpected and maybe unjust results. This is neither here nor there. All we have to decide is whether this agreement provides that £Y has to be added to £X or whether £Y has to be subtracted from £X. I cannot construe clause 2(g) as operating in diminution of the tenant’s right to compensation under clause 2(a). There is no express language to this effect. I am unable to imply any such right in the council. I think clause 2(g) is a separate and independent covenant enuring solely for the benefit of the tenant just as are the covenants in clause 2(c) and clause 2(e). On that narrow point of construction I regret I must differ both from Sir David Cairns and from the member. In agreement with Geoffrey Lane LJ on that issue I would allow the appeal. On the other points argued before us I agree with both the judgments delivered and have nothing to add. The appeal was allowed with costs in the Court of Appeal and below, except the costs of an application to the Lands Tribunal to settle the form of the case, which were to be paid by the appellants.