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You are here: BAILII >> Databases >> United Kingdom Upper Tribunal (Lands Chamber) >> Econometric Ltd & Ors v Greater London Authority [2014] UKUT 219 (LC) (22 May 2014) URL: https://www.bailii.org/uk/cases/UKUT/LC/2014/219.html Cite as: [2014] UKUT 219 (LC) |
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UPPER TRIBUNAL (LANDS CHAMBER)
|
UT Neutral citation number: [2013] UKUT 0219 (LC)
UTLC Case Number: ACQ/139/2011
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
COMPENSATION – Compulsory
Purchase – Acquisition of 0.67 acre waste transfer station in connection with
the
London 2012 Olympic Park development – valuation – rental value – treatment
of tenant’s payment on entry into lease – Land Compensation Act 1961 section 5,
rule (2) – compensation determined at £1,475,000
IN
THE
MATTER OF A NOTICE OF REFERENCE
and
GREATER LONDON AUTHORITY Acquiring Authority
re: 28 Marshgate Lane, Stratford, London E15 2NH & 4 Knobs Hill Road, Stratford, London E15
Before: HH David Mole QC and P R Francis FRICS
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on
3, 4 & 5 March 2014
Matthew Horton QC instructed
by Howard Hyman & Co, solicitors of London N12, for the
first claimant
Tim Mould QC instructed
by Taylor Wessing LLP, solicitors of London EC4, for the
second, third and
fourth claimants
Guy Williams instructed
by Eversheds LLP, solicitors of London EC2, for the
acquiring authority
The
following cases are referred to in this decision:
Bishopsgate Parking (No2) Ltd v The
Welsh Ministers [2012] RVR 237
Halpern & Ors v Greater London Authority [2014] UKUT 0116 (LC
1.
This is a consolidation of four references relating to the
compulsory
acquisition by London Development Agency (now Greater London Authority and
referred to hereafter as “
the
acquiring authority”) of a 0.67 acre site
occupied as a waste transfer station (“WTS”) at 28 Marshgate Lane, Stratford,
London E15 2NH and
the
adjoining site at 4 Knobs Hill Road, Stratford, London
E15 under
The
London Development Agency (Lower Lea Valley, Olympic and Legacy)
Compulsory Purchase Order 2005 (“
the
CPO”).
2.
The
CPO was made on 16 November 2005 and, following a public inquiry,
was confirmed by
the
Secretary of State on 18 December 2006. A general
vesting declaration was made in respect of
the
freehold of 28 Marshgate Lane on
2 March 2007, and that interest vested in
the
acquiring authority on 2 April
2007 – this being
the
valuation date for
the
purposes of that interest.
The
leasehold interest in 28 Marshgate Lane together with all interests in 4 Knobs Hill Road vested in
the
acquiring authority on 2 July 2007 by a general vesting
declaration dated 14 May 2007. 2 July 2007 is
the
valuation date for all those
interests.
3.
The
first claimant, Econometric Limited, referred to in this
decision as ”Econometric” was at
the
valuation date
the
owner of
the
freehold
interest in 28 Marshgate Lane.
The
notice of reference in its claim for
compensation was dated 8 November 2011 and was allocated
the
Tribunal reference
ACQ/125/2011. Mr Matthew Horton QC of Queen’s Counsel appeared for Econometric
and called Mr John Holland who gave evidence of fact. He is
the
father of Ms
Kelly Holland who is
the
beneficial owner of
the
company. Mr Horton also
called Mr Andrew Philip Sedgley Crawford MRICS MIQ AIWM a partner in Matthews
& Son LLP of London WC1, who gave expert valuation evidence.
4.
The
second claimant, Brewsters Waste Management Limited (“BWML”)
(ACQ/139/2011), was
the
occupier of 28 Marshgate Lane under
the
terms of a
lease between Econometric and
the
third claimant Courtville Properties
Limited (“Courtville”) (ACQ/140/2011).
The
fourth claimants, Barry,
Brian and Sheila Brewster (“
the
Brewsters”) (ACQ/142/2011) were
the
freehold owners of 4 Knobs Hill Lane. Mr Tim Mould of Queen’s Counsel appeared
for
the
second, third and fourth claimants and called Mr Barry Brewster,
managing director and majority shareholder in BWML, who gave evidence of fact.
Mr Brian Brewster, (Barry Brewster’s father) had also provided a witness
statement of fact but could not appear due to illness. Mr Kirk Macdiarmid
MRICS, an associate director in
the
Development Department of Savills gave
expert valuation evidence.
5.
Mr Guy Williams of counsel appeared for the
acquiring authority and
called Mr Mark Jonathan Barden BSc MRICS, a partner in Gerald Eve LLP,
Chartered Surveyors of London W1, who gave expert evidence on valuation.
6.
By an order dated 27 July 2012, the
Tribunal determined that
the
references should be allocated to
the
Special Procedure, and consolidated for
determination together at a single hearing under
the
reference ACQ/139/2011. It
was ordered that, at that hearing,
the
following substantive issues were to be
determined:
(1) Econometric’s claim for the
freehold value of 28 Marshgate Lane,
(2) Courtville’s claim for its leasehold interest therein, and
(3) The
Brewsters’ claim for
the
value of
the
freehold
interest in 4 Knobs Hill Road
Further, the
Tribunal determined that
the
following matters should also be resolved as
preliminary issues:
(4) The
appropriate rent for 28 Marshgate Lane on
the
valuation date
(5) The
appropriate rent for 4 Knobs Hill Road on
the
valuation date
(6) Whether the
second claimant was in lawful
occupation of 28 Marshgate Lane and 4 Knobs Hill Road, and
(7) If so, the
period for which
the
land occupied by
the
second claimant might reasonably have been expected to be available to it
for
the
purposes of its business
7.
Subsequently, issues (3) and (5) have been resolved as the
result of a
consent order. Agreement was reached between
the
relevant parties that
the
value of
the
freehold interest in 4 Knobs Hill Road was £320,000 and that
the
appropriate rental value for that site was £21,500 pa (£2.02 per sq ft).
The
amount of
the
basic loss payment, pre-reference fees and statutory interest,
have also been agreed. It has also been agreed that BWML was in lawful
possession of
the
two sites (issue (6)) and that it could be expected that BWML
would have been available to continue in occupation of 28 Marshgate Lane at
least until
the
natural expiry of
the
lease on 28 November 2028 (issue(7)).
8.
It is also common ground that there would only be a claim in respect of
issue (2) if the
Tribunal determines that
the
appropriate rent for 28 Marshgate
Lane was more than
the
passing rent under
the
lease (thus giving rise to a
profit rent). However, as it is Courtville’s case that
the
£104,000
represented a “full market rent”, no formal claim in this regard has yet been
made to
the
acquiring authority.
9.
It follows that the
substantive issues that remained to be resolved at
the
hearing of these references were (1) and possibly (2). Issue (4) is
critical to arriving at a conclusion on issue (1), and in that regard there is a
further question that needs to be addressed: Was
the
payment of £270,000 made
by BWML to Econometric at
the
commencement of Courtville’s lease of 28
Marshgate Lane a premium, “key money” or payment, as
the
receipt stated, for
equipment remaining on
the
site. Or was it simply a contribution to
the
development of
the
site and construction costs?
10.
The
principles of Econometric’s claim for reinvestment costs under
section 10A of
the
Land Compensation Act 1961 (
the
1961 Act), together with its
pre-reference costs, reasonably and properly incurred, under section (5) rule 6,
of
the
1961 Act, are accepted by
the
acquiring authority, subject to any such
claim being properly set out and evidence provided that such costs have been so
incurred. No such evidence had been produced by Econometric by
the
date of
the
hearing, and therefore
the
Tribunal is unable to determine those issues in
this decision.
11.
The
parties helpfully produced a statement of agreed facts and issues
from which, together with
the
witness statements and experts’ reports,
the
evidence and counsels’ helpful skeleton arguments and closing submissions
(which were all received by
the
Tribunal by 27 March 2014), we find
the
facts
set out below. It was agreed that, in
the
light of
the
close proximity of
the
reference land to 151 Marshgate Lane, which was another waste transfer station acquired
under
the
same CPO, and was
the
subject of a recent hearing by us (Halpern
& Ors v Greater London Authority [2014] UKUT 0116 (LC),
the
decision in
respect of which was published on 18 March 2014, and
the
comprehensive
inspection that was undertaken of
the
area in connection with that reference,
no further inspection was necessary. This was particularly so as
the
reference
land in these cases and
the
whole of
the
immediate area is now subsumed within
what is now known as
the
Queen Elizabeth Olympic Park.
12.
28 Marshgate Lane comprised a site of 0.2716 hectares (0.67 acre) which
occupied a corner plot on the
north-east side at
the
junction with Knobs Hill Road. Historically it had been owned by Mr Patrick Gladwell who owned a number
of waste sites in
the
area, including 151 Marshgate Lane from where he had operated
his own waste transfer business known as Clearun Ltd. Mr Gladwell had
previously let 28 Marshgate Lane to a Mr Barry Meyer who operated it in
the
name of City Waste Ltd as a waste transfer station and for which planning
consent and a waste transfer licence existed. Whilst it had initially been a
successful operation, City Waste eventually vacated voluntarily due to business
difficulties, leaving an old and dilapidated tipping hall, a considerable
amount of waste and a large quantity of redundant plant and machinery on
the
site. In July 2001 Mr Gladwell offered
the
freehold of
the
, by then unoccupied,
site to Mr Holland.
13.
After discussing and agreeing with his daughter Kelly (who at the
time
had recently commenced operating a refuse collection, recycling and disposal
business known as A3 Waste), that 28 Marshgate Lane offered a good business
opportunity for her to expand into licensed waste disposal and recycling from
her own premises,
the
site was acquired in August 2001 (following negotiations)
for £500,000.
The
acquisition was by Econometric Ltd, a company set up and
incorporated for
the
purpose and of which Ms Holland was at all material times
the
sole beneficial owner. Mr Holland assisted his daughter in
the
running of
the
business, and also used part of
the
site in connection with his own
commercial interests. Clearance of
the
site and trading commenced immediately.
14.
Subsequently, following an approach in autumn 2003 from Mr Barry
Brewster (via Mr Gladwell) who was in urgent need of a site to replace his family’s
existing business, Brewsters Waste Management Ltd (BWML) which was being
compulsorily acquired in connection with the
redevelopment of
the
Arsenal FC’s
Highbury Stadium in North London, a lease was entered into between Econometric
and
the
third claimant, Courtville Properties Ltd (a nominee company of BWML).
It was dated, and commenced upon, 28 November 2003 and was for a term of 25
years at a commencing rental of £104,000 pa with an upward only rent review on
28 November 2008 and every 5 years thereafter, such rent to be determined in
default of agreement by an independent surveyor acting as an arbitrator.
The
lease contained a tenant only break clause exercisable on 28 November 2008 upon
giving three months notice. Although
the
lease was in Courtville Properties’
name, BWML at all times paid
the
rent when demanded, and occupied
the
site for
the
purposes of its waste management business.
15.
At the
commencement of
the
term, BWML made a payment to Econometric in
the
sum of £270,000 plus VAT at 17.5% (total £317,250) for which a receipt
dated 1 December 2003 was provided, describing
the
payment as being “For
the
sale of contents of transfer station at 28 Marshgate Lane, Stratford, London
E15 2NH as per attached inventory”
The
inventory listed
the
items as follows:
“1 Grapple Grab, 1 Rotating Grab, 2 Steam Cleaning Machines, 1 Rough Terrain Fork Lift, 1 60ft Weighbridge, 2 36ft Portakabins, 1 Steel Framed Building, 791 Secondhand Skips, 24 Second-hand Rollon/off Bins”.
16.
During the
months following
the
grant of
the
lease, and before BWML took
occupation, Econometric continued
the
site preparation works, including
construction of
the
replacement tipping hall (from two deconstructed
second-hand buildings that Mr Holland had acquired for
the
purpose). On 11 May
2004
,
the
Environment Agency granted a new Waste Management Licence for 28 Marshgate Lane for 1,000 tonnes per day of inert wastes, metal waste and degradable
non-hazardous commercial and industrial waste up to a maximum of 275,000 tonnes
per annum.
17.
As to 4 Knobs Hill Road, which adjoined the
north-eastern boundary of 28 Marshgate Lane,
the
freehold of this 0.24 acre (0.097 ha) site was acquired by
the
Brewsters in
2004
. Part of it was occupied and used by BWML in conjunction
with
the
waste management business, and part was let to Meyers Skip Hire Ltd.
Compensation having now been agreed in respect of Knobs Hill,
the
only further
reference to it necessary in this decision relates to
the
valuation evidence in
connection with
the
relevance or otherwise of its agreed rental value at
the
valuation date.
18.
In September 2007, following the
compulsory acquisition of 28 Marshgate Lane, Econometric acquired
the
freehold of a site at Lynchford Lane,
Farnborough, Hants.
The
site, which fell partly in Hampshire and partly in Surrey, extended to about 0.53 ha. Planning consent was obtained for a waste recycling
facility from Surrey County Council in October 2009 and from Hampshire County
Council on January 2010.
The
requisite Environment Agency Permit granted
under
regulation
13 of
the
Environmental Permitting (England and Wales)
Regulations
2010 allowing up to 1,010 tonnes of material per day was dated 21
December 2010. Pursuant to an Agreement for Lease dated 30 September 2010
which was conditional upon Econometric constructing, at its own expense, all of
the
operational facilities on
the
site, a formal lease, at a rental of £208,000
pa was completed by Taurus Waste Management Ltd in May 2013.
19.
The
first claimant contends for a value of
the
freehold interest in 28 Marshgate Lane at
the
valuation date, subject to
the
lease to Courtville, in
the
sum of
£2,813,592 based upon its estimate of
the
open market rental value at that date
of £208,000 pa, capitalised at 7%. That rental value was based, principally,
upon
the
agreement for lease and subsequent letting of
the
waste transfer site at
Lynchford Lane, Farnborough (“Farnborough”), and upon
the
belief that
the
£104,000 pa commencing rental at 28 Marshgate Lane was a substantial undervalue
that reflected
the
fact that a premium of £270,000 had been paid.
20.
Mr Holland set out the
historical background to Econometric’s
acquisition of 28 Marshgate Lane (which we have briefly summarised above) and
said that he assisted his daughter, Kelly, in
the
management of
the
company. He
explained that when Mr Gladwell approached him in July 2001, 28 Marshgate Lane was in a very untidy and run down state.
The
steel framed and corrugated
iron clad building that was on it did not comply with modern day requirements
for a tipping hall and was fit only for demolition. Indeed, at that time,
the
extant waste transfer licence was
the
subject of an Enforcement Notice
prohibiting any more waste to enter
the
site until it had been cleared.
The
previous tenant when vacating had left a large amount of redundant plant and
equipment, much of which was buried under
the
piles of waste, and only came to
light when
the
site was eventually cleared. Most of any serviceable equipment,
including hundreds of skips and a fork lift truck, were taken away by Mr
Gladwell in lieu of
the
rent arrears that had accrued.
21.
Mr Gladwell was seeking £600,000 for the
site, but due to
the
amount of
clearance and other preparation works that would be required Mr Holland said
that he persuaded him to accept £500,000.
The
intention had been to remove and
dispose of what was estimated to amount to about 6,000 tonnes of waste, obtain
planning permission for a replacement tipping hall and thence acquire a new
waste transfer licence in Econometric’s own name to cover recycling and various
types of waste.
The
new tipping hall would require pile foundations and
substantial “push walls” (as now specified under
the
2002 Waste Act),
22.
As soon as the
site was acquired (in August 2001) and following
agreement with
the
Environment Agency, Mr Holland said that during
the
first
six months he and his daughter cleared
the
rubbish, moved
the
redundant
equipment to one corner of
the
site and commenced trading. Ms Holland used
the
majority of
the
site for storage of concrete and hardcore pending
the
necessary consents being obtained, and Mr Holland said he used part of
the
site
for
the
storage of commercial vehicles in connection with his own business.
23.
The
requisite planning application was made in July 2002 for
the
“erection of a new tipping hall (light industrial building)” and permission was
granted on 14 May 2003. Econometric then obtained a Waste Transfer Licence in
its own name on 11 May
2004
. Two second-hand buildings were acquired (to be
re-constructed as one building) at a total cost of £70,000, and
the
company eventually
went on to spend a total of £471,000 including VAT in preparing
the
site.
24.
Although a number of approaches had been made from people in the
waste
transfer business virtually as soon as they took occupation, Mr Holland said it
had been his and his daughter’s initial intention to run their businesses from
there. Due to
the
cost of carrying out
the
permitted development on
the
site,
Mr Holland said that they had considered seeking funding from their bankers,
Lloyds TSB. However, in
the
autumn of 2003, Mr Gladwell approached him and asked
him if he would be prepared to let
the
site as Brewsters had told him they desperately
needed somewhere due to
the
fact that their existing site in north London was
also
the
subject of a CPO, and they had been let down on a proposed relocation
site that they had been negotiating for.
25.
Mr Holland said (at paragraph 20 of his first witness statement) that he
discussed this approach with his daughter who welcomed the
idea as she was
finding it difficult to run
the
business and bring up her young children. He
therefore told Mr Gladwell that “if
the
price was right” he would consider it,
and they went on to discuss rental values. Although from his knowledge of
the
business Mr Holland said he thought it was worth £3,000 per week (£156,000 pa),
Mr Gladwell said that Mr Meyer had been paying £1,600pw and suggested he should
ask for £2,000pw together with £300,000 “key money”. Mr Holland said that he
“took
the
view that if suitable terms could be agreed, it would not be
necessary to rely on bank finance for
the
construction of
the
tipping hall.” Mr
Gladwell then went back to Mr Brian Brewster (who was his brother-in-law) to
say that Mr Holland might be interested. Mr Holland, negotiating on behalf of
Econometric, then commenced “extensive discussions” with Mr Brewster (first
quoting a rental of £104,000 pa along with “a capital sum” of £300,000) and a deal
was eventually struck in August 2003 with Barry Brewster, Brian’s son, who
offered to pay £270,000 plus VAT provided
the
rent was agreed at
the
said
£104,000 pa.
The
lease was agreed to be for 25 years with 5 yearly upwards
only rent reviews and with a tenant only break clause after
the
first 5 years, and
was to be subject to
the
requisite waste management licence being granted. A
deposit of £50,000 was paid to Mr Gladwell who was to act as a stakeholder
pending completion of
the
deal.
26. At paragraph 24 of his witness statement, Mr Holland went on to say:
“In the
middle
of November 2003, I received a phone call from Brian Brewster saying that
the
introduction of stamp duty on leases would take effect on 1 December and asking
if, in order to avoid having to pay it,
the
lease could be issued before
the
end of November. Although I have been informed subsequently that stamp duty
would not have been payable due to
the
premises benefitting from disadvantaged
area relief, I did not know that at
the
time I contacted
the
solicitor whom
Econometric used at
the
time who advised that, if
the
lease was to be
backdated, a rent free period should be granted until
the
development was
completed. Accordingly, work started in order to complete
the
documentation by
30 November. On
the
last Thursday of November 2003 (
the
26th) I
received a phone call from
the
solicitor to say that
the
lease was being sent
for Kelly to sign. It was received on Saturday 28th November 2003,
and Kelly signed it without reading it. Without reading it myself, I delivered
it to Mr Brewster’s solicitor on Sunday morning (29th November) so
that it could be signed by BWML on Monday 30th. Unbeknown to my
daughter and myself, in
the
hurry to get
the
lease completed, there were some
major errors made in
the
wording of
the
lease:
the
tenant named on it was not
BWML but Courtville Properties Ltd; there was a break clause in favour of
the
Lessor and in
the
user clause there was no specific reference to waste
recycling.
25. On the
1st
December, Mr Brian Brewster telephoned me to say that,
the
lease having been
signed, he would pay
the
balance of
the
£270,000. Over
the
telephone, he
suggested that
the
£270,000 should be expressed to be for
the
redundant plant
and machinery left on site and that I should provide him with an invoice and
inventory to reflect that. [I took it] round personally to his office in Emily Place, whereupon Brian Brewster gave me a cheque for £270,000. I explained to Mr
Brewster that work was to start soon on preparing
the
site for construction of
the
tipping hall and I asked him what he would like me to do with
the
articles
in
the
inventory. He replied that I should dispose of them as scrap.
26. I was not
aware at this time that I could have sought this payment in the
form of a
premium for
the
lease. My objective was simply to obtain a capital sum to
contribute towards
the
cost of redeveloping
the
site as a recycling facility. I
have been informed subsequently that it would have been more advantageous in
relation to tax if
the
sum had been expressed as a premium… Econometric would
not have granted
the
lease if Mr Brewster had not agreed to
the
payment.
The
advantage to him was
the
reduction in rent for
the
first 5 years.”
At paragraph 30, Mr Holland said that to take
into account the
payment of
the
“premium” of £270,000 plus VAT, Econometric
agreed
the
rent at £104,000 pa for
the
first 5 years. Adding
the
premium
created an equivalent annual rent of £158,000 which was virtually what he
believed
the
market rental value to be at that time, and he said he expected
that
the
rent would rise to £208,000 pa (£4,000pw) at
the
first review. Whilst
that increase was acknowledged to be much higher than
the
general trend in
industrial rents, it reflected
the
significant value created by Marshgate Lane’s excellent location near to
the
City of London and
the
pressure on consumers
to recycle waste and avoid having to pay Landfill Tax.
27.
In examination in chief, Mr Holland was asked what his response would be
if it were suggested that the
£270,000 was a payment to include
the
new tipping
hall. He responded that that would be ludicrous. It had never been suggested
or implied that Brewsters were buying anything other than was shown on
the
inventory. It would be
financial
suicide to let
the
tenant own
the
building,
and such an idea was akin to “renting out your house and letting
the
tenant buy
the
roof.” He said he could not speculate why Brewster’s wanted
the
transaction dealt with in
the
way that it was. Asked what he would have done
if
the
tenants had exercised
the
break clause, Mr Holland said “Happy days – we
would probably have gone back to running it ourselves as by then my daughter’s
children would be at school.”
28.
In cross-examination, Mr Holland reiterated that the
objective for
getting
the
up-front payment was purely to obtain a capital sum towards
the
cost of
the
works that were to be undertaken (at a cost of over £470,000) and
that in hindsight he thought it should have been expressed as a premium. He
did not accept
the
suggestion that
the
money was needed in order to be able to defray
the
costs, although he did say that
the
deal to BWML would not have gone ahead
if they had not been prepared to pay it.
The
plans for
the
site, he pointed
out, had been hatched long before
the
Brewsters came along, and whilst Econometric
considered borrowing to pay for
the
works, they did not in fact need such
funding as they had made some £973,000 profit before tax in 2003 and there was
plenty of cash to pay for
the
works. In fact, he said,
the
£270,000 was principally
used in connection with another matter.
The
statement that Mr Brian Brewster
had made in paragraph 8 of his witness statement that “in around mid-November
2003, Mr Holland approached me and requested an interim payment to cover his
construction costs”, and that as a result BWML had made
the
payment on
completion of
the
lease rather than waiting until
the
site was ready for
occupation, was simply untrue. He insisted that he would never have told
the
Brewsters he needed
the
money because, for
the
reasons he had given, he did
not. However, he accepted that
the
Brewsters’ apparent understanding (as set
out in Barry Brewster’s witness statement at paragraph 17) that
the
money was
to be used to put
the
site into
the
required order was broadly correct.
29.
Mr Holland said he acknowledged that the
money was not for
the
materials
left on site but that it was “to get
the
lease” and was a contribution towards
the
cost of getting
the
site ready for BWML. Whilst he agreed that he had referred
in paragraph 30 of his witness statement to
the
payment being a premium, he
accepted in cross-examination that
the
payment had not been sought as that, and
agreed with Mr Mould that it was therefore unnecessary to speculate as to
whether it might have been a premium, or simply a contribution to
the
required
site works. He accepted Mr Barry Brewster’s statement that
the
payment had
never been suggested as a premium, and that it was “key money”. Nevertheless,
he insisted that if it had not been for
the
up-front payment, BWML would have
had to pay £3,000pw (£156,000 pa). As to
the
suggestion that they would think
that was too much, he said they could have walked away from
the
deal, but that
“they knew it was worth
the
money.”
30.
The
fact was, Mr Holland said, that BWML offered £270,000 for a
collection of worthless “stuff” that would have cost him £20,000 to remove and
dispose of.
The
payment was offered early (before
the
site was ready), so he
said he rushed to collect
the
cheque before Mr Brewster changed his mind. On
being asked by Mr Mould to agree that this was a capital contribution to put
the
site into
the
required state for BWML to be able to use it, Mr Holland then
said “if they didn’t value it [
the
site] at more than £104,000 pa, why give me
the
£270,000”, and he reiterated that it was never stated by either party that
the
money was a contribution to anything. Having said that, he agreed that
due to BWML’s circumstances, Econometric had been in a strong bargaining
position.
31.
In re-examination, Mr Holland said that he did not know what the
VAT implications
would have been if
the
payment had been declared to be a contribution towards
the
works.
32.
In his supplementary witness statement, Mr Holland gave a number
of opinions in respect of the
comparables referred to in
the
valuation evidence
in
the
light of
the
evidence that had been before
the
Tribunal in
the
Clearun
case (151 Marshgate Lane). He said he had eventually received (after many
attempts) information from GLA’s solicitors regarding
the
cost to
the
authority
of making
the
three sites at Thames Wharf suitable for
the
relocation of waste
transfer stations that were being acquired under
the
Olympic CPO. It appeared
that over £5 million had been spent (on top of
the
£11,650,000 cost of
the
land). At
the
rental figures that Mr Barden said were applicable (£2.00 psf)
it would take almost 30 years to recoup
the
investment even without interest at
a yield of 3.44%. If
the
yield suggested by Mr Barden (7%) was used
the
total
annual rental for
the
sites would need to be almost £560,000 pa. This proved
just how tainted these transactions were, particularly considering that
the
planning permissions for waste transfer use were restricted to only a few
years. If only £2.00 psf could be achieved in such circumstances, no-one
would ever invest and there would be no waste transfer sites.
33.
Mr Holland went on to discuss the
Olympic Skips site at 80 River Road, Barking which was just an open storage site with no waste transfer facilities
or licence, no buildings and no
services
.
The
£2.00 psf quoted there was,
therefore, just rent for a storage site. Similar comments applied to
the
Knobs
Hill /Road site where
the
rental value was agreed at £2.02 psf. As to
the
Clearun site, Mr Holland said that despite what Mr Barden claimed, that site
was vastly inferior to 28 Marshgate Lane, and apart from its nearby location,
should not be compared with
the
subject property in terms of rental or capital
value.
34.
Regarding the
Farnborough site, relied upon by Mr Crawford in his
valuation evidence, Mr Holland said that they had been looking for somewhere to
move to since 2006, and eventually found this one, which was much larger than
the
one from which they had been dispossessed, but in a significantly less
favourable location. He said that Econometric spent three years obtaining
the
requisite planning and other consents, including a waste transfer licence for
similar volumes to Marshgate Lane. In July 2008, they were approached by
Taurus Waste Recycling Ltd (“Taurus”) and in August there was an Agreement for
Lease for a term of 25 years at an initial rent of £208,000 pa with five yearly
rent reviews. This Agreement was subject to Econometric gaining planning
consent and
the
licence. Consent was obtained in January 2010, following delays
caused by power lines and local objections. Taurus took up occupation in
September 2010 but
the
lease was not completed until March 2013 because of
having to wait for a Building
Regulation
certificate.
35.
In cross-examination, Mr Holland said that Taurus paid “under a type of
licence thing” £156,000 pa for approximately half of the
site between 2010 and
when
the
lease was completed.
36.
Mr Andrew Crawford is, in addition to being a chartered surveyor,
a member of the
Institute of Quarrying and an associate of
the
Chartered
Institute of Waste Management. He is also a past chairman of
the
Minerals and
Waste Management Faculty of
the
RICS, and has specialised for some 20 years in
the
valuation and planning of such properties throughout
the
UK and overseas. In
his report, he said that he had some general acquaintance with
the
vicinity of Marshgate Lane, but had not visited
the
Econometric site prior to
the
compulsory
acquisition. He said he understood that, when
the
site was acquired by
Econometric, it was in a vastly worse state than it was at
the
valuation date.
He was aware of
the
extent of works that had been undertaken by Mr Holland
before
the
site was let to BWML and said that in his view,
the
Waste Management
Licence that was subsequently obtained in May
2004
was of significant value due
to
the
very high volumes and broad range of waste types including putrescible
(food) waste that were permitted under it.
The
site had formerly been a waste
transfer station, but
the
extended licence enabled it to become a recycling
facility.
37.
The
site was also one of
the
nearest to Docklands and
the
City of London and this was of particular value as it meant journey times and
distances
from there
(where there was significant development occurring) were shorter than those to
most of
the
comparables that had been considered. Thus, wear and tear on
the
contractor’s vehicles was less, as were fuel costs, and more round trips could
be covered. Factors to be taken into account in assessing
the
value include
the
location and source of
the
waste arisings that
the
site would handle,
the
nature and extent of
the
waste transfer licence and
the
quality of buildings on
the
site. It was most unusual, Mr Crawford said, for waste management sites
to be purchased or sold as an individual property asset.
The
use of such
sites is sui generis (in a class of its own) and thus will be outside
the
presumptions contained within a local plan. Comparable evidence,
therefore, relating to either capital transactions or rental values in
the
vicinity for such sites was non-existent, and, he said, none of
the
supposed
comparables referred to by Mr Barden for
the
acquiring authority were
appropriate for varying reasons – principally that all of them were less
conveniently situated to
the
city, were tainted by
the
Olympic scheme or were
materially different as to size and/or quality of infrastructure.
38.
There were two probative factors upon which Mr Crawford relied in
support of the
contention that, on review in November 2008,
the
rental value of
28 Marshgate Lane would be £208,000 pa (£7.12 psf). Firstly, upon
the
basis
of what he had been told in connection with
the
£270,000 capital payment made
by BWML, he thought that it could be considered to be a premium for a lease,
and thus should be capitalised for
the
period to
the
first rent review. This
was, he said, his primary argument. Secondly, and only if
the
Tribunal does
not accept
the
lease premium contention,
the
acquisition of
the
site in
Farnborough by Econometric in 2007 and
the
subsequent letting to Taurus Waste
Management Ltd, once
the
site had been prepared for their occupation and
the
relevant Environment Agency permit had been obtained.
39.
In arriving at a capital value for the
site at
the
valuation date, Mr
Crawford said that he used a yield of 7%, this figure not being in dispute.
This produced a value of £2,813,592 to which he added re-investment costs at
5.7625% and a basic loss payment of £75,000 giving a total claim of £3,050,726.
40.
In examination in chief, Mr Crawford said that the
alleged premium would
be seen by a hypothetical purchaser to equate to about £1,000 per week over
the
first 5 years of
the
lease, and he would thus expect
the
rent to rise on
the
first review to at least that amount, and would thus be £4,000 pw from that
date.
The
waste industry, he said, tended to work, in assessing rental values,
on a weekly basis.
The
rental value for Farnborough was in
the
same sum and
due to
the
similarities, particularly in terms of
the
permitted tonnages, that
was a good proxy for his assessment of
the
value of 28 Marshgate Lane.
41.
In cross-examination by Mr Williams, Mr Crawford accepted that there was
nothing that would lead a hypothetical purchaser, who he thought would be
“someone like Mr Holland” rather than an institutional investor, to think that
there was any real likelihood of vacant possession being obtained before the
end of
the
term. He agreed that
the
rent review provision in
the
lease was
“upward only” and that clause A(IV) stated that an independent surveyor
appointed to determine
the
rent on review shall assume that “
the
Tenant has not
carried out any work which has diminished
the
rental value of
the
property” and
that “it is available to let by a willing lessor to a willing lessee as a whole
without premium…” He accepted that there was nothing in
the
lease, or anywhere
else (such as in a side letter), that encapsulated
the
£270,000 payment as a
premium. That sum was not, therefore, a characteristic of
the
interest being
sold. However, he did say that it could be expected that
the
agent for
the
landlord would point out to
the
arbitrator that
the
£270,000 had been paid, but
equally he accepted that
the
agent for
the
tenant would be quick to point out
that it was nowhere recorded as a premium. Further, Mr Crawford acknowledged
that, in
the
hypothetical sale at
the
valuation date, there was nothing in
the
lease that could lead a hypothetical purchaser to conclude that he could secure
a higher rent on review.
42.
As to his reliance upon the
Farnborough transaction, Mr Crawford
conceded that there was no evidence which could lead to
the
conclusion that a
hypothetical purchaser of 28 Marshgate Lane in April 2007 would have either
had, or have been able to obtain, any knowledge of
the
transaction that
eventually took place at Lynchford Lane – either Econometric’s purchase, or
the
subsequent lease to Taurus. He also acknowledged that
the
Farnborough site
was almost twice
the
size, had a tipping hall two and a half times as big as
that which was constructed at Marshgate Lane and, being some 45 miles from
central London was in a significantly different area. Further,
the
buildings
were three times larger at Farnborough and were purpose built.
The
only thing
that was broadly similar was
the
permitted tonnages, although Mr Crawford
accepted that permitted tonnages in excess of that which could reasonably be
processed within
the
confines and other restrictions of a site would have no
additional value.
43.
Mr Crawford accepted that, if the
issue of Econometric’s case on
the
premium was not accepted by
the
Tribunal, and if it found that Farnborough
could not be considered comparable, then there was nothing from which it could
be concluded that
the
rental value on review should be more then
the
passing
rent, and that in that case
the
capital value could be no more than £1.4
million.
44.
Cross-examined by Mr Mould QC, and asked to put himself in the
position
of a hypothetical bidder for 28 Marshgate Lane as an investment, Mr Crawford
said that he would have taken account of
the
£270,000 payment, and could have established
from
the
vendor what he thought it was for. However, he accepted once again
that there was no documentary evidence to support that contention, and that if
he had spoken to
the
tenant, he would have had
the
other side of
the
story. He
would also have considered
the
position of
the
tenant through inspecting its
accounts and accepted that if
the
payment was to be considered to be a premium,
with its consequent effect upon
the
rental payable at review, there would be a
question as to
the
tenant’s ability to pay such a significant increase. If
there was a risk of
the
tenant “going bust”, Mr Crawford acknowledged that
there was no evidence in
the
market at
the
valuation date, other than that upon
which he was relying, to support such an increase. Therefore, if there was a rental
void due to
the
demise of
the
tenant, it could not be anticipated that any
increase, significant or otherwise, could be expected.
45.
Mr MacDiarmid is a chartered surveyor and associate director with
Savills Development Department. He has some 6 years experience of development
and CPO related valuations in the
Stratford area of east London. Acting on
behalf of
the
second to fourth claimants, he said he had been instructed to
assess
the
rental value of 28 Marshgate Lane at
the
valuation date of 2 July
2007,
the
value of Courtville’s leasehold interest (if any) and
the
value of
the
Brewster family’s freehold interest in 4 Knobs Hill Road. It was accepted
that if it were found that there was no profit rent in 28 Marshgate Lane at
the
valuation date, there would be no value in
the
leasehold interest. As to Knobs Hill Road, this issue has now been resolved and we do not therefore deal with it
further here.
46.
Regarding the
rental value of 28 Marshgate Lane, Mr MacDiarmid said his investigations
of
the
market revealed
the
general tone of rents for industrial land in
the
area in 2007 to be between £2.00 and £2.80 psf. He produced a schedule of
the
rental evidence he had considered together with location plans. In his view,
the
land (as a bare site) would have been worth in
the
region of £2.50 psf at
the
valuation date (£73,087.50pa) and thus at £104,000 pa (£3.56 psf) it would
be regarded as significantly over-rented.
47.
However, he said he had also been asked to consider whether the
£270,000
payment made at
the
commencement of
the
lease and described as being for
various assets, machinery and a steel framed building, might be deemed to be a
premium, and if so what effect that would have on rental value. In order to formulate
his opinion, he said he sought to look at
the
situation mathematically by
analysing
the
rent in two ways. Firstly, on
the
assumption that
the
rent was
for a bare site with BWML having purchased
the
new tipping hall and
the
benefit
of it with a suitable rental adjustment.
The
passing rent of £104,000 pa
therefore equated to £3.56 psf for
the
29,235 sq ft site area.
48.
Alternatively, on the
assumption that
the
tipping hall was not
purchased, and
the
rental value of it was therefore included within
the
passing
rent.
The
gross internal area of
the
tipping hall was 7,750 sq ft and in
accordance with usual market convention, he said he had assumed that an area of
yard would be given over for circulation and parking (an equal amount). This
would leave 13,735 sq ft of useable remaining yard area. Being of modern
construction, he assumed a rental value for
the
hall (to include
the
circulation/parking area) at £4.00 psf giving £31,000 pa. This left £73,000
for
the
additional yard which equates to a rent of £5.31 psf.
49.
Mr MacDiarmid then sought to reconcile those figures using comparable
evidence relating to yards and buildings in the
area, and also took into
consideration
the
RICS definition of market rent applicable in 2003 which
states:
“The
estimated amount for which a property,
or space within a property, should lease (let) on
the
date of valuation between
a willing lessor and a willing lessee on appropriate lease teems in an
arms-length transaction after proper
marketing
wherein
the
parties had acted
knowledgeably, prudently and without compulsion.”
50.
He said that whilst he accepted the
rent agreed in 2003 would satisfy
the
RICS definition, and
the
transaction would be regarded as a relevant
comparable, a valuer acting at that date would be aware of
the
circumstances
prevailing (
the
prospective lessee’s “desperate” requirement to relocate) and
would thus place less weight on that figure than on other transactions.
51.
Taking all these factors into account, Mr MacDiarmid said that whichever
of the
two scenarios was considered,
the
rental agreed in 2003 was overstated
to
the
tune of about £45,000 pa.
52.
It was a fact that the
rent payable would be affected not only by
whether key money or a lease premium was payable, but also by any other
incentives including rent free periods or a contribution to tenant fit out.
Those incentives have
the
effect of distorting
the
headline rent, which can
result in under or over valuing
the
property. If therefore,
the
£270,000 were
to be rentalised for
the
5 years up to
the
first review date, and under
the
lease terms from that point on
the
rent would be determined in accordance with
the
rent review clause (upwards only), this would produce a net effective rent
of £158,000 pa. This, he said, had
the
effect of further increasing
the
amount
by which he thought
the
property was over-rented.
53.
Mr MacDiarmid went on make some assumptions as to what he thought would
have been in the
minds of
the
parties to
the
transaction in 2003 and concluded
that “
the
payment of £270,000 should not be considered a lease premium and
should be considered a payment for
the
chattels including
the
tipping hall” and
it would not therefore be appropriate to take
the
rental value of
the
tipping
hall into consideration when determining
the
rent at
the
2008 review.
54.
Regarding the
Farnborough comparable relied upon by Mr Crawford, Mr MacDiarmid
said in cross-examination that a hypothetical purchaser would attribute no
weight at all to this property – he would have no knowledge of it at
the
valuation date, because
the
deal had not happened. Even if
the
rent was agreed
in October 2008, as Mr Crawford said, that was still well over a year after
the
valuation date and, in any event, there is no documentary evidence before
the
formal agreement for Lease dated September 2010.
The
site was also a long way
away and in terms of comparability therefore it was a non-starter. It was his
view that
the
local comparables in east London produced by himself and Mr
Barden were more indicative
the
tone for
the
local market, even if were found that
some of them had been tainted by
the
CPO scheme. Mr Crawford, he said, had
chosen to completely ignore
the
local market and had thus failed to objectively
consider relevant transactions.
55.
Mr Barden is a partner in Gerald Eve LLP and has more than 30 years
experience as a valuer and planning adviser specialising in work relating to the
mineral, waste and industrial sectors. He said that in assessing
the
rental
value of 28 Marshgate Lane at
the
valuation date,
the
appropriate yield to
apply, and thus
the
capital value, he put himself in
the
position of
the
valuer
acting for a hypothetical purchaser who, he said, would be likely to be a
private investor or a personal pension fund seeking an income stream, but which
was prepared to accept an element of risk. Particular risks included
the
fact
that there was relatively weak covenant strength, and there was a tenant only
break option in 2008 which could lead to a potential rental void.
56.
He went on to provide a general market over view as at 2007 and commented
on the
likely specific demand for waste transfer sites before considering a
number of comparables from which he produced his conclusions. As to
the
£270,000 alleged premium, Mr Barden said that due to
the
fact that there was no
reference to
the
payment of a premium in
the
lease, he would have advised a
purchaser not to rely on
the
payment as evidence for assessing
the
rental value
unless there were clear comparables demonstrating that
the
property had been
under-rented.
57.
Mr Barden said that a rental increase of the
scale proposed by
the
claimant’s valuer would need strong confirmation from comparables that, at
the
valuation date, there was evidence to suggest
the
passing rent was below market
value. In his view, on
the
basis of
the
comparable sites that he had referred
to, a purchaser would be extremely cautious about assuming there would be any
increase on review. There is, it was accepted, little evidence available for
waste transfer sites, and that which there is needs to be subject to subjective
adjustment and specialist knowledge to interpret.
58.
Having considered a number of comparables (set out in Appendix 3 to his
report) based on both bare-sites and those with buildings, he said he could not
find any that supported a rental value at the
valuation date in excess of £3.56
psf. He had referred to four waste management sites at Thames Wharf which had been acquired by
the
authority for
the
purposes of relocation of sites affected
by
the
scheme, so he accepted that some of them were tainted and included
elements of compensation. However, he stressed that
the
agents had been
instructed to negotiate rents consistent wit
the
industrial market and
reflecting he users’ requirements. He also accepted that on those properties,
the
leases were relatively short, being for only 7 years.
59.
Mr Barden said that his analyses of the
land only comparables showed
rental values of between £1.71 and £2.01 psf, and land/buildings between £1.77
and £2.85 psf,
the
highest being in respect of BWML’s relocation from 28 Marshgate Lane. Even if
the
assumption were to be made that
the
tipping hall is not a
tenant’s improvement and falls to be valued for rent review purposes,
the
market rent based upon
the
comparables still falls below
the
£3.56 psf passing
rent. At an appropriate yield of 7% (agreed),
the
capital value of 28 Marshgate Lane based upon
the
passing rent of £104,000 pa becomes £1,400,000.
60.
In a supplemental report dated 28 January 2014, Mr Barden referred to the
Clearun case (Halpern & Ors v Greater London Authority [2014] UKUT
0116 (LC), relating to 151 Marshgate Lane and
the
evidence that had been
produced in it, but said none of that altered his opinion of
the
value of 28
Marshgate Lane.
61.
We consider firstly the
question of
the
£270,000 capital payment.
62.
A lease premium is a capitalised payment of rent. Since it is a payment
of rent, it is to be expected that it would be recorded as such, probably in
the
lease but possibly in some other document such as a side letter. It is common
ground that this payment was never recorded as a premium in any document.
The
invoice agreed to have been given in exchange for
the
£270,000 is
the
only
document that says what
the
payment was for. It records that it was a payment
for plant and machinery. No one now maintains that was in fact
the
case but it
does not support
the
proposition that
the
payment was a premium. It does
suggest caution is needed in considering
the
evidence of
the
parties.
The
sworn statement of Mr Brian Brewster says
the
payment was being requested as an
interim payment to cover Mr Holland's construction costs. We bear in mind that
Mr Brian Brewster was not available to be cross-examined and that Mr Holland
said Mr Brewster was simply telling a lie; Mr Holland insisted he did not need
the
money. On
the
other hand, he agreed that he did not seek
the
money as a
premium at
the
time
the
lease was being negotiated. He said that through
naïveté he did not realise that was something he could have done. He agreed he
had been in a strong bargaining position. In his written
statement he said "My objective was simply to obtain a capital sum to
contribute towards
the
cost of redeveloping
the
site as a recycling
facility." He agreed that
the
money did, at least in part, go towards developing
the
site.
63.
As Mr Williams submitted for the
acquiring authority,
the
payment would
only have a bearing on
the
hypothetical transaction upon which compensation is
assessed if
the
hypothetical purchaser was confident that, on
the
basis that
the
payment of £270,000 was really a premium, he could secure a higher rent on
review than
the
passing rent in
the
lease. If necessary he might have to
demonstrate that fact to an arbitrator on
the
basis of
the
available evidence.
64.
Mr Mould submitted for the
second to fourth claimants that Mr Holland
was in a strong negotiating position against
the
Brewsters. They were
desperate to relocate their business from Highbury and would have been aware of
the
significant capital sums that needed to be expended to make
the
site
operational as a waste management station. Mr Holland’s protestations that he
did not need
the
money are nothing to
the
point. He is a businessman, and saw
the
commercial opportunity to secure a substantial contribution to
the
costs,
the
incurrence of which was a pre-requisite of
the
lease going ahead.
65.
On the
evidence, we have no hesitation in concluding that it is more
probable than not that
the
true nature of
the
payment was a contribution
towards
the
development of
the
site and its construction costs, rather than a
capitalised payment of rent. In our judgment, no hypothetical purchaser, aware
of
the
evidence on either side, would conclude that this payment gave him a
reasonable basis for establishing on a review that
the
market rent was not to be
measured by
the
passing rent. It follows therefore that
the
payment of
£270,000 is not something we take into account in assessing compensation.
66.
We thus turn to the
rental evidence. Econometric’s case, aside from
the
treatment of
the
up-front payment, was based solely upon
the
Farnborough
transaction. Mr Williams submitted that notwithstanding
the
fact that
the
agreement for lease and
the
eventually completed transaction to Taurus took
place significantly after
the
valuation date, it took Econometric over two
years and £250,000 in fees just to get
the
planning consent.
The
site then
had to be readied and a permit obtained.
The
actual letting transaction did
not therefore occur until 2013.
67.
Mr Williams referred to Bishopsgate Parking (No2) Ltd v The
Welsh
Ministers [2012] RVR 237, a case in which post valuation date comparables
were considered in connection with
the
valuation of three multi-storey car
parks. It was held that section 5A of
the
1961 Act does not make irrelevant
comparable transactions that post-date
the
valuation date, but it excludes any
adjustment to
the
valuation in respect of anything that happens after
the
valuation date; that is an increase or decrease in
the
value. In
the
light of
Mr Crawford’s approach, and his statement that Farnborough was a valuable
“proxy”,
the
following paragraphs from
the
judgment were set out:
“62 The
clear acceptance in Millwood of
the
potential relevance of post
valuation date transactions has not in our judgment been rendered of no
application in claims for compensation under
the
1961 Act by
the
recent
insertion of section 5A. Subsection (2) does not say anything that happens
after
the
valuation date “shall not be taken into account” (cuff rule (3) in
section 5). This is what it could, and no doubt would, have said if
the
intention had been to achieve
the
effect for which Mr Humphries [counsel for
the
claimants] contends. What it says is that no adjustment is to be made to
the
valuation in respect of anything which happens after
the
valuation date.
“Adjustment” we take to imply an increase or decrease in value. What is
excluded, therefore, is any increase or decrease in value that
the
land would
have had if a post valuation date event had occurred before
the
valuation
date. If
the
value of
the
land, or an element of that value, can only be
established by reference to
the
knowledge that
the
market would have had at
the
valuation date, post valuation date events are necessarily excluded. Thus
hope value, a value based on
the
hope of a future event occurring, cannot be
established by reference to post valuation date events showing whether such
hope was, or became more likely, to be fulfilled (see e.g. Swansea City
Council v Griffiths, sub nom, Griffiths v Swansea City Council [
2004
]
RVR 111). To take such events into account could cause
the
valuer to increase
or decrease
the
hope value that
the
land in fact had on
the
valuation date.
63. By contrast, in our judgment,
evidence of a post valuation date event may be relied on to establish an objective
fact as at the
valuation date. Thus a comparable may provide evidence of what
the
hypothetical vendor and purchaser would in fact have agreed. That an
actual vendor and an actual purchaser have agreed a price on a property that is
comparable with
the
reference property is undoubtedly capable of constituting
evidence of what would have been agreed in
the
hypothetical transaction for
the
reference property itself. It is this evidential function that was accepted
in Melwood. To put it in
the
most obvious way,
the
open market value
of a precisely comparable property on
the
day after
the
valuation date would
clearly be good evidence of
the
price that would have been agreed
the
day
before for
the
subject property since
the
factors affecting
the
minds of
the
parties to
the
actual transaction would have been
the
same as those which would
have affected
the
minds of
the
parties to
the
hypothetical sale on
the
previous
day. Of course,
the
degree to which
the
comparable transaction will assist in
determining
the
price of
the
reference property will depend on how similar
the
factors that are material to
the
valuation were at, respectively,
the
date of
the
transaction and
the
date of
the
valuation and on whether adjustments can
satisfactorily be made for such differences as there were. But this applies
both to pre valuation date comparables and to post valuation date comparables.”
68.
It was submitted that the
term “proxy” used by Mr Crawford in his heavy
reliance on
the
Farnborough site is not helpful in
the
valuation issue which is
before us. A relevant transaction may be of assistance in two ways. It may
be known to
the
market at
the
valuation date, in which case
the
valuer advising
the
purchaser would have regard to it in formulating
the
bid. Secondly, and
if relying upon a post valuation date transaction, it might provide evidence of
an objective fact at
the
valuation date by demonstrating through
the
market
principle what factors would have been in
the
minds of
the
parties to
the
hypothetical transaction. This requires that
the
same factors are shown to
exist between
the
hypothetical transaction at
the
valuation date and
the
date
of
the
comparable transaction. Differences within those factors may be
the
subject of an adjustment. It is impermissible, however, to use later
transactions simply as a proxy for
the
hypothetical transaction as this is not
evidence of what
the
hypothetical purchaser would have had in mind in
the
round
in formulating his bid. To identify only certain factors from one post valuation
date transaction, for example, licensing capacity, and apply those selected
factors ignoring
the
other factors will plainly give an unbalanced view as to
the
outcome of
the
hypothetical transaction. It is not, in reality, a
comparable transaction, and as Mr Crawford admitted, there was nothing to which
the
hypothetical purchaser of 28 Marshgate Lane could have had regard in
respect of Farnborough at
the
valuation date.
69.
Mr Williams also pointed out, as identified by Mr Barden in his
evidence, just how different Farnborough is to 28 Marshgate Lane in terms of
size, fit out, location and market. Further, if the
Farnborough rent was
analysed on a unit basis per sq ft, it discloses a value of £3.58 psf which is
comparable to
the
passing rent at Marshgate Lane at
the
valuation date. That
is vastly different to
the
£7.12 psf which Mr Crawford contends as a rental
value for Marshgate at
the
2008 review date.
70.
We agree. This last point brings into stark reality the
error of Mr
Crawford’s methodology. Although
the
precise date upon which
the
new rent for
Farnborough was agreed with Taurus is not clear, it certainly would not have
been until well after
the
review date for Marshgate Lane. We were not advised
of
the
figure which Econometric paid for Farnborough in 2007 (surprisingly) but
the
deal with Taurus was so long after
the
valuation date (and
the
actual
“transaction” was not until 2013) that for that to be attributed any weight at
all would be to completely fly in
the
face of
the
principle set out in
the
extract from Bishopsgate set out above.
71.
Even if this transaction could be taken into account, we are satisfied
that the
circumstances in terms of
the
site’s location, market, size and other
factors are so different as to mean little if any weight could be attributed to
it. Thus,
the
two grounds upon which Econometric base their arguments fall
away, and in reality therefore, it has not been necessary to analyse in any
detail
the
comparable evidence that has been referred to by Mr Barden and by Mr
MacDiarmid. However, what we would say is that none of
the
comparables relied
upon by
the
acquiring authority indicate a rental value of
the
£3.56 psf
passing rent at 28 Marshgate Lane at
the
valuation date. Even if we conclude
that there should be a significant uplift from
the
range of rental values that
Mr Barden’s comparables do indicate to account for 28 Marshgate Lane’s much
closer proximity to
the
city,
the
rental value would not, in our view, increase
beyond
the
passing rental figure – and certainly there is absolutely nothing to
suggest anywhere near
the
figure argued for by Mr Crawford. Indeed, he
admitted just that when he said that, excluding Farnborough, there was nothing
to indicate that a profit rent existed at Marshgate Lane.
72.
We conclude therefore, that Econometric’s case has simply not been made
out and determine the
compensation for
the
compulsory acquisition of 28 Marshgate Lane in
the
sum of £1,400,000 to which should be added
the
basic loss payment
of £75,000 creating a total figure of £1,561,000.
73. It follows that, with no profit rent having been established, Courtville has no claim.
74.
This determines the
issues in dispute, and
the
decision is final. We
now invite
the parties to make submissions on costs and an addendum will be
added once that matter has been determined.
DATED 22 May 2014
HH David Mole QC
P R Francis FRICS