[2023] UKUT 153 (LC)

Both Mrs Okell and Mr Henderson included a tabular comparison of the attributes of the two properties in their expert reports. The factors they considered can broadly be divided between the characteristics of the properties themselves and the physical environment in which they are located. As far as the properties are concerned, the configurations differed markedly. Mrs Okell noted that the reference property was set out over a single floor while the relocation property, which she considered less convenient, had two floors, the upper of which had restricted headroom in part. She also noted the that the relocation property had less window display space as it lacked a return frontage and part of the primary frontage was compromised by the presence of the bulkhead for the mezzanine floor. Mr Henderson did not initially comment on the configuration of the unit other than noting Mr Lightowler’s conclusion that the layout of the unit was poorer than the reference property. He did however state that in his view the relocation property had a longer frontage that was better lit and occupied a more prominent position. In his supplemental report he refuted Mrs Okell’s assertion that the relocation property was materially less convenient, noting that the mezzanine level amounted to only 12.3 m² and expressed an opinion that it was better configured by virtue of a wider frontage and a larger Zone A area. Mr Henderson’s calculations of the respective floor areas for the reference and relocation properties can be summarised as follows:

Mrs Okell thought that the two units were broadly similar in terms of fit out. This was disputed by Mr Henderson who identified the fit out at the reference property as being a third of the way through its life whilst that in the relocation property was brand new.

Turning to the question of location Mrs Okell acknowledged that the position of the relocation was superior, describing it as a prime trading location in comparison to the reference property which she thought to be fringe of prime. Confusingly she also said the properties were in very similar trading locations, presumably inferring that there was not much difference between the two. She conceded that the shopping environment in Charter Place was less attractive than Intu Watford due to its age and design.

Mr Henderson focussed on retail adjacencies noting that with regard to the main frontage the reference property was located next to vacant units whilst the immediate neighbour on the return frontage was a small mobile phone shop. Large stores occupied by Argos and Wilko were situated on the opposite side of the main thoroughfare.

The relocation property on the other hand was within Intu Watford and benefited from a ground floor location immediately adjoining BHS, very close to M&S and opposite Next. He considered that these major retail occupiers attracted high levels of footfall which would draw customers to the area in which Warren James had relocated. He noted that Pragma had identified the area between Next and M&S as the ‘prime zone’ and recommended that Warren James should relocate to that part of the mall.

Mr. Henderson also said that the BHS store had closed in August 2016, a little over a month after Warren James had commenced trading in Intu Watford. He speculated that the loss of BHS, the closure of the doors to Charter Place, and the creation of an access way to the Charter Place car park had affected footfall until the Intu Watford extension had opened in September 2018. An important ‘cut through’ between the mall and the High Street was also lost when BHS closed. The BHS store was subsequently redeveloped but it was not until spring of 2019, nearly three years later, that the store was split up and the resultant units that faced on to the mall were occupied by Deichmann (a discount shoe retailer) and The Entertainer (a toy shop). The closure of BHS was unrelated to the scheme.

Mr Henderson conceded that there were a greater number of jewellery competitors in Intu Watford than elsewhere in the town centre but thought that shoppers wanting to compare the offerings of the various retailers would be attracted to the vicinity. He noted that the reference property was only 42 metres from the doors of Intu Watford and was itself near to competitors. He went on to say that most of the competitors were on the first floor of Intu Watford or at the southern end of the mall. This statement appeared to contradict his earlier comment about the proximity of the competition. Mr Henderson also emphasised that Intu Watford was covered and protected from the elements whilst shops in Charter Place did have canopies over their frontages but were subject to the vagaries of the weather.

As far as the terms of occupation were concerned Mrs Okell acknowledged that the lease at the relocation property had a shorter term but benefitted from a tenant’s break clause. It also had a turnover ‘top up’ provision and contained an obligation to join the Merchant’s Association which required an annual membership fee. The opening hours were also more onerous than those stipulated at Charter Place.

Whilst Mrs Okell acknowledged that not all benefits reflected in the additional rent would necessarily result in higher turnover, for example better and more convenient staff welfare facilities would not, she maintained that any benefit that the claimant had derived would not render the extra occupational costs incurred at the relocation property worthwhile.

Summarising the evidence for the claimant, Mr Easton submitted that although there were differences between the reference property and the relocation property, the benefits had been overstated by the respondent and would not justify a reasonable, knowledgeable and successful retailer such as the claimant incurring them. The claimant had therefore not obtained value for money.

In contrast Ms Clutten submitted that we should adopt Mr Henderson’s opinion that the additional occupational costs including rent, rates, and service charge were value for money in line with the presumption confirmed in Bibby. Furthermore, the claimant had failed to provide any evidence to rebut the presumption and the additional costs should not therefore be compensatable.