[2023] UKUT 153 (LC)

The experts agree that a temporary loss of profit was suffered by the claimant as a result of the relocation and interruption to trading. We consider that assessment of the temporary loss should be confined to the two partial trading years of YE 2016 and YE 2017. The figures in the management accounts show clearly the reduced sales and gross profit figures in those years, together with reduced overheads incurred as a result of partial closure in each year. The six month rent free period in the relocation property, from 20 June to 20 December 2016, contributed helpfully to the reduced overheads in YE 2017 and mitigated the loss suffered to some extent. We understand that the itemised disturbance costs incurred by the actual relocation and fitting out of the relocation property have been agreed separately at £131,618.85.

In order to assess the profit which would have been generated in the no-scheme world at the reference property, for a limited period of temporary loss, we prefer Mr Woodward’s net profit approach, which is grounded in the management accounts available to us for the Watford store. Mr Epstein’s gross profit approach has merit, but we consider that a hypothesis based on sales trends taken from the notional performance of a national average store is too far removed from the reality of trade in Watford to be relied on, particularly as national store numbers rose from 128 to 154 and then to 184 over the two year period. However, the weakness of Mr Woodward’s approach was that he assumed the net profit of £306,166, achieved in YE 2015 when net sales were at their highest level for at least three years, would have been matched in the following two years in the no scheme world. We find this to be unrealistic given the volatility of the retail sector. Mr Lightowler told us that budgets are not produced for individual stores but, even if they were, we consider it would be a bold business that assumed a continuation of profits from a high point. Ms Clutten submitted that past performance has not been an accurate or reliable guide to future performance of the claimant’s business, at national or store level, and this is not surprising, but we must use what we have available. We adopt a more cautious assumption than Mr Woodward for the two affected years, basing our assessment of performance in the no-scheme world on the average net profit achieved in the three years prior to relocation, which is £254,411. Our assessment of the temporary loss on a net profit basis is therefore: