[2025] UKUT 274 (LC)

The parties agreed that the principle which should guide the Tribunal’s determination of compensation is the principle of equivalence. The claimants should be compensated for all of the loss caused to them by the cessation of the business, including personal and incidental loss, provided it was not too remote; but they must have behaved reasonably to reduce their loss and should not be compensated for loss which they could have avoided. The onus of proving their loss is on the claimants, including loss claimed in respect of management time; but if the Council suggests that loss could have been avoided if the claimants had taken reasonable steps to that end, it is for the Council to identify what those steps were and to prove that the claimants’ loss would have been reduced if they had been taken.

In determining the extent of the loss sustained as a result of a compulsory purchase it is the value of the land (or business) to the owner which should be assessed, not the value to the person acquiring it.

It is convenient to deal with two areas of disagreement on the proper approach to valuation before looking in more detail at the figures. The first concerns the basis of valuation of the claimants’ stock of ELVs. Stock value was not the primary basis of valuation advanced by either side, but it was a component of the claimants’ valuation and proposed as an alternative by the Council’s expert if it were found to exceed the value of the business as a whole. The second issue of principle is whether the first and second heads of the claim can be advanced at the same time, or whether they involve double counting.

For the claimants, Mr Stinchcombe KC submitted that the stock of ELVs should be valued by reference to the value which they would have realised if their value had been realised in the ordinary course of the business. Mr Quyoom’s business was not the sale of ELVs, it was the sale of parts which could be stripped from ELVs and sold on for re-use. What was required was an assessment of the value of the saleable parts which each vehicle contained, to which should be added the scrap value of the remaining shell once those parts had been removed. Allowances should be made against the value of the saleable parts to reflect the time it would take to dispose of them, and to take account of the overheads of the business which were the cost of sale, and the fact that a proportion of the saleable stock would never be sold. Mr Stinchcombe KC submitted that if that assessment was made the resulting figure, which he referred to as the “retail value”, would be the value of the stock to the owners.

On behalf of the Council, Mr Fraser KC suggested that the value of the claimant’s stock was equal to the cost of acquiring it at the valuation date. Other than the disaggregated parts, the stock comprised whole vehicles which had not yet been broken up, and a purchaser would pay the auction price for them. This was referred to as the “cost to the claimants”.

The difference between the retail value of the stock and the cost to the claimants was considerable. The evidence showed that stock of equivalent value could have been acquired in 2017 for about £140,000, while the retail sale of all the stock at the same date (although without any allowance for time or overheads) would have yielded about £1.2m.

Mr Stinchcombe relied on a decision of the Lands Tribunal (CR Mallett FRICS), in Chiltmead Ltd v Reading Borough Council [1981] I EGLR 183 in support of his submission. That case concerned the compensation payable to a dealer in electronic equipment whose premises were compulsorily acquired and who incurred a loss on the forced sale of its stock. The circumstances of the valuation were analogous and although the commodity in which Chiltmead traded was electronic parts rather than vehicle parts, the rival approaches to the valuation of its stock were similar to those adopted in this case. The Tribunal favoured a valuation on the retail basis with the claimant being compensated by reference to the value its stock would have achieved if its sale had not been forced but had occurred in the ordinary course of business, with the proceeds of sale then being discounted for early receipts and for the prospect that some stock might never be sold.

Chiltmead establishes no rule of law, but it supports the claimants’ preferred approach to the valuation of stock and is consistent with the underlying principle that the relevant value to be identified is the value to the owner.

We are not attracted to Mr Fraser’s suggestion that the claimants’ stock of ELVs should be valued at its cost of acquisition. The claimants already owned the vehicles at the valuation date, and it is agreed that they should be compensated on the basis that their business could not be continued. What they have lost is the opportunity to sell the disaggregated parts which the stock would have yielded over many years. The cost to someone else of acquiring an equivalent stock of vehicles, which in any event could only be done over a lengthy period, bears no relation to the value of the ELVs to the claimants, which is properly represented instead by their resale value. If compensation is to be determined by reference to the value of stock, rather than by a valuation of the business as a whole, effect can best be given to the principle of equivalence by an approach which discounts the resale value of the stock to take account of overheads, time taken to sell, and the proportion of stock which is unlikely to have been sold.

As to the second issue of approach, it is said by the Council that the presentation of the claim in three parts is unsustainable because the losses claimed under the first head are claimed again under the second head. The claimants’ forensic accountancy expert, Mr Parton, acknowledged the force of this criticism and recast the second head of loss as “losses derived from unrealised business after the vesting date”. Mr Stinchcombe KC defended that approach and explained that the stock valued under the first head was the stock which the claimants owned when the Council took possession of the Site, whereas the stock which was referred to under the second head was stock which the business would have acquired and sold (at an assumed rate of 70 new ELVs a year for 10 years) had the Site not been acquired. That was said to produce no double counting.

The suggestion that the claimants’ quantification involves “double counting” may not be the best way of explaining what is wrong with a claim which includes both the value of the stock of the business at the valuation date and the value of stock which had not yet been acquired. We agree with the Council that the claim cannot be pursued at the same time under both headings. That is because they are based on mutually inconsistent hypotheses. The first head of claim assumes that the business ceased to trade on 29 March 2018 and that the claimants are to be compensated for the unrealised value of the stock they owned on that date. The second head assumes that the business would have carried on, would have made profits for ten years and would then have been sold as a going concern. The claimants cannot make both assumptions, because they are inconsistent.

The claimants may either claim the value of the business on the date it was lost, or, as the Council’s expert Mr Pearson proposed, the value of the stock at that date as an alternative measure of the loss they have sustained. The value of the business is the sum which it would have realised in the open market if it had been sold. Such a sale would have included the stock of the business at the date of sale, and the prospect of future revenue from buying new stock and selling on the parts. The same stock would not then have been available to Mr Quyoom to disaggregate and sell separately, nor can it be assumed that Mr Quyoom would have continued to buy and sell other stock; there was nothing to prevent him from doing so, elsewhere, and he is being compensated for his inability to do so from this Site by the total cessation of his business. As Mr Parton explained, the first head of loss was intended to represent the “historic value” of the business, while the second assessed future losses. We agree with the Council that where compensation is being assessed on a total cessation basis, both heads of loss cannot be sustained.