Faraday v Carmarthenshire County Council

A tribunal assessing disturbance loss after compulsory purchase may, in principle, consider whether a claimant reasonably failed to use time released by a scheme-related decline in business for another profitable activity. Such a deduction forms part of ordinary mitigation principles. It requires evidence of the claimant’s working practices, the available alternative activity and its profitability. A fall in turnover does not itself prove spare time. A tribunal cannot introduce and decide the issue without giving the parties an opportunity to provide submissions and evidence. A broad-brush percentage cannot cure those defects. On the material before the tribunal, the deduction was unavailable and the appeal succeeded.

Mr Faraday claimed disturbance compensation following the compulsory acquisition of his commercial property by the acquiring authority. The Lands Tribunal found that the compulsory purchase scheme had caused losses to his estate agency business and awarded compensation of £354,111, plus interest. It calculated the hypothetical profits in a no-scheme world, but reduced them by £66,345 to reflect the value of time which Mr Faraday allegedly no longer needed to devote to the declining business.

Mr Faraday appealed against that deduction. The acquiring authority had not advanced the point before the Lands Tribunal, and no evidence had addressed the time allegedly released, any alternative activity, or its profitability. The central issues were whether such a deduction was legally permissible and whether the Tribunal could determine it without first giving the parties an opportunity to address it.

Appeal allowed with costs. Lord Justice Peter Gibson gave the leading judgment. Lord Justice Sedley agreed with his reasoning and Lord Justice Maurice Kay agreed with both judgments. The decision was unanimous.

1. The starting principle was that disturbance loss could include loss sustained before the compulsory purchase order, subject to causation by the scheme, remoteness and the requirement that the loss was not one which a reasonable person would have avoided, as stated in Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111.
2. If a significant point occurs to a tribunal and it proposes to rely on it, fairness requires the parties to be given an opportunity to address it. This applies even where the point arises after the hearing. The opportunity may require further submissions and evidence. The Lands Tribunal had raised no issue about using allegedly released time to generate other profits, and its reliance on the point without notice was procedurally unfair.
3. The alleged freed-up time was not a new category of compensation deduction. It could only operate through ordinary mitigation principles. The relevant question was whether a reasonable person in the claimant’s position would have recognised spare time caused by the decline in the business and would have devoted it to another activity while continuing the existing business. A decline in turnover did not establish a corresponding reduction in work.
4. That conclusion required evidence about the claimant’s working practices, staffing and the generation of business. The Tribunal also needed to identify an alternative activity which was reasonably available and profitable. Those matters had not been explored, and the deductions of 25 per cent and 50 per cent had no evidential foundation. The decision was therefore not open to the Tribunal on the material before it.
5. The court did not exclude the possibility of such a deduction in an appropriate case. Lord Justice Gibson considered that such cases were likely to be exceptional. Lord Justice Sedley preferred to leave open whether they would necessarily be exceptional. Remission was refused because it would give the acquiring authority an opportunity to advance a new case after the hearing, and the compulsory purchase order had been made ten years earlier. The compensation was varied by adding £66,345 and the agreed interest.

• Court of Appeal (Civil Division): Allowed the appeal, refused remission, varied the compensation by adding £66,345 and agreed interest, and awarded costs.
• Lands Tribunal: Determined compensation at £354,111, plus £133,028 interest, after deducting sums for alleged freed-up time.