Zafar Quyoom & Ors v The Borough Council of Middlesbrough

Compensation for compulsory acquisition must reflect the owner’s loss, assessed on the principle of equivalence. Where a business is extinguished, compensation may be assessed by the open-market value of the business or, alternatively, by the value of its stock, but mutually inconsistent valuation hypotheses cannot both be claimed. Stock should be valued by reference to its value to the owner in the ordinary course of business, with appropriate allowances for overheads, disposal time and stock that will remain unsold. A company must prove loss caused by management time spent on the claim. An individual claimant may recover reasonable compensation for time personally devoted to the acquisition and compensation process.

The claimants operated a vehicle-dismantling business from land compulsorily acquired by the respondent. The parties agreed compensation for the land and professional fees, and agreed that the business had been extinguished on 29 March 2018. They disagreed about the value of the business, the value of end-of-life vehicles and parts, whether future trading losses and goodwill could also be claimed, compensation for management time, and the value of business equipment. The Tribunal was required to determine the compensation payable under section 5 of the Land Compensation Act 1961.

1. The Tribunal determined that the claimants were entitled to £804,950, comprising £657,500 for stock, £15,000 for Mr Quyoom’s time and £132,450 for business assets and equipment, together with statutory interest from 29 March 2018.

2. The governing principle was equivalence. The claimants were entitled to compensation for loss caused by the acquisition, subject to remoteness and reasonable mitigation. They bore the burden of proving loss. If the respondent alleged that loss could have been avoided, it had to identify the reasonable steps available and prove their likely effect.

3. The relevant valuation was the value of the business or stock to the owners, rather than its value to the acquiring authority or the cost to another purchaser of acquiring equivalent vehicles. The approach in Chiltmead Ltd v Reading Borough Council [1981] I EGLR 183 supported valuing stock by its anticipated ordinary-course resale value, subject to suitable deductions.

4. The claimants could not recover both the value of stock held at the valuation date and projected profits from stock which the business would have acquired and sold in future. Those claims depended on mutually inconsistent assumptions: total cessation on the one hand and continued trading on the other. The Tribunal therefore adopted a stock-based valuation, applying deductions for overheads, unsold stock and the time required for disposal.

5. The claim for company loss caused by management time failed because no loss by the company was proved. However, Mr Quyoom personally spent substantial time dealing with the acquisition, cataloguing stock and assisting with valuation. Applying the distinction in Lancaster City Council v Thomas Newall Ltd [2013] EWCA Civ 802; [2013] RVR 309, the Tribunal awarded him £15,000 for 300 hours at £50 per hour. The reference was accordingly determined in the sums stated above.