[2002] EWLands ACQ_81_2001 (22 January 2002)
	ACQ/81/2001

	LANDS TRIBUNAL ACT 1949
	
COMPENSATION – disturbance – bank loan – whether repayment of this an admissible head of claim – held that it was not

IN THE MATTER of a NOTICE OF REFERENCE

BETWEEN	WEYMEDE LITHO PRINTERS LIMITED	Claimants
	v
		
	RUNNYMEDE BOROUGH COUNCIL	Acquiring
		Authority

	Re:	Shop, Workshop and Store
		24 Guildford Street
		Chertsey
		Surrey

	Determination by the President without a hearing

	
The following cases are referred to in this decision:

Hadley v Baxendale (1854) 9 Exch. 341
The Wagon Mound  [1961] AC 388 
The Heron II [1969] 1 AC 350 
Hedley Byrne & Co v Heller Partners [1964] AC 465.
Surrey County Council v Bredero Homes Ltd [1993] 1 WLR 1361
Harvey v Crawley Development Corporation [1957] 1 QB 485.
Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111

DECISION
1.	This reference seeks the determination of the amount of compensation payable to the claimants by the acquiring authority in respect of premises at 24 Guildford Street, Chertsey, Surrey.  The freehold of the premises was acquired by the authority in 1998.  The premises were occupied by Weymede Litho Printers Ltd who were holding over under the terms of a 10 year lease granted in 1988.  Application had been made to the court for the granting of a new tenancy.  The leasehold premises were included within the Runnymede Borough Council (Phases 7, 8-11, 12-14 Chertsey Redevelopment) Compulsory Purchase Order 1999, which was confirmed by the Secretary of State on 14 June 2000.  Notice to treat was served on 24 August 2000 and entry was taken on 8 January 2001.  
2.	Weymede Litho Printers was a printing and graphic design business which had occupied the premises since 1985.  The property comprised a double-fronted ground floor retail unit with workshops to the rear together with office, finishing room, dark room and ancillaries on the first floor.  The claim in the sum of £469,864.31 has now been settled at £200,000 (apportioned as to £115,000 for the business goodwill and £85,000 in respect of termination losses) plus interest and fees, in full and final settlement, save as to one head of claim which the parties have agreed should be determined by me without a hearing under rule 27 of the Lands Tribunal Rules 1996.  The issue to be determined is whether or not the claim for the repayment of a bank loan in the sum of £20,399.76 is an admissible head of claim.
3.	The claimants say that the payment of £115,000 for the business goodwill approximates to a settlement of just under 2 YP of their net business profits of £60,000 per annum.  They say that, had they been able to continue the business either at the premises acquired or elsewhere, it would have been reasonable to amortise the bank borrowings over a period of 8 years and not over 2 years as the 2 YP multiplier suggests.  They refer to the leading cases on remoteness of damage, Hadley v Baxendale (1854) 9 Exch. 341, The Wagon Mound  [1961] AC 388, The Heron II [1969] 1 AC 350, and Hedley Byrne & Co v Heller Partners [1964] AC 465.  They also refer to Surrey County Council v Bredero Homes Ltd [1993] 1 WLR 1361 and to the disturbance case of Harvey v Crawley Development Corporation [1957] 1 QB 485.
4.	The principle in such cases as the present is that the claimant should receive such compensation as is fairly attributable to the taking of his land but should not receive any greater amount: see Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111 at 125D.  There must be a causal connection between the acquisition and the loss in question and the loss must not be too remote: ibid 126 A-D.  Where, as here, the effect of the acquisition is to terminate a profitable business, the principal element of disturbance compensation is likely to consist of a capitalisation of the net annual profits.  That is what the parties evidently agreed here, and it is not disputed that £115,000 of the compensation agreed reflects about 2 YP of the business profits.
5.	The valuation of a business in this way assumes that a reasonable period of marketing is available to achieve a sale.  A business is likely to have assets in addition to goodwill, and, if these have to be disposed of at less than market value because of a forced sale, the loss on forced sale will be an additional element of the compensation.  It was in the present case.  A business is also likely to have debts, as the claimants had here.  They will in general, it seems to me, only come into the reckoning if there is a penalty on their early discharge (the equivalent of a loss on the forced sale of assets) or if they are at such an advantageous rate of interest that a purchaser of the business would pay more for it on account of this.  Neither of these conditions applies here.  The debt consists of an overdraft from Barclays Bank.  The overdraft facility was “to assist with working capital on a day to day basis.”  There is no suggestion that any penalty was to be incurred for its early discharge.  Indeed it seems likely that it could have been called in by the bank at any time.  Nor is there any suggestion that it was at an advantageous rate of interest so that its availability added to the value of the business.  
6.	The claimants seek to link the repayment of the bank overdraft to the loss on forced sale of business assets.  They say that they were only able to realise £55,319 as a last minute package disposal of a number of items that they list, including a Heidelberg Press GTO 52 in respect of which £49,321 had to be paid in settlement of the leasing agreement.  The remaining items were worth about £20,000, so that the shortfall was about £14,000 (£49,321 + £20,000 - £55,319).  Since, they say, part of the bank borrowing had been used to finance the purchase of some of these items, they should receive compensation for this shortfall.
7.	I cannot accept this contention.  The loss on forced sale was a head of claim contained within the settlement of £200,000.  That the overdraft may have been used to finance some of the items that were sold at below their market value is nothing to the point.  The loss on forced sale has been dealt with, and it is irrelevant in determining whether compensation should be paid in respect of the overdraft that it was used for the purchase of these items. 
8.	The claimants say that they would have continued to run the business profitably for 8 years, so that the overdraft could have been discharged out of profits made during that period.  However, as the authority point out, there is no evidence to show that the loan would be amortised over this period, and the accounts show a fluctuating overdraft with no pattern of repayment.  The material before me does not show that there was any loss suffered by the claimants through having to discharge the overdraft that was attributable to the compulsory acquisition.  I determine, therefore, that there is no additional compensation to which the claimants are entitled beyond that in the settlement reached with the authority.
					Dated 22 January 2002

					George Bartlett QC, President