Mohammed & Ors v Newcastle City Council

Factual and Procedural Background

These three references concern the compulsory purchase of properties collectively referred to as the reference property, located at 15 Waterloo Street and 1 and 1A Sunderland Street in The City. The acquiring authority, Company A, acquired the reference property under a compulsory purchase order made in 2002, with the agreed valuation date of 29 January 2004. The claim involves compensation for the value of a takeaway fish and chip shop with residential upper parts, together with disturbance claims. However, the case is complex and acrimonious, with claims amounting to approximately £8.54 million in the claimants' latest amended statements of case. After a nine-day substantive hearing, only factual evidence has been heard, with a further hearing to consider expert evidence scheduled.

The claimants are members of a single family: Plaintiff, Appellant 1, Appellant 2, Appellant 3, and Appellant 4. The dispute involves the nature and validity of leases purportedly granted by Plaintiff as freeholder to his siblings and spouse, the existence of multiple businesses operated from the reference property, challenges to the genuineness and effect of leases, claims for disturbance due to relocation of businesses to nearby property owned by Plaintiff, and issues surrounding construction works, mitigation of losses, and the credibility of parties' evidence.

The acquiring authority challenges the genuineness of leases, the existence of separate businesses, the reliability of accounting and tax evidence, and the reasonableness of costs claimed. The Tribunal conducted a site inspection and received written closing submissions from both parties.

Legal Issues Presented

1. Credibility of witnesses
2. The nature and condition of the reference property
3. Details and tenure of 4 Waterloo Street
4. Validity and genuineness of leases and tenure arrangements
5. Existence of multiple businesses at the reference property
6. Reliability of submitted accounts
7. Reliability and completeness of tax returns
8. Impact of surrounding circumstances on the businesses
9. Definition and extent of the redevelopment scheme
10. Appropriate base year for assessment of claims
11. Claims relating to the Convenience Store and Especially 4 You businesses
12. Compensability of shadow period losses
13. Claims for injurious affection and severance
14. Causal connection and mitigation of loss regarding relocation
15. Compensation for works undertaken at Unit 1, 4 Waterloo Street
16. Compensation for works undertaken at Unit 2, 4 Waterloo Street
17. Claimants’ personal time spent in relation to relocation and works

Arguments of the Parties

Appellants' Arguments

• The claimants assert that leases were granted to family members and separate businesses operated from the reference property.
• They claim compensation for disturbance due to relocation of businesses to nearby premises and for works undertaken to adapt those premises.
• The claimants rely on accounting and tax returns to substantiate business losses and assert that extended trading hours were essential to business success.
• They argue that the redevelopment scheme adversely affected their trade by reducing pedestrian traffic and night-time economy in the immediate area.
• The claimants contend that the year 2000 is an appropriate base year for assessing losses as it predates the impact of the scheme.
• They submit that personal time spent on relocation and supervising works is compensatable.
• They maintain that the leases, although informal and poorly drafted, reflect genuine arrangements.
• The claimants rely on expert valuation evidence yet to be heard for the value of works and losses.

Acquiring Authority's Arguments

• The acquiring authority submits that the leases were shams and not genuine legal interests, created to inflate compensation claims.
• They deny the existence of separate businesses other than the main fish and chip shop, describing other claimed businesses as implausible or ancillary.
• The acquiring authority challenges the credibility of the claimants and the reliability of their accounting and tax records, pointing to discrepancies, omissions, and lack of corroboration.
• They argue that the claimants failed to mitigate losses by moving to premises without unrestricted trading hours and that the second relocation was too remote and unreasonable.
• The authority contends that the redevelopment scheme did not eliminate the night-time economy in the area and that the claimants’ own contemporaneous statements contradict their current case.
• They submit that shadow period losses are not compensatable unless directly caused by the compulsory acquisition of the land.
• The acquiring authority disputes the reasonableness and payment of costs for works claimed by the claimants and challenges the valuation of such works.
• They submit that personal time claims are exaggerated, unsupported, and lack credible evidence.
• The authority disputes the claim for injurious affection, particularly the reliance on an alleged car parking area, which they assert is public highway and not part of the landowner’s property.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal undertook a detailed factual and legal analysis of the claims, focusing on the credibility of the claimants and the genuineness of the leases. It found that the leases purportedly granted by Plaintiff to his siblings and spouse were shams, not intended to create genuine legal interests, but rather family arrangements or accounting devices to inflate compensation claims. This conclusion was supported by poor drafting, lack of corroboration of rental payments, and inconsistent documentary evidence.

The Tribunal accepted that the claimants occupied the reference property as informal licensees and were entitled to disturbance payments under the Land Compensation Act 1973, but had no compensatable leasehold interests. It rejected submissions that equitable interests arose from the sham leases.

Regarding the existence of multiple businesses, the Tribunal concluded that only one business—the fish and chip shop—was conducted from the reference property and later from 4 Waterloo Street. The other purported businesses were found to be ancillary or not independently established, with insufficient evidence to support separate claims.

The Tribunal found the claimants’ accounting and tax records to be unreliable and incomplete, with numerous discrepancies unexplained, undermining the credibility of financial claims. The absence of evidence of tax payment was particularly concerning.

On the surrounding circumstances, the Tribunal accepted that the redevelopment scheme altered the immediate environment, reducing pedestrian traffic past the reference property due to closure or relocation of some nightclubs and bars, but rejected the claimants’ assertion of a monopoly or total loss of night-time trade. The Tribunal found that the redevelopment scheme did not entirely eliminate the night-time economy in the area.

The Tribunal carefully considered the extent of the redevelopment scheme for valuation and compensation purposes, applying statutory provisions under the Land Compensation Act 1961 and relevant case law, and concluded that the scheme’s extent should be defined in accordance with statutory assumptions rather than broader or earlier regeneration strategies.

The choice of the year 2000 as the base year for claims was rejected as inappropriate due to unreliability and lack of representativeness of the accounts for that year, and the claimants’ own evidence suggested the scheme’s effects predated that year.

The Tribunal rejected claims for shadow period losses that were not directly caused by the compulsory acquisition of the land, distinguishing losses caused by the general blight of the scheme or construction activities from those caused by dispossession.

On injurious affection, the Tribunal found that the claimants had to prove that the freehold interests in the reference property and 4 Waterloo Street were held together so that severance caused prejudice. The Tribunal expressed provisional skepticism about the claimants’ reliance on alleged car parking areas as enhancing value, noting that such areas appeared to be public highway. The question of compensation for interference with rights of light was reserved for expert evidence.

Regarding causal connection and mitigation of loss, the Tribunal found that the claimants’ relocation to Unit 1 at 4 Waterloo Street was reasonable in principle, but the subsequent move to Unit 2 was not a direct consequence of dispossession and was therefore too remote. The Tribunal rejected the claimants’ failure to consider alternative premises seriously and found inconsistencies in their actions and evidence regarding availability and suitability of premises.

The Tribunal was critical of the claimants’ evidence on costs of works to Units 1 and 2, noting lack of evidence of proper tendering, payment, and the reasonableness of the expenditure relative to property values. The Tribunal accepted that expert evidence on measurement and valuation of works was necessary but found the claimants’ documentary evidence lacking in credibility.

The claim for personal time spent by the claimants on relocation and supervision of works was found to be exaggerated, inconsistent, and inadequately supported. The Tribunal allowed a substantially reduced allowance for personal time based on a reasonable estimate and the national minimum wage rather than the arbitrary and unsupported rates claimed by the claimants.

Overall, the Tribunal emphasized the importance of credible, corroborated evidence and the application of statutory principles and relevant case law in assessing compensation claims arising from compulsory purchase.

Holding and Implications

The Tribunal DETERMINED the factual issues identified, finding that:

• The leases purportedly granted by Plaintiff to family members were shams and have no legal effect.
• Only one business—the fish and chip shop—was conducted from the reference property and 4 Waterloo Street.
• The claimants were informal licensees entitled to disturbance payments but had no compensatable leasehold interests.
• The accounting and tax evidence submitted by claimants is unreliable and incomplete.
• The redevelopment scheme altered the immediate area but did not eliminate the night-time economy.
• The claimants’ relocation to Unit 1 was reasonable, but the subsequent move to Unit 2 was too remote and not compensatable.
• Claims for shadow period losses not directly caused by compulsory acquisition are not compensatable.
• Claims for injurious affection require further expert evidence, particularly regarding whether properties were held together and rights of light interference.
• Claims for costs of works and personal time require expert evidence and have been substantially reduced or disallowed in part due to lack of credible evidence.

The Tribunal scheduled a further substantive hearing to consider expert evidence and case management, noting that some expert evidence may no longer be necessary or relevant in light of the factual findings. No new precedent was established; the decision primarily resolves factual disputes and guides the further conduct of the case.