Wrexham Maelor Borough Council v Macdougall & Ors [1993] EWCA Civ 24

Mr Macdougall held a lease of office premises from which his company Crest conducted insurance business. Following compulsory acquisition, the business was extinguished. The Court of Appeal considered whether Crest was entitled to disturbance payments under section 37 of the Land Compensation Act 1973 as a licensee in 'lawful possession' and whether Mr Macdougall could claim for loss of his service agreement.

Facts

Mr Macdougall held a leasehold interest in office premises at Lambpit Street, Wrexham. The premises were occupied by Crest Insurance Services Ltd and Crest (Life and Pensions) Ltd, companies in which Mr and Mrs Macdougall were controlling shareholders. There was no formal arrangement regarding Crest’s occupation of the premises. Wrexham Maelor Borough Council compulsorily acquired Mr Macdougall’s leasehold interest. Following displacement, Crest relocated to Chirk where the business was wound down and extinguished in October 1991. Mr Macdougall claimed compensation for the value of his lease and consequential loss including loss of his service agreement with Crest. Crest claimed compensation under section 37 of the Land Compensation Act 1973.

Issues

Meaning of ‘Lawful Possession’ under Section 37

The principal issue was whether Crest, as a company occupying premises under an informal arrangement with the leaseholder, was in ‘lawful possession’ within the meaning of section 37 of the 1973 Act, entitling it to disturbance payments.

Entitlement to Compensation for Loss of Service Agreement

Whether Mr Macdougall, as a non-occupying owner, could claim compensation for loss of his service agreement as consequential loss arising from the compulsory acquisition of his leasehold interest.

Double Counting

Whether the awards to both Crest for goodwill and to Mr Macdougall for loss of service agreement constituted duplication.

Judgment

Section 37 and Lawful Possession

The Court of Appeal upheld the Lands Tribunal’s finding that Crest was entitled to disturbance payments under section 37. Ralph Gibson LJ held that ‘possession’ in the context of section 37 means physical occupation with intention to exclude unauthorised intruders, and ‘lawful’ simply requires that possession not be unlawful by crime, trespass or breach of contract.

“The member held that Crest and Crest Life had from Mr Macdougall exclusive occupation which in his view was possession… If the person is not given exclusive possession he may still, in my judgment, have possession of the land within the meaning of section 37.”

The court rejected the Council’s argument that ‘lawful possession’ required possession ‘recognised in the eyes of the law’ such as a tenant holding over.

Loss of Service Agreement

The court held that Mr Macdougall’s claim for loss of his service agreement was not excluded merely because he was not in occupation of the premises. The claim fell within rule 6 of section 5 of the Land Compensation Act 1961 as compensation for ‘any other matter not directly based on the value of land’.

“I have reached the conclusion that the Council has failed to identify any error of law by the member in holding that Mr Macdougall was entitled to claim in respect of the loss of the service agreement. Such a claim is not excluded merely because Mr Macdougall was not in occupation.”

Double Counting

The court found no double counting as the award to Crest was based on the assumption that goodwill could have been realised with Mr Macdougall’s service agreement continuing to age 65.

Implications

This case clarifies that section 37 of the Land Compensation Act 1973 provides disturbance payments to persons in physical occupation of land who have no compensatable interest, including licensees whose possession is not unlawful. It also establishes that non-occupying owners may claim consequential losses under rule 6 of section 5 of the 1961 Act where such losses are not too remote and are natural and reasonable consequences of the acquisition.

Verdict: Appeal dismissed. The Lands Tribunal’s awards to both Crest Insurance Services Ltd under section 37 of the Land Compensation Act 1973 and to Mr Macdougall for loss of his service agreement were upheld.

Source: Wrexham Maelor Borough Council v Macdougall & Ors [1993] EWCA Civ 24