UPPER TRIBUNAL (LANDS CHAMBER)

	
UT Neutral citation number: [2015] UKUT 354 (LC)
UTLC Case Number: ACQ/72/2013	

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

COMPENSATION – compulsory acquisition of land and commercial buildings in connection with the London Olympics 2012 – disturbance – loss of profits – increased costs of replacement premises – value for money – other temporary losses – directors’ time – pre-reference costs - Land Compensation Act 1961 section 5, Rule (6) – Compensation £360,596

	IN THE MATTER OF A NOTICE OF REFERENCE

BETWEEN	KENDON PACKAGING LIMITED	Claimant

	and

		GREATER LONDON AUTHORITY		Acquiring 
		   					Authority

re: Bow Paper Works, Bridgewater Road, Stratford, London E15 2JZ

	Before: P R Francis FRICS
 	 
Sitting at: Royal Courts of Justice, Strand, London WC2A 2LL

3 - 6 & 9 February 2015

Neil King QC, instructed by Bond Dickinson LLP, solicitors of Bristol for the claimant
Alexander Booth, instructed by Wragge, Lawrence Graham, solicitors of Birmingham for the acquiring authority

© CROWN COPYRIGHT 2015

The following cases are referred to in this decision:

Director of Buildings v Shun Fung Ironworks [1995] 2 AC 111
Waters v Welsh Development Agency [2004] 1 WLR 1304
Horn v Sunderland [1941] 2 KB 26
Lindon Print Ltd v West Midlands County Council [1987] 2 EGLR 200
J Bibby & Sons Ltd v Merseyside County Council (1979) 39 P & CR 53
Service Welding v Tyne & Wear County Council [1979] 38 P&CR 352
Lancaster City Council v Thomas Newall Ltd [2013] EWCA Civ 802

DECISION
Introduction
1.	This is a decision to determine the compensation (if any) payable to Kendon Packaging Ltd (“the claimant” or “KPG”) for business losses alleged to have occurred following the enforced relocation from its operating premises at Bow Paper Works, Bridgewater Road, Stratford, London E15 2JZ (the subject premises referred to hereafter as “BPW” or “the reference land”) to Unit 2, Innova park, Enfield, Middx EN3 7FL (the replacement premises, referred to as “Innova Park”) occasioned by The London Development Agency (Lower Lea Valley, Olympic & Legacy) Compulsory Purchase Order 2005 (“the CPO”).  The compensating authority, and respondent in this matter, is the Greater London Authority (“the GLA”) which has succeeded the London Development Agency (“LDA”).
2.	Mr Neil King QC of counsel appeared for the claimant and called Mr Edwin Kendon and his brother, Mr Alistair Kendon, both directors of the claimant, who gave evidence of fact together with Mr David Epstein FCA of Kingston Smith, Forensic Accounting Services, London EC1 who gave expert forensic accountancy evidence.
3.	Mr Alexander Booth of counsel appeared for the GLA, and called Mr Graeme Lawes, a director of the Real Estate Team at Deloitte LLP who gave evidence of fact and opinion in connection with his involvement with the relocation process and other matters; Mr Mitchell Collins, an Independent Packaging Consultant who gave evidence on the paper and plastics packaging industry; and Mr Gordon Stevenson of Zolfo Cooper, Chartered Accountants, who gave forensic accountancy evidence. 
4.	In pursuing the claim which is the subject of this reference, the claimant initially sought the sum of £16,076,328 under three heads:
(a)	 Compensation for the freehold value of BPW, pursuant to section 5, Rule (2) of the Land Compensation Act 1961 (“the 1961 Act”) in the sum of £9,400,000.
(b)	Compensation for costs incurred in connection with KPG’s relocation to Innova Park pursuant to section 5, Rule (6) of the 1961 Act in the sum of £1,563,983.
(c)	Compensation for loss of profits alleged to have occurred to the claimant’s business as a consequence of the compulsory acquisition (again pursuant to Rule (6)) in the sum of £4,810,583. 
5.	Following negotiations between the parties claims (a) and (b) were settled in May 2014 in the sums of £8,500,000 and £1,100,000 respectively.  The claimant has received £9,445,000 advance payments pursuant to sections 52 and 52A of the 1961 Act, made up as to £75,000 towards professional fees, £7,650,000 being 90% of the Rule (2) claim (claim (a)), £1,620,000 being 90% of the acquiring authority’s originally estimated rule 6 claim (claim (b)) of £1,800,000 (that being made up of £250,000 loss of profits, £30,000 management time and £1,520,000 “other relocation costs”), together with £100,000 in full and final settlement of the claimant’s entitlement to compensation under section 33 of the Land Compensation Act 1973. 
Issues
6.	The remaining issue, (c), is made up of four discrete aspects which, following some minor revisions to the initial claim, amount to £4,952,879:
(a)	Losses allegedly occasioned by loss of customers said to have ceased trading with the claimant due solely to the compulsory acquisition and KPG’s subsequent move to Enfield (the ‘Lost Customers’ claim valued at £2,703,277).
(b)	Increased costs incurred at the Enfield premises which are alleged not to provide value for money (the ‘Increased Costs Claim’ valued at £1,912,603).
(c)	Loss of profits allegedly due to the amount of management time which two of the directors had to expend in connection with the compulsory acquisition, thus distracting them from their principal duties of running the business (the ‘Management Time’ claim valued at £231,570).  
(d)	Temporary losses (the ‘Temporary Loss’ claim valued at £105,429).
Claims were also made for pre-reference costs, and statutory interest.
7.	It was the GLA’s case that no compensation is payable in respect of any of the four remaining principal heads of claim.  
Factual background
8.	The parties helpfully produced a statement of agreed facts and issues from which, together with the evidence, counsel’s helpful skeleton arguments and written closing statements (the latter all being received by 16 March 2015), and my inspections on 17 February 2015 of Innova Park and premises at Beckton that were considered by the GLA to be a suitable alternative as a potential relocation site for the claimant, I find the following facts. 
9.	The reference land included in the CPO consisted of:
Plot 642:   18,392 sq m of factory and offices known as Bow Paperworks  and comprising Main Warehouse (modern), Rear Warehouse, Brick Shed, Production Space and Main Offices, yards, parking areas and access ways, open storage area and expansion land with electricity pylon (south-west site).  	
Plots 645, 646 and 647:  281 sq m of overgrown and vacant scrub land adjacent to the above. 
10.	Access to the reference land, which extended to about 5 acres (2.02 ha) and included 72,045 sq ft (6,692sq m) of floorspace in three buildings, was along Bridgewater Road, a privately maintained cul-de-sac over which the claimant had unfettered rights, and which led off the public highway at Warton Road, E15.  The land lay on the north-west side Bridgewater Road, over a concrete bridge that crossed the Waterworks River, the river forming the north-east boundary of the site.  The north-west boundary was onto the main London – Norwich railway line with, to the west, the Northern Outfall Sewer (over which there was a public car park).  Opposite the site, on the other side of the road, were further industrial/warehouse units.  The area was, in general, of a mixed industrial and commercial nature.
11.	Following the award by the International Olympic Committee of the 2012 Olympics on 6 July 2005 to London, the CPO was made on 16 November 2005 and confirmed by the Secretary of State on 18 December 2006.  A General Vesting Declaration was made on 23 April 2007 and the land vested in the acquiring authority on 2 June 2007 - that being the valuation date for the purposes of this reference.  However, whilst the acquiring authority took immediate possession of the unused expansion land on that date, pursuant to a lease-back agreement dated 24 July 2007 (“the Bow Paperworks Agreement”), KPG remained in occupation of the remainder of its premises until 28 February 2008 when the LDA took over the part known as ‘Warehouse 1’, eventually vacating the remainder on 15 May 2008.  
12.	The initial approach to the claimant had been made by the LDA in 2004 in an attempt to purchase the land by agreement subject to London being awarded the 2012 Olympic Games.  Although negotiations formally commenced in October 2005, the CPO was made in the November of that year and detailed negotiations began in earnest in early 2006, KPG being advised that possession of the land would be required in July 2007.
13.	The claimant initiated a search for alternative premises and appointed Strettons, Chartered Surveyors, to assist.  A number of potential sites were also suggested by the LDA, including the premises at Beckton, but none of these were deemed suitable.  Having considered over twenty potential relocation sites, in the summer of 2006 KPG entered directly into discussions with the owner/developer of land at Innova Park, Enfield (to which it eventually moved) with a view to relocating there once a bespoke design and build contract had been completed. That would provide an office/warehouse building of 56,155 sq ft (5,217 sq m), accommodation. There were delays in finalising the terms for the Innova Park contract due to circumstances wholly outside KPG’s control, this resulting in the need for the Bow Paperworks Agreement to enable them to remain in possession of part of BPW pending completion of Innova Park.	KPG eventually took up occupation of Innova Park and finally vacated the remaining part of the reference land in May 2008.
Claimant’s case
14.	Mr Edwin Kendon produced an extensive (58 page) witness statement setting out details of the Company including its history, activities and modus operandi, together with his own background and responsibilities therein.  He also provided comprehensive descriptions of BPW and the Innova Park relocation premises along with narrative relating to the alleged effects of the CPO, the relationship with the LDA and GLA and the negotiations and steps he and his brother Alistair had taken to find the alternative premises. He also produced over 730 pages of appendices together with a rebuttal statement following service of the acquiring authority’s expert reports and witness statements, a further rebuttal statement and some corrections/amendments to details earlier provided.  
15.	Mr Kendon is currently chairman of KPG but, at the valuation date of 2 June 2007, was Sales Director.  He said that he and his brother Alistair (who is Managing Director) are the sole shareholders in the company, each having a 50/50 stake.  The firm (known originally as L A Kendon & Co Ltd) was founded by their father in 1933 and he joined the Company in 1970.  There were then a total of 5 employees including his brother.  Over the years, both by acquisitions and organic growth, the Company has become one of the UK’s largest importers, converters and distributors of consumable packaging materials.  They also have a number of associate companies including Kendon Rope & Twine Co Ltd in Yorkshire and various other outlets throughout England. Kendon Packaging Group Plc, as the Company became known, had occupied Bow Paper Works (the reference land) for 27 years prior to its enforced move due to the CPO in 2008.  In addition to the main buildings, the Company, through its subsidiary, H. Cormacey & Co owned the “expansion land” towards the south of the site.
16.	BPW, Mr Kendon said, was the Group Head Office and it occupied a 5 acre site that was conveniently situated close to the City, West End and most Inner London postal districts which was where their key markets are located. He explained that KPG had a strong presence in the fashion industry, supplying the West End fashion houses with specialist papers together with consumable packaging materials for the production and distribution of completed garments.  They also produced a general and bespoke assortment of packaging materials for a broad range of companies along with specialist food grade papers (such as greaseproof paper) for the food production and distribution companies in London.  At the valuation date, approximately 50% of their business was focused on the London area.  
17.	The reference land was also the “key distribution node” for KPG’s other sites in Nottingham, Dewsbury, Manchester, Ottery St Mary in Devon and East Ardsley in Yorkshire. Access to their wider markets via the A1(M), M11, M1 and other motorways was also easy via the A12 and the M25.  BPW consisted of a main warehouse totalling 33,769 sq ft (3,137 sq m) and contained a conventional 5-tier Dexion racking system for the stock capable of accommodating 3,215 pallets.   Servicing of the warehouse was via a large yard to high roller-shutter doors that could accommodate 40ft delivery vehicles.  The second building, of 17,426 sq ft (1,618 sq m), was of steel clad portal frame construction and used for the storage of mill reels and other awkwardly shaped packaging materials.  The rear of this building overlooked the main railway line to the north-western boundary and accommodated a large advertising hoarding stating: “Kendon Packaging Group PLC – London’s foremost suppliers of packaging materials.”   The conversion plant and administration offices occupied a single-storey building that extended to 20,094 sq ft (1,867 sq m).  The offices took up about 30% of the building.  There was a further, disused, storage building of 756 sq ft (70 sq m) together with a good sized yard and ample staff and visitor parking.  Finally there was the 1.57 acre (0.63 ha) area of vacant land with the potential for expansion of the business or other industrial development.   
18.	 The Company made its profit, Mr Kendon said, by purchasing well, understanding its markets, selling at competitive prices and controlling its overheads.  They had to know their customers’ needs and requirements.  With much of the paper being sourced from China, Malaysia and Asia there was the potential for 6 month lead in times for production, shipping and delivery (even more for specialist papers or small orders), so they had to be ‘ahead of the game’ to ensure they had the right product available at the right time. Many of KPG’s customers expected 24 hour delivery, and competitive advantage was gained from knowing one’s customers and the particular markets to ensure immediate availability. A detailed international knowledge of suppliers was also required to understand, for instance, which mill or plant was able to produce which product, and what that supplier’s pricing strategy was. Part of his job was to monitor exchange rates, raw material prices and sea freight costs and from all this information decisions could be made in respect of product pricing.  Mr Kendon said he disagreed with Mr Collins’ view that lead in and delivery times of the raw materials were significantly shorter.
19.	Mr Kendon explained that the Company was one of the only ones to have the added advantage of being able to convert many of their products to clients’ specific requirements from mill sized master reels.  For instance, their conversion plant cut and packed sheets of greaseproof and other cooking papers to specific sizes from large reels that were moved around the warehouse from the reel storage area by specialist fork-lift trucks.   
20.	The third member of the Company’s board (although not a shareholder) prior to the move to Enfield was Mr Vic Hunnable who was Purchasing Director.  He was said to have had an enviable reputation in the industry and was recruited in 1972.   His principal responsibilities were for the negotiation and purchase of the packaging materials to be converted and sold by the Company and his intimate knowledge of the product enabled the firm to expand into new areas of business. As a small board of directors, Mr Kendon said that their meetings tended to be informal and were not minuted.  Major decisions were made by himself and Alistair jointly.   Neither he nor his brother had formal contracts of employment, and their remuneration packages (which had remained static for many years) were decided on the basis of market review and assessed as an appropriate percentage of the Company’s profits. 
21.	The two other principal employees (out of a total of 60 at head office with 150 more in other locations) were Mr Frazer Kendon (Alistair’s son) who was Sales Manager and was also responsible for the sales staff, together with Mr John Proctor who was director of Ingham Paper & Packaging Ltd, a subsidiary company.  Mr Kendon went on to set out in considerable detail the overall extent of his own role in the Company, and provided a comprehensive description of precisely what the Company did.  He said that from 2004 when the potential for them losing their premises at BPW arose, a considerable amount of his own, and his brother’s time had been necessarily expended on negotiations with the LDA and the GLA, appointing solicitors and surveyors, seeking out a replacement site, carrying out negotiations for its acquisition, dealing with the design and build contract and organising the move.  The total claimed for management time was £231,570 being calculated as to 1,321.9 hours expended by Messrs Edwin and Alistair Kenyon at £175.18 per hour.   All this distraction, Mr Kendon explained, was the principal reason why customers were lost.  He and Alistair were unable to monitor and visit the clients to ensure relationships were maintained.  In such a competitive market, if a company’s principal supplier takes its eye off the ball, competitors will soon step into their place and the business will not be retained.  He also said that he was unable to spend as much time as he should monitoring exchange rates, and this had the effect of making their purchases of stock and materials considerable more expensive. In his view, it was all this intense involvement in the move that reflected in the significant reduction in the Company’s profitability, especially in 2009 and 2010, as the accounts revealed. 
22.	Mr Kendon said that they first became aware of the Olympic proposals in 2003.   When the CPO was made, their appointed agents, Strettons, submitted an objection on KPG’s behalf on the grounds that the bridge over the railway to provide access from West Ham station for which the land was specifically required would be unlikely to ever be built (which indeed it transpired was the case).  It was argued that, if a bridge were indeed to be needed it could be accessed off the expansion land, and their main site could be left intact.  So, whilst the objection had merit, the CPO was eventually confirmed following the inquiry and the whole of KPG’s land was taken.   
23.	Once the search for alternative premises or development sites commenced, following the appointment of Strettons as their property advisers and Bond Pearce (now Bond Dickinson) as their legal team, Mr Kendon said that three potential locations that were owned by the LDA were suggested in January 2006, along with 17 others that were either found by their agents or they found for themselves.  Inspections of all of these were made, and detailed investigations were undertaken such as monitoring traffic levels at certain times of the day and gauging accessibility to the major road network, in addition to the suitability or otherwise of the buildings and sites themselves. None of these was deemed suitable.  
24.	In particular, a 100,000 sq ft (9,290 sq m) site with plans for a 53,648 sq ft (4,984 sq m) industrial unit to be constructed thereon, owned by the LDA at Beckton Waterfront was considered closely. The acquiring authority had argued that it was a most suitable relocation opportunity which could have been available sooner than Innova Park and was in any event closer to KPG’s main London based clientele.  Meetings were held with the LDA’s appointed developers, Rosemount, but in addition to the fact that it would have cost more than was at that time being offered for BPW, and extra funding would be required, it failed to meet their needs.  The proposed eaves height and overall size of the unit would not have been enough for the required levels of pallet storage.   It was acknowledged that the LDA then offered an adjacent building of 12,000 sq ft (1,115 sq m) in addition, but this would have been separated from the main building by the estate road and there were concerns about the fork lift trucks having to use this to get between the buildings especially in wet or otherwise inclement weather.  There were also insufficient office facilities, inadequate parking and concerns over congestion and access for the large delivery vehicles.   The site was also immediately adjacent to the largest sewage farm in Europe and it was known that problems had been encountered with this, particularly in respect of noxious odours.   After very careful consideration, Mr Kendon said, this site was rejected too.
25.	In May 2006, KPG appointed SBH – International Property and Construction Consultants, as their advisors in respect of all the building aspects of what they required and how to achieve it.  At around the same time, the site at Innova Science Park, Enfield, was identified and in June he and Alistair met the owners, Kennet Properties Limited to take matters forward.  It appeared, from discussions with Kennett and SBH that there was sufficient time for an appropriate design and build contract to be set up and undertaken to meet the LDA’s proposed deadline for them to vacate BPW – June 2007.    The site was close to the M25 and whilst it was significantly further away from KPG’s core London based customers, it would provide enhanced accessibility to the Company’s regional sites in the Midlands and the north of England. Applying the same criteria they had used in investigating all the other potential relocation sites, the decision was made that Innova Park whilst not being perfect, offered the best option available.  
26.	KPG was initially offered a 4.25 acre site on the park with the capability of constructing an 80,000 sq ft (7,432 sq m) building which still left some room for expansion.  However, this proved, with the price being asked for the land and with the construction and fit out costs, to be unaffordable.  Kennet then offered the adjacent site, which was substantially smaller and would only accommodate a building that was smaller than BPW and had no opportunities for expansion.  However, although it was not ideal, due to the severe time constraints and lack of suitable alternatives it was decided to proceed as it was affordable without having to arrange additional funding (based upon the advance payment which at that time was being offered) and could, it was thought, be constructed in accordance with the timetable imposed by the LDA.  
27.	Although it could accommodate less storage than was available at BPW there was just about sufficient room if a minimum 14m eaves height could be provided, and if they were prepared to install Very Narrow Aisle (“VNA”) racking.  This was what the name suggested and included guide wires along the aisles which were picked up on sensors underneath the special fork lift trucks that would be required.  These allowed the fork-lift to automatically take the correct route along the aisles enabling the driver to concentrate entirely on the very precise task of loading/unloading the racks.  In all space for 4,983 pallets was provided.  The overall area of the warehouse and conversion area in the new building was 49,068 sq ft (4,558 sq m) excluding the two-storey offices to the front of the building.  
28.	Mr Kendon said that throughout the process of finding and eventually proceeding with Innova Park, LDA and their agents were kept closely informed of progress. This was particularly important as negotiations were necessary to secure the funding (through the advance payments) and to deal with all the other relevant disturbance issues.   Unfortunately, in August 2006, a party who was aggrieved at the variations to the original planning permission for the Science Park that had been allowed by LB Enfield, commenced Judicial Review proceedings in the High Court.  Although KPG had been advised that the application had little merit, it was not until April 2007 that a notice of discontinuance was issued.   With all the other work that had to be undertaken in respect of finalising the acquisition of the land and setting up the design and build contract, these delays meant that it was not until August 2007 that the contracts were finally signed – this already being two months after the original deadline date.  Construction work commenced on 3 September 2007.
29.	This is why it had become necessary, in connection with the ongoing negotiations with LDA for the purchase of BPW, to negotiate and put into place arrangements for a lease back of the BPW premises to allow the Company to continue to trade pending the completion of Innova Park.  Thus, after numerous re-drafts, the “Bow Paper Works Agreement” was finally concluded on 24 July 2007.  This allowed them to stay at the operational part of the premises (the ‘expansion land’ being taken as at 2 June 2007) until 2 February 2008.  The Agreement also made provision for advance payments of £9,445,000. Due to the fact that Innova Park was not completed by February 2008, it was agreed that the LDA would take over just the long narrow “industrial” building adjacent to the railway lines on 29 February 2008 allowing KPG to remain in occupation of the remainder until mid May 2008 when Innova Park finally became ready, and the rest of the move could take place.
30.	The taking of the industrial building, in February 2008, meant that KPG had to find a temporary location for everything that had been stored in there.  Mr Alistair Kenyon identified some farm buildings at Ingatestone in Essex, and these were used for the purpose between February and May 2008.  The costs of this additional storage formed part of the disturbance claim and the need for off-site storage also had serious implications in terms of efficiency and the quality of their delivery service to customers.    
31.	Although there are a number of advantages to Innova Park, and the Company had been fortunate to retain the services of the majority of the staff, Mr Kendon set out a list of disadvantages, principally due to constraints on space creating difficulties in stock movement – this resulting in additional production costs and reducing profitability.  An example of increased costs was that due to the lack of storage, they had to order reduced levels of stock which, at half rather than full lorry loads, meant they were unable to obtain bulk discounts.  There had been no real operational or marketing advantage in moving and Innova Park was at best a compromise.  The nature of the Company had also changed with the loss of a number of its London based customers.  Whilst it was acknowledged that Frazer Kendon and the sales staff had been successful in obtaining new customers and markets, it was Mr Kendon’s view that those new accounts would have been obtained anyway if they had remained at BPW.
32.	The analysis that had been performed by himself, Frazer Kendon and the financial controller to establish, for the purposes of obtaining compensation for loss of profits, why customers had left during the lead up to the move, and afterwards, revealed that it was principally due to concerns about whether the Company would continue, and whether it would be able to sustain historical levels of service.  Several customers were hedging their bets by finding alternative suppliers in tandem with, or to replace KPG.  There had been a significant reduction in turnover in the year that the move had occurred, this being due to the lost accounts.  Whilst he did have the opportunity to talk to customers, and allay any fears they may have had, Mr Kendon said that it was not until contracts were finally signed for Innova Park in August 2007 that he was able to give an entirely positive response.  
33.	It was established in evidence that the question of loss of profits had been included as a heading in Mr Fisher’s (of Strettons) initial calculations of the compensation claim in June 2006, but that heading had been under the section covering exclusions along with matters such as staff redundancy and relocation packages which could not be known at the time.  The December 2006 version which was headed “Kendon – Disturbance Assessment for s52 Advance Payment” and included figures claimed by Strettons together with a column setting out the acquiring authority’s assessment incorporated estimated personnel costs but, under the heading “Loss of Profits” included sections for ‘Pre Notice to Treat’; ‘Temporary losses’ and ‘Future losses’ against each of which it said “claim to follow”.  The remaining section under loss of profits related to ‘Affordability’ and included an estimated claim for additional business rates at Innova Park.  It was accepted by Mr Kendon in cross-examination that the subject of losses occasioned by a loss of customers “but for” the move to Innova Park and thus resulting from the CPO was not considered until much later, the initial claims having just concentrated on the value of BPW and relocation costs.  He said, when asked when he thought about making a loss of profits claim, that some time after the move, perhaps in 2009 or 2010, Mr Fisher said KPG might have a case, and suggested that a forensic accountant should be approached.  
34.	It was thus not until Mr Epstein had been appointed that this element of the claim was pursued. This was the reason why specific contemporaneous evidence relating to lost customers had not been retained, whereas Mr Fisher had at the outset of Strettons’ appointment advised them to keep specific records of all the time that he and Alistair spent dealing with compensation matters.    
35.	The exercise that was performed for the purposes of establishing precisely how many customers were lost due to the CPO, and which was provided to Mr Epstein, was not therefore  undertaken until 2013.  It was admitted that due to a shortage of space on the Company’s computer system, customer computer records from pre-2007 had been deleted.  However, the Company list of accounts existing for the financial year ending 31 March 2008 was analysed and compared with future financial years 2009 and 2010, the first full year of trading at Innova Park.  Over 1,000 customers were initially identified and details were then passed to Mr Epstein for analysis.  The Kendons then applied their own knowledge and the recollections of the sales personnel who had had contact with those customers to try and recall the reason why a particular account had been either completely lost or where their business had significantly reduced, and if it was “due solely to reasons associated with the move of the Company.”   The list was then whittled down to 112 where it was considered the reasons may have been move related and after discussions with Mr Epstein, it was reduced further to a total of 91. 
36.	Mr Kendon accepted that in respect of 82 of those customers, he had no contemporaneous evidence whatsoever to support the assertion that they had withdrawn or reduced the business they undertook with KPG due to the CPO.  No letters had been written to them to ask, and none had been received giving that (or anything else) as a reason.  There were no records of telephone calls having been made to find out why they had left, and there was no email evidence.  There was also no internal email traffic between the directors and members of staff, Mr Kendon explaining that all communications had been entirely verbal.  Although Mr Stevenson, the acquiring authority’s forensic accountant had repeatedly asked for documentary evidence to support this aspect of the claim, he said that the level of information sought was considerable and out of all proportion to what was required.  It would have taken an inordinate and unacceptable amount of time and effort to wade through thousands of records to provide what it was that Mr Stevenson was seeking.  Mr Kendon admitted that he was unable to recall which member of the sales team had spoken to which former customer and there was no record of what had been said.  He confirmed that certain of the lost customers included in the claim had told the staff that there were other reasons for leaving, but they had been included, as in some cases it had been assumed that in fact the real reason for the cessation of trade was the CPO.
37.	Mr Kendon then explained that contact had been made with nine of the largest customers where the contacts were still known and available to comment, and their written responses to the questions asked had been provided to Mr Epstein.    Findel, which had the largest spend, was not contacted because KPG’s former contact with them had left.  The process of contacting these nine former customers was by Mr Kendon initially telephoning them and asking for the reasons.  He then wrote each customer a letter reiterating how they [KPG] saw the situation with a request that they copy and sign the letter confirming that summary to be correct.  Each of the letters written was based upon the same template, although they were slightly amended where the company had resumed trading with KPG, either fully or partially, and in some instances where one of the reasons given was the departure, in June 2007 of Mr Vic Hunnable, with whom that company had originally been dealing.  These letters were all written either in March or April 2014, one example, a letter to Dreamgrade (UK) Ltd of London E8, which was signed and returned being thus: 
“Dear Mr Kogan
You will remember that I recently contacted you requesting your recollections as to why you decided to alter your purchasing pattern during 2007 prior to our moving from the Bridgewater Road site which had been the subject of a CPO to allow for the London Olympics of 2012.
You confirmed that the primary reason for having to review your sources of supply was the total uncertainty as to whether Kendons were going to be able to find a suitable site which called into question the continuation of the business.  In addition, the rapid response and speed of delivery required are most important to you and you anticipated this could be at risk during a period of major disruption.
This meant you were obliged to investigate the possibility of sourcing from other merchants to ensure continuity of supply.  It is reasonable to say that if the above circumstances of the London Olympics had not been occasioned you would have continued to use Kendon for all your packaging requirements.  
Now that the period of uncertainty is over, you have placed some of your business back with Kendons but have decided to dual-source to minimise future risk. We should be most grateful if you would confirm that the above is what occurred by returning this note by return email, with the word “confirmed”
Yours sincerely,
Edwin Kendon
Director

I confirm that the above is correct

.........................................................”
38.	Mr Kendon accepted that there would always be an element of “churn” in the business as some customers leave and others come on board, but the nine that had been contacted were all established clients who had been using KPG for between 13 and 15 years.  As to the reasons why turnover in 2009 was less than in 2008, he acknowledged that, as Mr Stevenson had pointed out in his report, a large proportion of the reduction was a drop in internal sales within the KPG group.  Whilst it was his view that the recession played little if any part in the dropping off in KPG’s fortunes, he accepted that it had hit the packaging industry and agreed that some of its competitors had suffered as a result. He accepted Mr Mitchell Collins’ evidence that McFarlane Group PLC, which was a similar company but very much larger than KPG had suffered similar declines in turnover in 2009 in comparison with its previous financial year.  Kite Packaging Ltd had also suffered, but much of their business was conducted online. On having it pointed out to him that there were are large number of customers within the 91 against which losses alleged to be due to the CPO were in fact continuing to use KPG, Mr Kendon said he was relying upon information provided by the staff, and that it was equally fair to claim for partial losses of trade. 
39.	Regarding Mr Hunnable, Mr Kendon said that by the time he left the Company in 2007 he had accumulated some 35 years service.  Although he, like Mr Kendon, had reached the statutory retirement age of 65 in 2006, there had been no question of either of them wanting to retire.  However, Mr Kendon was told by Mr Hunnable that in the light of the pressures and uncertainties surrounding the move, and the fact that the Company was most likely relocating to Enfield, which would have meant longer journey times from home, he had decided to retire.  Although, due to an element of succession planning and some new staff appointments, Mr Hunnable’s duties had to some extent been reduced, he was a major catalyst between KPG and its suppliers.  With him having so much knowledge of KPG’s products and such long standing relationships with his customers and suppliers, it was inevitable that his leaving would be an additional concern to those who may already have been considering find alternative suppliers.   
40.	Turning to the claim for increased costs at Innova Park, Mr Kendon said that there had been significant increases in the costs of non-domestic rates, electricity and gas services, insurance premiums and service charges (all of these being fully itemised and dealt with by Mr Epstein).  However, this was in return for what was a smaller building on a smaller site and against which there had been no perceivable benefits in terms of operational efficiency.  He did not agree that these were altogether more prestigious, modern and efficient premises in a superior and more convenient position, although he did admit that the staff preferred that location and the working environment.    
41.	As to the offers that had been made by the GLA in respect of the rule (2) claim for the value of BPW, Mr Kendon accepted while the two time-limited offers of £8.5 million that had been made respectively in June and July 2006 were conditional upon KPG withdrawing their objection to the CPO, the third offer in August 2006 in the same amount was neither time-limited or subject to withdrawal of the CPO objection, the inquiry by then having finished.  Although Mr Matthews had been seeking on the claimant’s behalf an increased figure from the original valuation that included hope value for the expansion land (£10 million) in June 2006 the figure they were seeking, in August 2013, was £9.4 million.  Mr Kendon said that they eventually, some 8 years after the original offer, decided to accept the £8.5 million “as it meant less work before the Tribunal.”
42.	Although there had been considerable discussion and argument about the need to install the more expensive VNA racking system at Innova Park, Mr Kendon agreed that it is a better system than the one they had at BPW.
43.	Asked about the “spectacular” growth in turnover and profitability that the Company had enjoyed between 2011 and 2014, Mr Kendon agreed that it had been significant but insisted it was not due to the new premises or the location.  He said it was because there had been a step change in the customer profile, with a number of smaller customers being replaced with large contracts.  There had, he admitted, also been a certain amount of complacency in the years up to 2008, but the bringing in of new staff since then (particularly Frazer Kendon in his role as sales manager) had had a very positive effect.
44.	Mr Alistair Kendon is, and was at the valuation date, managing director of KPG.  He said that he had, with his brother, been primarily involved with relocation and compensation issues between 2005 and 2009.  He reiterated his brother’s expressed concerns about the negotiations that took place with the LDA, and in particular the tight deadline of July 2007 that was being sought for the move.  He said that on 23 August 2006, he wrote an email to Neal Matthews of Strettons stating:
“It’s all very well Graeme Lawes [of Deloitte LLP, LDA’s agents] expressing concerns about the July deadline, he’s not the one who has to move.  I believe he, with his intransigence, is the prime obstacle that has had to be overcome in our attempts to relocate, with Gareth Blacker [of the LDA] running a very close second.”
45.	Mr Kendon said that he and Edwin were not only having to spend an inordinate amount of their time dealing with the negotiations for the purchase of BPW, and on the Bow Paper Works Agreement, but they were also having to seek out alternative premises.  As Edwin had said, they inspected around 20 potential sites including Beckton Waterfront which was one of the alternative suggested by the LDA.  They considered it very seriously, but concluded that it would not meet their needs as not only did it not give them sufficient built area or suitable eaves heights, but it was not a location that they thought would be attractive to the existing employees, and there were the sewage works problems also to consider. They also seriously considered premises at Beam Reach which on the face of it were a suitable prospect and would give them a larger building than Beckton, but after inquiries were made with the local planning authority it became apparent that they did not want B8 use.  There was, therefore, a potential for serious planning delays, and there would be insufficient time to build out (even if planning permission could be obtained) by the 2007 deadline.  
46.	After considering, and dismissing, all the prospects that had been offered to them Mr Kendon said that he and his brother went on a tour of north east London to seek out further opportunities, and came across the Kennet site at Innova Park.  This was eventually selected, and Neal Matthews advised Mr Lawes of their decision on 4 October 2006, stating that it was a suitably flexible and financially viable relocation option that was the only opportunity that offered KPG what it required in terms of layout, location, tenure (freehold) functionality and budget.  Mr Kendon said that this opportunity for a modern, purpose built facility, “offered the claimant the chance to take the group forward”. 
47.	Due to the delays that his brother had explained it became clear that despite the best will in the world, Innova Park would not be ready by June or July 2007 and with discussions moving towards the LDA allowing them to remain for a short time at BPW whilst taking part possession of the site and one of the buildings, Mr Kendon said that further of his time had to be spent on seeking out the temporary storage premises which he eventually found in Ingatestone.    
48.	All of these distractions, Mr Kendon said, meant that he was unable to spend as much time as he should on the efficient running and management of the business – the effects of which had been explained in detail, particularly in respect of lost customers, by his brother. 
49.	Mr David Epstein is a Chartered Accountant and a consultant with Kingston Smith specialising in the provision of forensic accounting services.  He said he had been instructed by the claimant in 2012 to provide his expert opinion, from the Company’s accounts and from information provided by Messrs Kendon and relevant staff, as to the measure of losses attributable to the compulsory acquisition.  The areas upon which his initial and rebuttal reports focused were losses of profits due to lost customers, increased costs at Innova Park not providing value for money, lost management time and temporary losses.    
50.	Regarding loss of profits, he stated that the material he had been supplied with included the trading results for the financial years ending 31 March 2007 to 31 March 2012, a summary of which was provided as an Appendix to his first report. The trading results showed that turnover had been steady for 2007 and 2008 at slightly in excess of £10 million pa (and indeed was also at that level in 2006), but reduced to £9.5 million in 2009, the first year following the move, and then grew to £11.4 m in 2010, £13.1 m in 2011 and nearly £13.6 m in 2012.  The operating profit (which could fluctuate for a number of reasons unconnected with turnover) fell from £882,114 in 2008 to £388,714 in 2009 and then grew over the next three years to £604,576, £896,020 and £1,220,466 respectively.   Gross margin in 2007 was 30.31%, in 2008 28.61%, 2009 26.35%, rising thereafter to 27.42%, 27.43% and then in 2012 to 28.15%.  
51.	Mr Epstein said that, as the years of 2009 and 2010 may have been affected by the recession, it was not possible to identify any general loss of profit emanating from the relocation.  However, he said he was advised by Mr Edwin Kendon that for the reasons he had set out in his witness statement, including staff uneasiness about the move, Mr Hunnable’s retirement and customers’ concerns over KPG’s continuing ability to service their business, it was suspected that many customers either completely or partially ceased purchasing from the Company.   In order, therefore, to undertake a forensic analysis of that possibility (because there could be many reasons for a customer removing their business), Mr Epstein asked for details of those customers who they suspected had been lost due to the CPO.  He said that, following the trawl of the customer records that KPG then undertook, he was provided with a spreadsheet containing 112 out of a total of 1,047 customers who were considered to have withdrawn at least some if not all of business for that specific reason.   That gave the sales recorded for each of them for each month in each year from 1 April 2007 to 31 March 2013.  Because, for the reasons Mr Kendon had explained, the Company’s computer records prior to 31 March 2007 were not in readily accessible form, and an equivalent analysis could not therefore be undertaken, Mr Epstein said that he decided the available data for the period 1 April to 30 September 2007 would provide a fair base for calculation (although in rebuttal of Mr Stevenson’s evidence, he accepted that this may have been too short, and carried out a further analysis for the full year to 31 March 2008).   This did not, however, make a significant difference to the losses he arrived at.
52.	The list of 112 accounts was reduced to 100 following some duplication and for other reasons, and was eventually reduced further after discussions with Mr Stevenson to the final 91.  Of these, Mr Epstein accepted that the only documentation specifically relating to the reasons for the alleged loss of business was the letters or emails from the nine customers that Mr Edwin Kendon had been able to make contact with.  He acknowledged that this evidence was not contemporaneous but nevertheless undertook an exercise to measure what proportion of the lost customers those nine represented.  This was 26.63% of the after-tax profit for all the 100 customers originally analysed, even though in terms of numbers of customers, that was only 9%.  It was thus reasonable to assume that the lost customers were important profit generating clients for the Company, even though the largest one that was thought to have been lost (Customer 2 - Findel) could not be contacted.   However, Mr Epstein’s loss of profits claim based on lost customers was for all 91 and not just the nine who had confirmed their reasoning, and thus included alleged losses caused by Findel’s withdrawal of over £320,000 despite no confirmation having been received.
53.	In all, after making some “robust” allowances for newly gained business and other potential reasons, it was claimed that the Company had lost £369,554 of annual gross profits (which became £266,079 after allowances for tax).  The approach that he then took (which was an approach not agreed with Mr Stevenson) was to consider this permanent annual loss as a reduction in the value of the business, and to assess this partial extinguishment he sought to apply an appropriate multiple which he considered, by comparing with the valuation of other similar companies, to be 12.03. This produced approximately £3.2 million, from which needed to be deducted an allowance for gross profits earned on the elements of business from customers who had only partially reduced their business dealings after the valuation date of £418,441.  This produced £2,782,484 but due to some further adjustments, by the hearing date the figure became £2,703,277.  
54.	Mr Epstein accepted that, on the question of “churn”, he had not specifically taken this into account, but that would normally be reflected in the multiplier used in the valuation process.  He acknowledged that one of the difficulties in the exercise he had undertaken was the fact that some of the customers whose business was alleged to have been lost because of the CPO had not totally withdrawn their custom, but had either permanently or temporarily reduced their spend.  There were also others who had ceased spending around the date of the relocation, but had later returned to KPG, together with another (customer 342 - Brampton) who had increased their business.  In order to provide as accurate a measure as possible of the losses that could have been CPO related, Mr Epstein said had had to estimate the level of business retained, effectively carrying out a “smoothing” exercise.     
55.	Whilst he had no familiarity with the type of business undertaken by KPG, and had not visited BPW, he said he did have input into the construction of the claimant’s statement of case. He had undertaken no independent audit of the accounts or verification of the documentation with which he had been supplied, taking what he had been told by the Kendons entirely at face value.  He had suggested to them that they should contact as many customers as possible, as he was concerned that there was a complete lack of contemporaneous or independent evidence to support the claims at the time he was instructed.  It was only on the day before he appeared at the hearing that he discovered that the correspondence relating to the nine lost customers was based upon drafts that had been prepared by Mr Edwin Kendon.  However, whilst those letters could be said to have been “leading the witness”, he felt sure that the letters would not have been signed if the customer did not agree with the contents.  Mr Epstein accepted that he could not assert that there was firm evidence to support the claim that all of the losses relating to the other 82 customers were caused by the CPO.  However, he said it was likely that that could have been the reason as there had been a positive response from all nine of the customers where actual contact was made. 	
56.	It was put to Mr Epstein that the case was pleaded by the claimant on the basis that the cause for the 91 customers either wholly or partially removing their business was solely due to the CPO, whereas he had said that he had attempted to assess losses which would not have occurred but for the acquisition.  The difference, he said, was that on his basis the loss does not have to be caused only by the acquisition, and there could be other factors involved such as dissatisfaction with service levels or the customer itself going out of business (which had indeed occurred in a number of the cases within the 91 referred to).   Thus, the CPO concerns could have been the “tipping point” that finally made the customer decide to leave and on this basis compensation was due.   However, whilst he acknowledged what Mr King had said in his skeleton argument (para 27) that “if the loss would not have occurred but for the acquisition, but other factors can be shown to have contributed to the amount of the loss, then the sum recoverable should reflect that” he said that was not how he had calculated such losses – i.e. his methodology was not on a percentage basis as to the individual customers, but was “all or nothing.”  
57.	Mr Epstein also agreed that there may have been a positive impact from the move to Innova Park which might have persuaded an otherwise dissatisfied customer to stay with KPG. He said that on his case, he had simply “assessed the value of the Company with and without the 91 customers and ignoring post valuation date evidence save for where it would have impacted.” However, he accepted that much of the claim was based upon losses that had allegedly occurred well past the valuation date of June 2007, and by May 2008 when the Company had moved and was in a position to provide the level of service that he customers had previously enjoyed.
58.	It was agreed that the nuances of this argument as to causation were a matter for legal submission, to which I shall return later in this decision.      
59.	 He said he did not agree with Mr Stevenson’s assertion that the loss of £2.7 million claimed under this head equated, in effect, to a loss of turnover of £10.4 million.  This was because his £2.7 million was calculated on the basis of partial extinguishment, and was thus a loss in the overall value of the business.   Mr Epstein also accepted that he had only given credit, in terms of customers gained as a result of the move to Innova Park, in respect of those that were closely proximate to Enfield in the sum of £54,500 pa.    
60.	Turning to the increased costs at Innova Park, Mr Epstein said that despite the significant rise in sales, overheads had not changed much except in respect of matters such as business rates, notional rent, electricity and gas costs, insurance and service charges.  He said where regular costs incurred in operating a business increase it is normally assumed that the business obtains value for money, but that assumption is rebuttable.  The key issue was that the new premises are smaller than BPW, and are much less visible to the public being at the end of a cul-de-sac on a business park.   They are also less accessible to KPG’s main customer base but in that regard, he said that the directors considered the improved accessibility to other locations balanced this out.   As to the GLA’s argument that the Company, since moving, had enjoyed significant increase in turnover which must to a great extend be as a result of the move to new, purpose built premises, he accepted Mr Kendon’s arguments that the extra business would have been achieved in any event if they had stayed at BPW. 
61.	From the relevant lines in the company’s accounts, and from information provided by the Kendons together with, in terms of notional rent (which he accepted had not been pleaded in the claimant’s statement of case, and were not costs that were actually incurred), from Neal Matthews of Strettons, he assessed the additional annual costs for which no value for money had been received in the sum of £222,004.  After Corporation Tax relief, that became £159,843.  He then made a small reduction to reflect savings in transport costs (£857) to produce £158,986.  To this, he applied the same multiple that had been used in the calculation of loss of profits (12.03) which became a claimed loss of £1,912,601.  
62.	On the question of management time, Mr Epstein said that he had been provided with the claimant’s detailed schedule of time spent by the directors on CPO related matters.  He said he was aware of the Court of Appeal decision in Lancaster City Council v Thomas Newall Ltd [2013] EWCA Civ 802 whereby in respect of limited companies it was held that a claimant needed to be able to demonstrate that the diversion had caused actual loss.  In most relocation cases, he said, there would be a claim for general loss of profits in which losses caused by distractions to the management would be subsumed.  In this case, however, the claims relating to lost customers and from the permanent extra costs were specific rather than general and, therefore, there would be no double-counting in respect of the additional claim for management time.  
63.	The reduction in gross profits in 2009 from the 2007 and 2008 financial years was 3.96%.  During that period, the directors’ time was spent on relocation issues and they were unable to concentrate as much as they should on customer contact, negotiating raw material prices, exchange rate and currency fluctuations and business development.  With profits gradually increasing post 2009, it was evident that things were getting back to normal as far as the directors’ input and value was concerned.  Mr Epstein went on to say that, in his opinion, it would be impractical to endeavour to measure the loss flowing from these distractions and, furthermore, calculating those losses would require the measurement of something which has not actually occurred.  He thought that, therefore, an evaluation of time spent measured at the appropriate hourly rate would be a fair measure of the loss suffered.  
64.	He thus calculated that the whole of the 1,321.9 hours spent should be compensated for at the rate of £175.18 per hour, resulting in the claim of £231,570.  An additional, lately submitted, claim for time spent for a further two years (2013 and 2014) was withdrawn by Mr King following the cross-examination of Mr Edwin Kendon.   Mr Epstein went on to undertake a “reasonableness test” which he said supported his view.   However, he accepted in cross-examination that what Mr Stevenson had said in his rebuttal report (paragraphs 4.75 to 4.84) about that exercise was correct.  The suggestion that the £231,570 claimed amounted to 61% of the lost margin during 2009 (leaving 39% attributable to other factors) was, in fact, incorrect and on his basis was, in fact, 220% of the lost margin.  If the margin had been correctly calculated, 61% of it would have amounted to £64,230.
65.	In respect of the claim for temporary losses, Mr Epstein said that the claimant had reimbursed its subsidiary Company, Harver Packaging & Co Ltd (although it was not contractually bound to do so) the sum of £13,120 in storage costs it had incurred for goods that it used to keep at BPW for a period of time between when part of BPW was taken by the GLA, and when the final move to Innova Park occurred.  There was also a claim for £31,880 relating to losses alleged to have been occasioned by four customers temporarily removing their business before reinstating it after the move occurred.   This sum was calculated on the basis of lost turnover of £118,190 at a margin of 26.81%. 
66.	There was a third element to the temporary losses claim that was not referred to by Mr Epstein.  This related to a one-off service charge that the claimant had incurred at Innova Park (not claimed for under the heading ‘increased costs’) in respect of the making up and adoption of the service road in the sum of £60,429.  
Acquiring Authority’s case.  
67.	Mr Graeme Lawes is a director of Deloitte Real Estate and has acted for both the LDA and the GLA in respect of compensation matters relating to the Olympic Park CPOs continuously since November 2005. His report dealt with general matters relating to the reference land, and the claimant’s search for a relocation property.  It also included comments on the other aspects of the claim.  He described the premises at BPW in detail, having carried out a measured survey in August 2006. The premises were in poor condition and had suffered from a lack of maintenance.   There was evidence of leaks through roofing sheets and some of the wall cladding, and there were areas that could not, therefore, be effectively utilised.   Mr Lawes said that he had visited the site at Beckton Waterfront (that being one of those that had been offered to the claimant by the LDA) on a number of occasions, and in fact lived quite close by.  There had never been anything other than the occasional mild odour from the treatment works, and he had never heard any other complaints about it.  The claimant had also been offered units totalling 7,060 sq m at Beam Reach, some 10.5 miles from BPW and these were considered closely by the claimant, but for reasons that were unclear, they decided not to proceed.   
68.	Mr Lawes said in his report that the claimant’s decision to acquire the Innova Park site, which was over 18 miles from BPW, and have a bespoke building constructed had been questioned by the acquiring authority, particularly as it was well outside the area where the properties that had been offered to them were located, and they could have moved more quickly and more cheaply.   However, it was accepted that there was no suggestion that the relocation site or premises were unsuitable or that the claimant’s decision to move there was unreasonable.  Thus, whilst the acquiring authority does not criticise KPG for choosing where it eventually moved to, it was a choice made in the light of alternatives, at least one of which was considered to be eminently reasonable (Beckton).  The point was simply that had the claimant accepted Beckton or one of the other buildings, there may have been no need for the Bow Paper Works Agreement and all that that entailed, nor would there have been a need for the temporary storage arrangements.  It was not therefore reasonable for the claimant now to complain about the inadequacy or location of the premises to which it chose to move. 
69.	The authority, Mr Lawes insisted, worked tirelessly with the claimant from early 2006 to help it to relocate, and in his rebuttal report he rejected the criticisms of the authority that had been made by the Kendons. If the claimant had accepted the £8,500,000 offer when it was made in July 2006 rather than wait until 28 May 2014 to accept it, it would have had the use of the £850,000 difference between the 90% paid under the BPW Agreement and the full amount for almost eight years.  As it was, the amounts that were paid by the acquiring authority were more than the total cost of Innova Park, and were made to coincide with the land acquisition and building costs incurred there.
70.	As to the outstanding issues in connection with disturbance (other than the relocation costs that had now been agreed at £1.1 million) Mr Lawes explained that following the claimant’s commitment to move to Innova Park, its total disturbance claim increased to over £4 million which included over £1 million for loss of profits.  There were then negotiations and, he said, in an attempt to offer the claimant a “full” figure to encourage it to focus on the relocation, he prepared his own assessment against the detailed schedule that had had been provided by the claimant’s advisers, Strettons.  That assessment totalled £1,800,000 and was made up of three parts:  Firstly £250,000 against four elements of the section headed “Loss of profits” which included a claim for additional costs that would be encountered at Innova Park (despite there being no evidence other than an estimate of the additional rates payable) under the sub-heading “Affordability/Additional rates”.  He did not agree with Mr Kendon’s suggestion that, because there were some calculations regarding potential increased rates liability in the ‘comments’ section of the Schedule, that the £250,000 all related to that.  In any event, on the question of the claim for increased rates at Innova Park, the rateable value reflected the fact that it was a much superior building in a better location, and so the claimant would be receiving value for money. Secondly £30,000 for management time (notwithstanding that no loss had by then been evidenced). The remaining £1,520,000 related to all the other claimed relocation costs.  That assessment was contained within the heads of terms for the Bow Paper Works Agreement in March 2007 and an advance payment of £1,620,000 (90%) was made to the claimant on 24 July 2007 when the Agreement was completed. Mr Lawes said the claimant’s acceptance in 2014 of compensation for relocation costs in the sum of £1.1 million was thus significantly less than his own estimate had been.  The claim for management time, and the loss of profits claims were, of course, still very much live issues and he accepted that it could be expected (in terms of the judgment in Newall) that the directors provided value for money.  However, the hours claimed for seemed significant.          
71.	Mr Lawes went on to say that the claim in connection with the claimant’s need to take temporary storage at Dunsteads Farm Ingatestone from February to May 2008 should not be accepted because the delays in the claimant vacating BPW were of its own making.  Also, the alleged need to reimburse its associate Company, Harver Packaging, for storage costs incurred between May and November 2008 in the sum of £13,120 should not be accepted as compensateable.  There was no explanation of the space taken, or why it could not have been provided at Innova Park.   Further, even if the alleged loss were deemed not to be too remote, any such payment would offend the value for money principle.  The claimant would have had to sacrifice some of its own space at the reference land, and such an arrangement could have continued – especially if KPG had moved to one of the larger premises that had been offered.   
72.	Mr Mitchell Collins is an independent packaging consultant who has over 30 years experience in the industry.  He had been asked to provide information on, and to describe industry practice in the paper and plastics consumable sector and relate that to the claimant and its move to Innova Park.   He set out details of KPG’s business, and compared it with other companies in the sector who are competitors  including McFarlane Group which is also based in Enfield, but is significantly larger having a turnover in 2013 of £143 million and a margin of 31% against KPG’s £13.6m and margin of 28.5% in the same year.  McFarlane occupy a 58,000 sq ft distribution centre with 5,000 pallet spaces unit against KPG’s 54,000 sq ft and approximately 6,000 pallet spaces. 
73.	 Pausing here, on the subject of pallet spaces, I consider it apposite to mention that a significant amount of evidence, and time taken at the hearing, related to the amount and type of pallet spaces KPG had at BPW, and what they had and needed to have at Innova Park (the Very Narrow Aisle system).  However, in submissions, Mr King for the claimant after summarising the main areas of dispute in that regard said:
“The claimant is content nevertheless to invite the Tribunal to conclude that the operation of the claimant’s business was not, and is not, constrained either at BPW or [Innova Park] by the number of available pallet positions.  Such a conclusion would be consistent with both the claimant’s and the [acquiring authority’s] evidence, and avoids the need to resolve the conflict in the evidence which would be very difficult to achieve.”
Further, he went on to say that despite evidence relating to the need for different production processes or stock moving sequences at Innova Park because of the different building sizes and configurations, no claim for compensation was made on the basis that the production process is more difficult at the relocation premises.  In the light of those submissions, I refrain from saying anything further in regard to the evidence on pallet spaces and on comparisons between the two premises in respect of materials handling and particular production processes.  
74.	However, as to the VNA racking, it was clear from Mr Collins’ evidence that he considered this to be a far superior system in terms of efficiency from the racking at BPW, and this better system was, of course, paid for in the relocation costs agreed with the claimant. Indeed, with the new premises that have better eaves heights and modern technology, the CPO has effectively funded the modernisation of the claimant’s business, allowing it to achieve significant advantages that had increased turnover - that being evident from the post-move accounts.  He doubted that BPW would have been able to cope with the extra business that has resulted in the increased turnover. 
75.	Mr Collins said that, quite simply, the new premises are clearly more suitable for the claimant’s current business model than BPW had been. They, and the investment that had gone into them, were an impressive model for existing and new customers alike.  During the early days of the recession, customers would no doubt be reassured that, by taking up the new accommodation, KPG was a progressive and modern business with a sound financial base.  Various other packaging companies had struggled during this period, and several had gone out of business.  Thus, customers would be sourcing new suppliers, and KPG was well placed to pick up this extra business.  There was no doubt in his mind that any potential new customer looking at KPG when they were at BPW in comparison with say Macfarlane with its modern facility in Enfield would be more likely to be impressed by the latter.  However, with KPG in its new high-tech premises, they would be in a much better position to compete.  It was evident from the marketing brochure that KPG had produced to coincide with the move that this was precisely the stance they were taking, and it was evident from the improved performance that this strategy had worked.   Indeed, Mr Collins said, Mr Alistair Kendon said in an article in Packaging News on 5 May 2008 that it was “gratifying” that so many staff had moved and that:
 “Transferring what we have been doing at Stratford to Enfield amounted pretty much to a straight swap.  However, our other sites and our customers will benefit because of the proximity to the M25.” 
However, it was acknowledged that this, together with comments made in the new brochure would, of course, contain some advertising ‘licence’. 
76.	Mr Collins also referred to Kite Packaging in Coventry which has a similar product range and a turnover of £33 million in 2013 with a margin of 24%, other competitors were said to include Zeus Packaging in Ireland, Smith & Bateson Ltd and Weller Packaging in Staffordshire.  He said that his analysis of the figures made available to him by the claimant showed their customers to be mainly small to medium size businesses and the average order value of £839 indicates that in general, quantities of products purchased are not high.  The sector was particularly competitive, and there had been a significant downturn caused by the recession – this being evident from the figures for KPG’s competitor companies.  In the period up to 2009 there had, however, been significant increases in the cost of raw materials and with the market being so competitive, this would inevitably lead to a squeeze on margins and would affect sales.  In his view, KPG have not considered the effect of the downturn in calculating the value of their claim. 
77.	Mr Collins said that an analysis of KPG’s accounts for the period 2000 to 2014 showed that in the five years up to the announcement of the Olympic Games award to London, turnover had dropped by 12.8%.   From 2005 up to the date of the move in 2008, turnover increased by 4.4%.  This demonstrated no adverse reaction to the CPO announcement, and if customers were fleeing at the rates claimed by the directors of KPG, he would have expected that to be reflected in the performance figures.  Inter-group sales dropped significantly in 2008 (some 34%) and he thought this was a reflection of the recession. Allowing for the integration of Ingham Packaging into the main Company accounts from 2007, he said that in 2009, whilst stripping out the Ingham turnover [for like for like comparison purposes] KPG’s turnover declined by some £1.006 m.  This, he said, could be simplistically explained by taking the 2008 figures (£7.591 m), deducting the (estimated) £245,000 loss of Ingham sales and then factoring in the effects of the recession (-8.3% based upon competitors results) giving a figure of £6.736 m.  KPG’s actual turnover in 2009 was £6.585 m – this leaving a shortfall of £151,000.  Whilst this was within the range of variations in the Company’s turnover in non-recessionary times, and was thus not necessarily attributable to the CPO, with sales having increased from 2010 to the present day it would not be unreasonable to suggest that this one-off sales loss could have been the maximum attributable to the CPO.  
78.	The move towards larger (and fewer) customers, as evidenced by the latest trading accounts and agreed by Mr Edwin Kendon, demonstrated that there was a move away from the historic small customers, many of those being the traditional base in the centre and east end of London.  The evidence relating to the purchasing patterns of customer 1 (whose name was not given due to a confidentiality clause in KPG’s agreement with it) showed that since the move to Innova Park, KPG was attracting customers who place larger orders than had historically been the case. Although it had been a customer of KPG for many years, the increases in orders from customer 1 could well have been due to the move to the new premises.  Large customers who are purchasing products that are critical to their business will most likely expect to visit the premises and meet key quality assurance and other personnel.  It was obvious, he said, that a prospective customer would be highly impressed with the new facility, and those who adopt a full “customer assessment scheme” would be far more likely to positively tick the boxes relating to important criteria such as compliance with quality standards, technical superiority and financial stability.  In connection with the claim for costs allegedly incurred for off-site storage by Harver Packaging, Mr Collins pointed out that the inter-company invoice for storage costs in 2008 was dated 26 June 2013 and there was also no invoice provided from the provider of the external storage facility to prove the loss. 
79.	Mr Collins said that in his experience 3 months was a far more realistic assessment of lead times for obtaining materials from the Far East than Mr Kendon’s figure of 6 months or more.  
80.	Mr Stevenson is a Chartered Accountant who, when he produced his first report, was with Baker Tilly as a Forensic Services Director, but by the time he served his report in rebuttal of Mr Epstein’s accountancy evidence and the Messrs Kendons’ witness reports, had moved to Zolfo Cooper.  He had been asked to review the claimant’s claim for loss of profits – both permanent and temporary.  He said that he had sought a considerable amount of information from the claimant, not just in respect of the alleged loss of customers, but also to obtain relevant facts about the business as a whole.  However, his efforts were thwarted to a considerable extent by the failure of the claimant to provide, in particular, sufficient sales data and customer correspondence relating to the (eventual) 91 customers who it was alleged had been permanently lost and the four who had been temporarily lost due to the CPO.    
81.	This documentation was required to establish historic sales patterns for the lost customers prior to the CPO, and to establish the “churn” rate (the rate of customers historically won and lost without any CPO effects).   No pre-April 2007 data was provided and Mr Stevenson said that conflicting reasons for its unavailability were given – for instance in response to one request he was advised it had been deleted from the claimant’s computer system due to space constraints and in response to another that some records may still be there, but the Company did not know how to retrieve them.  As to post April 2007 data, he said that initially he was unable to obtain any customer information “for reasons of confidentiality.”  Eventually he obtained some information relating to the alleged lost customers, but with no names or addresses although these were subsequently provided.  However, no contemporaneous evidence whatsoever that could be linked to the CPO during the period up to and including 2008/09 was provided, other than copies of the letters/emails that Mr Edwin Kendon had produced relating to the nine customers with whom he had made contact on the issue.  He said that he also received no information as to what steps the claimant had taken to mitigate the alleged losses.
82.	As a result of these difficulties, Mr Stevenson said that he had had to resort to analysing, principally from the Company accounts, its performance generally throughout the period from 2004 to 2014 both in respect of the Kendon Packaging Group as a whole (including its subsidiaries) and the BPW/Innova Park operation itself.   From that information, it was evident that turnover had fluctuated around £10m pa from 2000 to 2007, then declined by just £0.43 m in 2008 and by £0.82 m in 2008 (almost half of that being in respect of internal sales).  Then, in 2010 turnover grew by £1.87 m, of which £1.59 m was external sales.  It continued to grow year on year thereafter.  The decline in 2008/09, he said, could have been due to a number of factors such as normal year to year fluctuations, price competition, effects of the recession, internal trading arrangements and the CPO.  However, there was simply not enough information for him to be able to state which of these factors (and it could have been a combination of several of them) was responsible.   Mr Stevenson reiterated that there was nothing to prove that any of the reductions in turnover, let alone all of them, were in any way related to the CPO.  In any event, even if the Tribunal were to accept the claimant’s arguments and reasoning, the fact remained that KPG has recovered far more in turnover (and profit) subsequently than it lost during those two years.
83.	It was, of course, necessary to establish how the Company’s impressive growth developed post 2009, and explanations had been sought from the Kendons at various meetings held with them and their advisors during 2013. Apart from one customer (customer 1) which was KPG’s largest client, he had not been provided with any explanation of how the growth had been achieved.  Mr Stevenson said that from the information he had gained, and from the timing of KPG’s growth, he had concluded that the move to Innova Park must have been a contributory factor to that growth.     
84.	Regarding the claimant’s arguments that the loss of profit from customers before the vesting date was caused by uncertainty as to KPG’s ongoing viability due to the impending enforced move, and the fact that a key member of staff had resigned in June 2007 (Mr Hunnable), Mr Stevenson said that there was no evidence that losses were being sustained before that date.  Indeed, by July 2007 KPG had signed up for Innova Park and were thus in a position to be able to reassure customers and promote the positive aspects of the move.  This would be normal business behaviour in terms of risk management, and in any event, there was a requirement that they fulfil their duty to mitigate.  
85.	In any event, Mr Stevenson said, the review of the customer sales data that he had been provided with revealed that several of the customers allegedly lost due to the uncertainty were still buying many months after August 2007.  The fact was that the claim calculated sales to have been lost from October 2007, and there was no suggestion that any had been lost in the period during which the uncertainty apparently existed.  The data also showed that, in February 2008, 36 of the alleged permanently lost customers were still buying, and one year later 18 were still purchasing.  He did not accept Mr Epstein’s explanation that this was because customers took time to change their supplier as to change “was a costly and time consuming exercise.”  In reality, KPG were in a position from August 2007 onwards to provide those customers who did leave with cogent reasons why they should stay.  Mr Stevenson produced a graphic illustration of the reduction in turnover from the 100 or so customers that had been analysed.  Whilst there was clear evidence that sales to these customers had declined, there was none that demonstrated it had been caused by the CPO, but there was evidence that some had ceased trading or had continued to purchase under another name.  There was also the question of natural churn which neither the claimants nor Mr Epstein had taken into account.   18% of the claim related to one customer, Findel.  It was alleged that £220,000 of annual income had been lost which, on the assumption that sales at that level would, but for the CPO, have continued in perpetuity, converted in to a loss of profit of around £490,000.   As this was such a significant part of the claim, further information was sought but no correspondence has been provided, and Mr Edwin Kendon had admitted he couldn’t get hold of Findel as their buyer had left.  Thus, despite being one of the largest elements of the loss, it was not one of the 9 firms to whom Mr Kendon had spoken.
86.	From his own research into Findel, Mr Stevenson said that there were a number of reasons, nothing to do with the CPO that could have caused them to stop using KPG.  From its trading updates he had been able to establish that it had become loss making in 2008, and was taking a number of steps to achieve cost savings, including an element of de-stocking and, as the claimant had admitted, had started to purchase direct from manufacturers, thus cutting out people like KPG as the ‘middle-man’.      
87.	Mr Stevenson also referred to the alleged loss of profits caused by the withdrawal of business by Turner Langdale.  £134,000 was claimed based upon a loss of annual sales of c. £63,000.  However, this Company did not cease trading with KPG until November 2008 which was after they had moved into Innova Park and only 3 months before Turner Langdale actually went into administration.  Other similar examples were found, including Entertainment UK Ltd.
88.	The key, issue, Mr Stevenson explained, was that the claimant’s basis of calculation of the losses was not only based upon the wrong period of time (i.e. after the vesting date) but the analysis that Mr Epstein had carried out was over far too short a period [6 months, eventually extended to 12 months] whereas a much longer period would be needed – at least two and a half to three years but preferably four and a half.  In any event it had been assessed on the basis of a partial extinguishment of the business as at the vesting date of June 2007 and this was an altogether incorrect approach. 
89.	It was normal, he said, for a loss of profit claim to be quantified by reference to a company’s financial results.  A baseline period of two to three years or more leading up to the triggering event would be analysed and compared with the profits after the event to allow for the loss to be estimated.  Of course, the claimant cannot do this as due to the growth it has achieved since the relocation it would be unable to show a loss.    The way the claimant had set out its claim [as Mr Stevenson understood it and as it stood at the time his first report was being prepared] was thus:
Average monthly sales to 100 lost customers Apr – Sept 2007				£   126,368
Projected [company] sales for 12 month period					£1,516,417
Less:
New sales generated by relocation							(£    54,500)
Sales permanently retained or won back						(    £83,500)
Projected annual sales								£1,378.417

Gross margin									26.8.%
Gross profit									£   369,554

Corporation tax at 28%								(£  103,475)
Gross profit after tax								 £  266,079

Multiple										12.03 
Value of projected lost sales								£3,200,926
Less:
Actual sales from FY 2008 to 2013				(1,560,767)
Gross margin							26.8%   
Actual gross profit from FY 2008 to FY2013						£   418,442 
Claimed total loss of gross profit							£2,782,485
90.	It seemed, Mr Stevenson said, that the claimant had sought to include information which only became known after the vesting date whilst excluding other information.  For instance, it has selected the allegedly lost customers based upon sales post 2007, but excluded matters such as insolvencies during 2008 and 2009 on the basis that that information would not have been known at the valuation date.  Such an approach was inconsistent, and would over-compensate the claimant.   Any quantification of a claim for loss of profits should reflect the actual losses incurred and should not be based upon a calculation that reflects the notional purchase of a part of the business as at June 2007, with that purchaser having only the knowledge that was available at that date.   A claim based upon partial extinguishment of the business would need to show that the losses that had been calculated were permanent, and that most certainly could not be proved on the basis of the information that had been provided.  Even if Mr Epstein’s methodology were to be accepted by the Tribunal, his multiplier of 12.03 used was wholly unrealistic and far too high for what was not really a part of the businesses, but just a loss of some of its customers.  It was based upon comparisons with other companies, but not in respect of sales under the circumstances that were being alleged to apply in this case.  
91.	Also, as Mr Epstein had accepted, none of the figures upon which the claimant relied took into account the churn rate and Mr Epstein had accepted that he did not take that into account. Mr Epstein had said that the multiplier included churn but did not seem to appreciate that the application of a churn rate for any particular type of business would take into account customers gained as well as lost.  There was no evidence as to how long KPG typically retained its customers and it was not right to assume that 100% of those alleged to have been lost would otherwise have permanently remained as customers.   
92.	As to the loss of the services of Mr Hunnable, Mr Stevenson thought it was strange that he should leave in June 2007, before the relocation plans were finalised, and some 11 months before the move actually took place.  He was 66 at the time, and may have just decided to retire.  As it was he gave up a senior management role that he had held for 16 years on the basis of a relocation that had not even been finally agreed.  Further, Mr Stevenson suggested that the claimant had actually benefited from Mr Hunnable’s retirement – the increase in turnover and profitability was, as the Kendon’s had explained, due in large part to Mr Frazer Kendon’s efforts (particularly in respect of customer 1), and the re-appointment of Mr Marzetti who had previously been employed by the Company.      
93.	In an attempt to assist the Tribunal in quantifying the amount that the claimant might genuinely have been assumed to have lost purely as a result of the CPO, if it were minded in any way to accept the claimant’s arguments, Mr Stevenson carried out an exercise based upon a number of assumptions:
1.	That the significant increase in KPG’s turnover and profits following the relocation    was a coincidence of timing and totally unrelated to the move.    
2.	That the temporary decline in sales in 2008 and 2009 were solely the result of the CPO and not related to other factors such as the recession.
3.	That reasonable attempts had been made in mitigation.
4.	That the six month baseline period for analysing KPG’s normal sales pattern was reliable.   In doing that it also had to be assumed that the customers routinely purchased from the Company and had been doing so since before the CPO was announced.
5.	That it could be assumed that all those customers would have continued buying  at the baseline levels after September 2007.
94.	The calculation considered 104 customers – the 100 originally claimed to have been permanently lost (before that figure was reduced to 91) and the four who were alleged to have been temporarily lost.  The period of loss assumed, rather than in perpetuity, was three and a half years.  The approach also used the benefit of hindsight so, for instance, customers who went into liquidation or who for other unconnected reasons ceased to trade with the Company were excluded.  Also, the expected sales to each customer were compared with the actual sales that were achieved to determine the actual sales lost.  Then he deducted KPG’s figure of £54,500 for gained sales at Innova Park, and used the gross margin figure adopted by Mr Epstein – 26.8%
95.	Mr Stevenson said that purely for the purposes of the exercise, and due to the lack of information that had been provided to him, he included all of the customers other than those where he had specific reason to consider they should be excluded, but that of course risked losses being significantly overstated.  For the reasons he had given, he excluded Findel and Turner Langdale.   Of the 84 customers used in his calculation, Mr Stevenson said that 19 were still buying in 2010 and 15 were still customers in 2012.  He said he had calculated losses up to four different dates - 31 March 2009, 2010, 2011 and 2012.   Finally, he said that he had made an allowance for the fact that there would almost certainly have been other factors involved in the customer’s reasons for leaving such as the recession or dissatisfaction with service. This was calculated at 50%.  
96.	The calculations for the losses for each of the four periods were then carried out under four scenarios, and the resultant “losses” that were subject to revision during the hearing following the receipt of further information from Mr Epstein [Bundle file 8, tab 2, p.161A] became:

(£ 000)							2009   	2010	    2011	     2012					
Scenario 1 (all customers as per assumptions)    		119	248	    383	     515
Scenario 2 (Hunnable customers excluded)			38	97	    160	     214
Scenario 3 (The nine customers who had confirmed)		11	33	    55	     74
Scenario 4 (Nine customers and excluding Hunnable)		5	22	    40	     55
97.	Finally, Mr Stevenson provided an “alternative calculation” because of the fact that both Mr Epstein’s and his own exercise carried out on a similar basis suffered from one fundamental flaw in that they rely upon sales data relating to specific customers that was far too incomplete to be able to make any accurate assessment.   He therefore prepared a calculation that was based upon the actual dip in sales (to all external customers) in 2008 and 2009 which amounted in total to £1.15 million.   Applying the same 26.8% margin, and allowing 50% for “other factors” such as the recession, the total loss that could be established due to the CPO was £154,000.  
98.	In summary, Mr Stevenson said that in both of his reports, he had sought to consider the overall performance of the claimant’s business both before and after the relocation as it was necessary to calculate whether or not it had been compensated by growth resulting from the move to Innova Park.  The key factor was that turnover had grown from £10.8 million in the year ending 31 March 2007 to £14.3 million in 2014.  The loss being claimed was, in net present value terms, equivalent to KPG claiming that they had lost £10.4 million in sales.  This was simply not the case, and in his view the losses claimed were based purely on assertion with little or no documentary evidence to support it.   What’s more, he said it was an irrefutable fact that the loss of customers in 2009, at 21% of the total base was no different to the 2010 figure, and only marginally more than the 17% lost in each of the 2011 and 2012 financial years, and 20% in 2013.   The claimant was claiming that 91 customers were lost to the CPO, out of a total of over 200 lost in 2009.  If that was the case, and only 100 odd were lost through natural churn, that would have made it an exceptionally good year for customer retention.  As he had said, there was no evidence produced showing customer gain.        
99.	In cross-examination, Mr Stevenson accepted that his analysis of Findel’s figures did not reflect the fact that the group’s profits had been re-stated, and that there was evidence within the financial statements that indicated trading conditions to their educational division were significantly better than he had implied.  Nevertheless, he said that one could not get away from the fact that Findel had decided to purchase what KPG had previously supplied direct and there was no evidence that this was anything to do with the CPO. 
Discussion
(a) The Lost Customers Claim.
100.	It was clear from Mr Edwin Kendon’s evidence that, despite there having been a heading   in Mr Geoff Fisher of Strettons’ initial Schedule relating to loss of profits as early as June 2006 (which said ‘claim to follow’), it was not until “2009 or 2010” when Mr Fisher suggested they may have a case, that any serious action in this regard was taken.  It was on the appointment of Mr Epstein in 2012 that the question of lost customers was pursued. Indeed, Mr King acknowledged in his closing submissions (in connection with an apparent misunderstanding as to precisely what the £250,000 figure in Mr Fisher’s December 2006 Schedule under the heading of lost profits related to) that the claimant plainly was not contemplating a claim for loss of profits at the time.  
101.	The exercise which Mr Edwin Kendon and the staff did eventually carry out to try and establish which customers were either partly or wholly lost due to the CPO was not credible.  There was not one iota of contemporaneous evidence relating to any of the 91 customers (as admitted by Mr Kendon and acknowledged by Mr King in closing) alleged to have been lost due to the CPO, and no documentation or records of conversations, contemporaneous or not, in connection with 82 of them, provided to support the claim.  In terms of the requirement to establish causation (per Director of Buildings v Shun Fung Ironworks [1995] 2 AC 111) the claimant has singularly failed.  Further, I find the “evidence” produced in respect of the nine customers with whom contact was made to be utterly unpersuasive.  In reality, each of those to whom Mr Edwin Kendon wrote effectively had their script written for them.  In any event, that evidence was also far from contemporaneous - the contact was made and the letters written no less than six years after the Company moved.  None of this evidence was sworn or could be verified as none of those contacted were called on to provide witness statements or to appear. I attach no weight to this evidence.  Further, the list of allegedly lost customers was compiled from the recollections of unnamed employees and, as Mr Edwin Kendon admitted in cross-examination, certain of the lost customers had advised the staff that there were other reasons for them withdrawing their business, but nevertheless they were included because it had been assumed that the real reason was the CPO.  
102.	The parties were agreed that it was for the claimant to prove causation (as per Lord Nicholls in Shun Fung) and Mr King accepted that the claimant acknowledged the difficulties inherent in proving business loss.  However he said that it was incumbent upon the acquiring authority to pay “full and fair compensation” (per Lord Nicholls in Waters v Welsh Development Agency [2004] 1 WLR 1304 at para 1) and that the Tribunal should guard against setting the bar too high.  In reality, he submitted, there was “ample evidence that the claimant was not only likely to but did suffer losses as a result of the acquisition of BPW and the move to Innova Park”.  There was however nothing to persuade me that any of the short-term loss of turnover suffered in the 2008 and 2009 financial years was caused by the CPO, and I accept the acquiring authority’s suggestion that it was far more likely to have been caused by the recession or other factors especially as evidence was produced that confirmed similar businesses suffered dips in their turnover in those same two years (as demonstrated by Mr Collins).  It is not a case of setting the bar too high; it is that there is simply no proof, and I therefore disagree with Mr King’s suggestion that it was not plausible for the GLA to say that compensation under this head should be nil.  As Mr Booth said, the authority had not said the claimant was entitled to no compensation – it having already received £9.7 million under the heads that had been agreed – it was that no compensation was due under this head.  Indeed, Mr Booth pointed out that the acquiring authority had been quick to respond to the claimant’s initial disturbance claim (in the sum of £1.3 m but eventually settled at £1.1 m) against which it made an advance payment of £900,000 notwithstanding the fact that at the time that claim was made in June 2006, it lacked any evidential basis.  Mr Booth also pointed to Horn v Sunderland [1941] 2 KB 26 and said that a payment of further compensation would offend the principle of equivalence which in that case required that the dispossessed owner “shall be paid neither less nor more than his loss”.   I agree.    
103.	Mr King then went on to argue that the requirement that there should be a causal connection between the acquisition and the loss does not signify that the acquisition must be the sole cause of the loss.  Rather, if the loss would not have occurred “but for” the acquisition, then the first condition set out in Shun Fung would be satisfied.  Further, even if the Tribunal was to be satisfied that KPG’s business had benefitted from the move to Innova Park (as argued by the authority), that could only affect the claim in respect of the additional and ongoing expenses at Innova Park over those incurred at BPW.  In respect of the claim for business losses (and management time and temporary losses), any such benefits would not affect them because they are based entirely upon losses that, but for the CPO, would not have occurred.  There is thus no connection between benefits gained and losses incurred.   
104.	On this matter, it was submitted for the GLA that even if the claimant were to have been able to prove it had lost customers as a direct result of the CPO, then any such loss would need to be offset by any benefit that it had gained from the CPO – for instance by way of customers gained as a consequence of the relocation. The question was: has the business incurred a loss, and if so, how much?  The identity of the customers lost or gained is an unnecessary distraction.  Mr Booth provided an analogy to illustrate the point: 
“The owner of a cafe at the east end of Fleet Street is forced to relocate to new premises at the west end of Fleet Street, by reason of a CPO.  50% of its original customer base (those that work in the centre of Fleet Street) continue to patronise the establishment in its new location, but the 50% of customers who are based at the east end of Fleet Street cease to visit.  However, these ‘east end’ customers are replaced by an equivalent number of new customers based at the west end of Fleet Street who did not previously patronise the cafe in its former location.  In such a scenario, notwithstanding that the identity of the customer base has changed, the cafe has suffered no business loss since it continues to trade at the same level as before.  No compensation is payable.”
He went on to say that whilst the claimant has repeatedly asserted that the new business it has gained since it left BPW is not a consequence of the relocation, at no time has it contended for the proposition that even if the new business were attributable to the move, the winning of it would be an irrelevant consideration.  This must be, Mr Booth said, because the claimant recognises that were it to gain and lose customers in equal measure, there would be no loss.
105.	Mr Epstein had accepted in cross-examination that the same approach to causation should be adopted in respect of both loss and gain of customers – where the CPO can be proved to be the cause.  It would offend the principle of equivalence were the business to be compensated for the loss without any account being taken of the gain.            
106.	I agree with the acquiring authority on this point, but just as there was no evidence which I could find sufficiently supportive of the claim for lost customers, there was none which could prove that the gains that have undoubtedly occurred were attributable directly to the move.   So, the fact remains that the allegation that the loss of customers (with which I am dealing here) remains unproven, so this argument does not apply in these circumstances.             
107.	Whilst I did not see the business as it was when operating from BPW, my inspection of Innova Park revealed what appeared to me to be a supremely efficient and well run operation.  Therefore, I do not find much force in the assertion made by Mr King in submissions that it “would be astonishing had there been no effect upon the claimant’s business, at least in the relatively short term.”  It is readily apparent from the accounts that the business has fared exceptionally well since the move, and only suffered a relatively short term dip in turnover.  That dip, as I have said, could have been for any number of reasons, the most likely being the effects of the recession which coincided with the upheaval caused by the move. That was a possibility that was accepted by Mr Epstein who had said that “it is not [therefore] possible to identify any general loss of profit emanating from the relocation at the same time as the recession was being experienced.”  Mr Epstein also confirmed that the permanent loss of profits claim was based upon one specific, identifiable factor, namely existing customers that were lost solely due to the CPO.
108.	Mr King said in closing that the basis for the loss of customers element of the claim has been clearly set out in the evidence and that whilst it was “by no means perfect”, it was entirely sufficient to found the claim. I disagree.  It was, to me, far from sufficient.  There were a number of customers included in the claim whose business had not, in fact, been lost, or who had temporarily (for whatever reason) withdrawn their trade and then returned, and there were several others (including, for instance, Taylor Langdale) who very shortly after the vesting date went into liquidation.   
109.	One of the main reasons for loss of customers was given as the departure of Mr Hunnable, but apart from a letter he wrote to Mr Alistair Kendon citing the move as a reason, I am surprised that he was not asked to provide a sworn statement and was not called.  There is clear evidence that, thanks to the efforts of those who replaced Mr Hunnable, and the increased business that has resulted, his departure has had a far less significant affect than claimed.  I therefore attach little weight to that line of reasoning.  As I have indicated above, the simple answer is that the claimant’s case on lost customers is unproven and no causal connection has been established. I therefore determine compensation under this head at nil.  It is not, therefore, necessary for me to deal at any length with Mr Epstein’s evidence, but I consider it appropriate (particularly if I were to be wrong on the causation issue) to record that I agree with Mr Stevenson’s arguments that his methodology was wrong.  
110.	As Mr Stevenson pointed out, not only had no account been taken of churn in respect of turnover in customers (and in that regard it was accepted in closing that there would need to be a downward movement in the multiplier), but the loss of customers that actually occurred during the two years where turnover dipped was no greater than in other years (indeed, Mr King submitted that “the claimant retained the vast majority – around 90% - of its customers and took them to IP....and this was a considerable achievement.”  It was thus entirely inappropriate to calculate alleged losses on the basis of a partial extinguishment of the business. It was, as the acquiring authority submitted, an entirely artificial exercise constructed with a view to maximising the claim.  
111.	There was also the reduction in internal sales to be taken into account in arriving at an overall assessment of the causes of the reductions in turnover, and Mr Stevenson was also surprised that there was no evidence relating to losses that might have occurred prior to the move actually having taken place – the two years in which a dip in turnover and profits was recorded being post the move.  If customers were fleeing due to concerns about the ongoing viability of the Company, then why, he said, was there no indication of turnover falling away in the 2007 financial year which ended 31 March 2008, just 2 months before the final move occurred. There was also the question of the length of the “baseline period” initially calculated over 6 months by Mr Epstein and then extended to twelve months.  This in Mr Stevenson’s opinion, and mine, was still far too short if any meaningful answer was to be found.  It does seem to me to be somewhat odd that a large proportion of the claim relates to customers allegedly having been lost post the move, and I really do not see how that can possibly be a result of “concerns” over the potential effects of the CPO. I am also not persuaded by Mr Edwin Kendon’s suggestion that the disparity in dates could be due to lengthy lead-in times before materials required to fulfil orders could be obtained.
112.	Mr Stevenson also went to a lot of trouble to calculate the figures which might be appropriate to apply if I found that despite all the GLA’s evidence and arguments, that the claimant’s case was sustainable.  Under four different scenarios, making a number of assumptions with which he clearly did not agree, including losses calculated over around four years rather than in perpetuity as Mr Epstein had done, he arrived at a worst case figure of £515,000. Picking up on this in closing, Mr King produced a revised scenario 3 valuation (loss of just the nine customers that had been heard from including Mr Hunnable’s customers) which had been re-worked by Mr Epstein and made some different assumptions.  If the loss period was restricted to four and a half years until 2012 per Mr Stevenson, the loss would be £222,257 and if taken up to 2015 would be £442,750.  
113.	Mr Stevenson also prepared a simple alternative based upon the actual dip in turnover for the two years in which it had occurred (which seems to me a far more sensible way of doing it).   He then applied the agreed margin of 26.8% and deducted 50% for the risk that there could well have been other reasons for the fall off in sales. The resultant figure was a loss due to the CPO of £154,000.  Nevertheless, I am not satisfied that even that level of loss was caused by the CPO, as the evidence is simply too speculative and unreliable.  
114.	For the reasons I have given, therefore, I assess compensation under this head at nil.
(b) The Increased Costs Claim
115.	The total under this head was calculated by Mr Epstein, based upon information provided by the Company and from the accounts, in the sum of £1,912,601 for three specific items: a one off service charge, increased business rates liability and notional rent.   To arrive at this sum he applied the same multiplier as he had used in the loss of profits claim – 12.03.
116.	It being the claimant’s case that no advantage had been gained from the move to Innova Park in respect of the suitability of the premises or its location, and that they were the only premises to which it could have moved, it was submitted that the rebuttable assumption referred to in the judgment in Service Welding v Tyne & Wear County Council [1979] 38 P&CR 352 that the claimant had received value for money had, indeed, been suitably rebutted.  The claimant had acted reasonably in mitigating its loss in deciding to move to Innova Park (a fact agreed by the acquiring authority) and not one of the other units offered (particularly Beckton which would probably have been even more expensive in any case) was suitable.   Whilst it was the acquiring authority’s case that the claimant had achieved considerable advantages from the move (that being reflected in the increased turnover and profits), it was submitted that there was simply no evidence that those increases were attributable to the move.  As Mr Edwin Kendon had explained, it was KPG’s view that the increases would have occurred if they had remained at BPW. The increased costs at Innova Park conferred no benefit on the claimant and should therefore be compensated for.
117.	As to the specific items claimed for, the increases in business rates, electricity and gas together with the addition of annual service charges that were not payable at BPW have not been challenged.  However, the one-off service charge in connection with the road had been questioned on the grounds that the claimant could have incurred a similar liability in respect of the maintenance of the roadway and bridge serving the access to BPW, but the claimant had advised that it was perfectly serviceable.  The claim for increased notional rent was on the assumption that there was nothing in terms of improved facilities to take into account (and in fact the new premises were much smaller) so, for the profitability of the Company to remain the same, the rent (whether notional or actual) would need to stay at the same amount.  The fact that at Innova Park it was, according to Mr Matthews (of Strettons) calculations significantly more, meant that the equivalent profitability had been adversely affected.
118.	For the acquiring authority, it was submitted that, firstly, Mr King had conceded in his opening submissions that this element of the claim was “unusual”.  Secondly, it was also misconceived.  As to the “rebuttable presumption” argument per Service Welding it was for the claimant to prove that it has not received value for money in respect of the increased costs. The parties have agreed that the leading authority on whether a claimant may recover such costs is J Bibby & Sons Ltd v Merseyside County Council (1979) 39 P & CR 53 where Brandon LJ stated (at 59):
“The question is whether the tribunal was right in disallowing altogether a claim for compensation in respect of increased operating costs, and it is that question that I shall endeavour to answer.  
In answering this question, it seems to me necessary to consider three points.  The first point is whether, as a matter of law, it can ever be right to award compensation to a claimant in respect of increased operating costs.  The second question is: if so, in what circumstances would it be right to do so?...  
As regards the first question, it was, as I understood it, conceded by Mr Martin, for the authority, that there could be cases in which it would in principle be right to award compensation in respect of extra operating costs.  It would only be right in certain circumstances, but it was impossible to say that it would never be right.  In my judgment, that concession was rightly made.    
I pass, therefore, to the second question, viz, in what circumstances would it be right to award compensation in respect of such items?  It seems to me that it would be right to award compensation in respect of such items if it were shown, first, that the claimant, as a result of the compulsory purchase, had had no alternative but to incur the increased operating costs concerned, and, secondly, that he had had no benefit as a result of the extra operating costs that would have made the incurring of them worthwhile.”         
119.	It was thus common ground that the claimant may only receive compensation for increased operating costs in circumstances where both (1) it had no alternative and (2) it receives no benefit as a result.  Although there was an issue between the parties over (1) it was submitted that not much turned on it.  The acquiring authority’s case was that, whilst there was no criticism of the claimant for moving to Innova Park, it did have at least one alternative site (Beckton) to which it could have moved.  Indeed, Mr Edwin Kendon said in his first witness statement that there had been “little choice”, not that there had been no other choice.  The evidence of Mr Lawes, who knew the area well, should be noted, and the two units there offered larger accommodation than the claimant has at Innova Park.  It was accepted that the same arguments as to increased costs could have applied there too, however the fact remained that there was, in the authority’s view, a suitable alternative from which the activities at BPW could have been all but replicated.
120.	Whether or not the claimant had received a benefit was fundamental to the increased costs claim.  It was the authority’s case that it most definitely had.  The BPW premises were old and, as Mr Lawes’ Schedule of condition and series of photographs had demonstrated, they were in poor condition (a view that was supported by the claimant’s own surveyor).  They were not designed for the claimant’s business requirements and the Company had to make the best use of a series of interconnected buildings that it could.  Conversely, the Innova Park premises were purpose designed and built to accommodate the Company’s operations, convenient for access to the motorway network and altogether more impressive than those at the reference land.  These factors illustrated significant benefits.  Also the Company’s annual repair budget would be less than was required to be spent on BPW (although it was acknowledged that in the last few years of occupation, not much had been spent as it was known BPW was likely to be demolished).  Although it was suggested that there was less storage available at Innova Park in terms of area, the storage areas at BPW would undoubtedly have been less convenient and there were parts of the buildings that could not be used due to the condition of the buildings.
121.	Further benefits included the impression that the new premises would give to existing and prospective clients and in terms of asset protection, if the claimant ever decided to sell the new premises on what was a high quality purpose built business park in pleasant surroundings, it would be likely to achieve much more than the old and run down units at BPW.  Much was also made of the comments made by the Company in its new promotional material, although I accept the argument that not too much weight should be attached to that as it was of course a marketing tool designed to paint the Company in the most favourable light possible. However, it should not go unnoticed that the sales brochure included a picture of the high tech interior of Innova Park, which Mr Edwin Kendon admitted had been inserted as a ‘selling point’. 
122.	 For all these reasons, on top of the very significant increases in turnover and profit which the claimant was now enjoying, it was submitted that the Tribunal should find that benefits have been achieved.  
123.	As to specifics, it was submitted that the service charges that the claimant now has to pay towards the upkeep of what is an impressive and well maintained estate and replace a liability which it had at BPW that could well have resulted in significant payments having to be made in the future.  The increased business rates reflect the manifest benefits that the claimant has achieved, and should not be recoverable, and the same argument applies with equal force to the notional rent.  
124.	I accept the acquiring authority’s arguments in terms of the application of the law.  The premises at Beckton may, and could well have been, an alternative in terms of size and location.  Nonetheless, I accept the claimant’s concerns in respect of the difficulties that would undoubtedly be experienced in relation to the fact that the two buildings were not interconnecting, and their far less attractive location (in terms of staff retention and satisfaction), although I am not persuaded as to the problems from the Beckton Water Treatment Plant.  Thus, there was potentially an alternative, but I fully accept the reasons why KPG chose Innova Park in preference and do not regard its decision as unreasonable.
125.	Turning therefore to benefits, I am satisfied on the balance of probabilities that the claimant has received a number of benefits from the move to Innova Park that, although not able to be specifically proven in evidence, are most likely to have been a contributory factor in the marked increase in turnover and profitability since the move occurred.  They are modern, purpose built and most conveniently located premises (except perhaps for access to the city of London and West End customers), although it is clear from the evidence that the focus of the business has changed to larger customers and somewhat less of them – resulting in an altogether more profitable operation.  KPG has a building that will require less in terms of ongoing maintenance (and it could be expected that significant sums would have to be spent on BPW in the foreseeable future), and will maintain its asset value much better.   Then there is the question of whether BPW could have coped with the significant extra business that has been achieved.  Whilst they were managing perfectly satisfactorily with business that generated around £10m p.a. I conclude from the evidence that without the more efficient layout and configuration of the premises that they currently occupy, BPW could not have coped with what is approaching a 50% increase in business.     
126.	Therefore, in terms of the increased costs claimed for notional rent and business rates I am satisfied that the claimant has achieved value for money, and that no compensation is payable under this head.  Both the assessment of business rates and the notional rent reflect the open market rental value of the premises and, as Mr Matthews calculated, that rental value would be higher at Innova Park than at BPW despite the premises smaller size.  In any event, even if I were to have found that there was no benefit, I have serious concerns about Mr Epstein’s basis of calculation and particularly the multiplier he has used.  
127.	As to the one off service charge, whilst I accept that there was a possibility (and I put it no higher than that) that the claimant might have had to incur some potentially significant costs at some time in the future at BPW, the fact remains that it did have to pay a significant sum towards the making up and adoption of the estate road at Innova Park, and that early liability could not have been anticipated.  I therefore accept that element of the service charge (in the sum of £60,429), but as far as the c. £1,960 annual maintenance charges, they are clearly only to be expected and value for money is received.  
128.	The total compensation under this head therefore amounts to £60,429.
(c)	Management time
129.	Mr Epstein’s evidence, and details of how he had calculated the claimed loss of £231,570 under this head is set out at paragraphs 62 to 64 above, and Mr Kendon’s explanation of the immense amount of time alleged to have been spent on relocation by himself and his brother and CPO matters generally is at paragraph 21.  In his view the loss of customers was exacerbated by the directors having to take their eyes off the ball as to customer contact, exchange rate monitoring and general business related activities.  It was pointed out by Mr Stevenson that there had been a mathematical error in Mr Epstein’s “check” valuation (calculated as a percentage of the overall alleged loss of margin during the relevant years), and if corrected, this would amount to £64,230.  This was accepted by Mr Epstein to be the case.  
130.	It was submitted for the claimant that despite the error in Mr Epstein’s check valuation, the principal claim was soundly based and took account of the recent decision in Lancaster City Council v Thomas Newall Ltd [2013] EWCA Civ 802.  In that judgment, Rimer LJ said, having taken into account the Court of Appeal decision in Aerospace Publishing Ltd v Thames Water Utilities Ltd [2007] EWCA Civ3, and this Tribunal’s decision in Welford v Transport for London [2010] UKUT 99 (LC)., at para 31:
“If the director is paid a salary for his time so devoted, and that the diversion of his time has caused significant disruption to the company’s business, it may be reasonable to infer that the company will have suffered a loss at least equal to the salary cost of his diversion (see the Aerospace case).”
In Thomas Newall there had been a complete absence of any evidence that the claimant had suffered any loss at all, and notably there was no evidence of the remuneration (if any) paid to the director.  There was clearly such evidence in the present case.  Losses have occurred, and the claimant had provided a full and detailed breakdown of the time spent on CPO related matters, together with proven evidence of the directors’ remuneration.
131.	It was submitted that the highly speculative suggestions made by the acquiring authority that the directors had not been working hard and could have been making more effort to run the business were utterly hopeless.  It was, it appeared, being suggested that the Messrs Kendon were providing no ‘value for money’ whatsoever.
132.	For the GLA it was submitted that despite the director’s detailed time log, no specific loss had been identified by reason of the time they allegedly spent on CPO related matters.  Mr King had put to the acquiring authority’s witnesses that it should be presumed that the directors provided value for money, but Mr Stevenson had rejected that proposition saying that it would depend upon the particular director and particular company concerned.    It was pointed out that in answer to a question about the unimpressive performance of the business prior to 2008, Mr Edwin Kendon had volunteered that he and others at the top of the company had “not been working very hard”, that being a response to a point about the company’s subsequent significantly improved performance.  
133.	In connection with Thomas Newall, Mr Booth said that it was evident from a correct reading of the paragraph referred to above, that there were a number of caveats applied by the judge.  Whilst the GLA was happy to accept that the directors were paid the salaries mentioned, it was not accepted that the claimant had proved there was ‘significant disruption’ to the business.  Even if there was, Rimer LJ’s observation that it ‘may’ be appropriate to pay compensation meant that it was very much dependent upon the circumstances of the case.  Here, it was evident that the relocation has had a manifestly positive effect upon the company’s fortunes and it would thus be inappropriate for anything more than a nominal amount of compensation to be paid under this head.          
134.	I have to say that I find the acquiring authority’s submissions on this element of the claim to be somewhat ‘clutching at straws’.  Whilst I am of the view that it would not be appropriate to compensate the two directors for every single hour they spent on CPO related matters (especially as a wholly disproportionate amount of the time spent related to trying to justify the claim for loss of customers which, as will be seen above, I have found to be unproven), I do not think that it would be at all fair to refuse any compensation for their diversions just because, subsequent to the move, they have become supremely successful.
135.	I accept what Mr Edwin Kendon said about not working too hard at face value, and acknowledging the fact that the downturn in turnover in 2008 and 2009 could have been for a number of other reasons, particularly the recession, I nonetheless find that had the Messrs Kendon not been distracted to the extent they were and had Mr Edwin Kendon been able to spend more time on his normal sales and exchange rate monitoring duties, the reduced profitability would have been less or to some extent negated.  
136.	The fact is that, in order to relocate this significant business the directors had to take time  and undertake a considerable amount of work that, were it not for the CPO, they would not have had to do.  I think it reasonable to infer in this case that the Company would at least have recouped the cost of the directors’ time if it had been devoted instead to the business. Therefore, doing the best that I can, and in the light of the fact that Mr Epstein’s ‘check’ valuation is no longer relied upon, I consider that fair compensation for the losses caused by the said distractions to management time would be at 50% of the claim.  I therefore determine compensation under this head at, say, £115,000.      
137.	(d)	Temporary loss
138.	This is made up of two elements: reimbursement of storage costs allegedly paid to Harver Packaging Ltd (a KPG subsidiary) in the sum of £13,120 and the alleged temporary loss of four customers who suspended their buying from KPG but reinstated their business later.  The sum claimed here was £31,880.  These matters can be dealt with very shortly.
139.	Firstly, Harver.  It was agreed that there was no contractual obligation for KPG to store the materials at BPW which, it was said, had to be withdrawn and put into temporary storage for the period May to November 2008 as a direct result of the move to Innova Park where there was no room for them.  An invoice was drawn up in June 2013 based on Mr Edwin Kendon’s analysis of Harver’s storage costs for each of the financial years 2007 to 2011 and £13,120 was paid by KPG.   It was submitted for the acquiring authority that Harver was not a party to these proceedings and is not therefore entitled to receive compensation. However, in my view that argument was irrelevant because the invoice was paid by KPG, and KPG therefore ultimately suffered the cost.
140.	Although I accept that it was not contractually obliged to pay the money, I do think that  the payment made can be seen to have been caused by the CPO and in my judgment it is not too remote.  I therefore allow it. 
141.	As to the four customers said to have withdrawn their business but subsequently resumed their custom, I agree with the acquiring authority that, as with the claim for permanent lost customers, there is simply no evidence (let alone contemporaneous) to support this claim.  There was no oral evidence given and there was in my view nothing at all produced that could possibly support that the reasons for these four customers temporarily withdrawing their business was in any way caused by the CPO.  This element of claim is therefore determined at nil compensation.      
Professional fees
142.	In attempting to determine the issue of pre-reference costs in relation to professional fees incurred, I am entirely reliant upon the revised Schedule to the claimant’s statement of case (in the sum of £286,745) and the copy invoices included at pages 520 to 554 of the second volume of the trial bundle together with a brief reference to them in the claimant’s skeleton argument, and a rebuttal of the acquiring authority’s submissions on the issue in its closing statement, together with those submissions.  
143.	For the GLA, it was submitted that whilst there was no dispute that these fees were actually incurred, a large part of the claim (£252,382) should be disallowed in respect of fees charged by solicitors, forensic accountants and surveyors from July 2007 because, by that date, the claimant had received full compensation.  The rule (2) offer of £8,500,000 for the value of BPW had remained open (that fact being accepted by Mr Edwin Kendon in cross-examination) for the whole of the period from August 2006 up until it was eventually accepted in May 2014 and any costs incurred up to the date of the reference and after which the advance payment had been made should not be compensated due to this entirely unnecessary delay.  Further, it was argued that the rule (6) claim for disturbance would not exceed the £1,620,000 payment already made in July 2007.   In the circumstances, the GLA was prepared to pay £30,863 for the fees incurred prior to July 2007.
144.	In response, Mr King submitted that the authority’s stance was surprising as, neither in its evidence or at the hearing did it seek to raise any issue about this.  The arguments relating to the delays in accepting the rule (2) compensation were not accepted for the reasons given in evidence, and the outcome of the rule (6) claim was of course dependent upon the findings of the Tribunal in this reference.
145.	He went on to say that the onus has at all times been upon the claimant to prove its claim and that principle was unaffected by the Bow Paper Works Agreement in July 2007.  The claimant was fully entitled to be compensated for the professional fees it has reasonably incurred as a direct consequence of being dispossessed.  Whatever the amount determined by the Tribunal against the heads of claim that were before it, the legal, accountancy and surveyors fees up to the date of the notice of reference were all reasonably incurred as the claimant was perfectly entitled to instruct those professionals and to rely upon the advice that they gave.
146.	Further, in deciding if there should be any reduction in the fees claimed, it needed to be remembered that the fees of the solicitors and surveyors related to both rule (2) and rule (6) elements of the claim, and therefore, if the Tribunal were to accept a part of the authority’s argument and reject another it would be necessary for further submissions as to quantum to be made.
147.	My inclination would be to deny a proportion of those fees that relate to the rule (6) disturbance part of the claim.  Whilst there was no reason why the issue should not have remained live beyond the date upon which the advance payment was made, there should in my judgment be a discount to reflect the serious delays that occurred before any proper consideration was given to pursuing those elements of the claim that were before me until at least 2009, and Mr Epstein was not appointed until 2012.  There should also be a discount to the fees relating to the rule (2) element to reflect that there really was no reason why it should have taken 8 years to accept the sum that was offered.  Nevertheless, the amount of that discount should in my view be tempered by the fact that it was clearly the claimant’s surveyors’ view that there was more to be had in terms of the value of the premises, and as Mr King said, the claimant was perfectly entitled to rely upon that advice.
148.	Doing the best that I can in all the circumstances, I determine that the total fees claimed under this head should be discounted by 40% to £172,047.
149.	In the light of my findings above, I determine the compensation payable under the various heads as follows:
(a)	Lost customers					£nil
(b)	Increased costs					£   60,429
(c)	Management time 				£ 115,000
(d)	Temporary loss					£   13,120
(e)	Professional fees					£ 172,047   
		TOTAL 						£ 360,596
150.	This decision is final on all matters other than the costs of the reference. The parties may now make submissions on such costs and a letter giving directions for the exchange of submissions accompanies this decision. 
						DATED: 1 July 2015

						P R Francis FRICS