Neutral Citation Number: [2018] EWHC 111 (QB)
Case No: HQ14A03229 
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 29/01/2018

Before:

MARTIN CHAMBERLAIN QC
(Sitting as a Deputy High Court Judge)
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Between:

	PATRICIA GEORGINA GRANT 
(widow and executrix of the estate of 
DOUGLAS MICHAEL GRANT, deceased)	Claimant	
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	THE SECRETARY OF STATE FOR TRANSPORT	Defendant	

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Harry Steinberg QC and Patrick Kerr (instructed by Charles Lucas & Marshall) for the Claimant
Patrick Limb QC (instructed by DWF LLP) for the Defendant

Hearing dates: 5th December 2017 
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Judgment Approved
Martin Chamberlain QC: 
Introduction

1.	On 30 June 2017, I handed down a judgment determining various factual and legal issues that had been in dispute in relation to quantum: [2017] EWHC 1663 (QB). (References to paragraph numbers are to paragraph numbers of that judgment, unless otherwise stated.) I gave judgment for the Claimant in the sum of £267,844.35, representing all claimed heads of damages to which she was entitled on my findings bar one: the claim for dependency on the income from the development profits from the Highworth Estate. It was not possible for me to give judgment on that head of claim because my method of valuation was not the one proposed at trial by either party and so had not been addressed by the experts. Given that it was on any view the most substantial element of the damages claimed, I gave directions for further expert evidence to be filed and for a further hearing if necessary. The directions also allowed for the resolution of any outstanding issues as to costs. There is one such issue, namely, what order should be made with respect to the costs of an application made by the Defendant on 23 September 2015 for specific disclosure.

The claim for income from the development profits of the Highworth Estate

2.	In the event, the experts were not agreed. For the Defendant, Mr Lockhart produced a first supplemental report on 29 June 1997 and a second supplemental report on 27 July 2017. For the Claimant, Mr Barefoot produced a first supplemental report on 27 July 2017. After meeting, the experts produced a joint statement on 31 October 2017. Mr Barefoot’s second supplemental report was produced shortly before the hearing, but did nothing more than update his previous figures by adding VAT to them. On that basis, I admitted it despite its lateness.

3.	Mr Barefoot and Mr Lockhart were cross-examined. It soon became clear, however, that, whilst some of the matters on which they disagreed turned on genuine differences of expert opinion, others reflected different understandings as to the proper legal approach to the assessment of damages in the light of my earlier findings. There were five issues:

i.	To what extent, if at all, should it be assumed that the development of the Highworth Estate would involve bare land sales? 

ii.	Should it be assumed that a property development consultant would require, in addition to the terms set out by Mr Preece, a commission on investment sales?

iii.	Should the 11-year timeline for the development be taken to run from the date of Mr Grant’s death or the date of planning permission (which is anticipated in the near future)? Should the cost of engaging a property development consultant be calculated as at 2014 (the date of Mr Grant’s death) or as at today?

iv.	Should VAT be added to the cost of employing a development consultant when valuing the income dependency claim? 

v.	Should the dependency ratio generally applicable to income dependency claims be applied to this head of loss?

i. Land sales

4.	The position of the experts is helpfully summarised in a table at §9.2 of their Second Joint Report. Mr Barefoot’s position is as follows:

“Mr Barefoot advises that the average annual take-up of business units (offices) in the Swindon area is around 200,000 sq. ft and of industrial/warehouse units around 1 million sq. ft (see Joint Statement of Barefoot & Lockhart dated 28 March 2017 para 3.6.9, p. 617 of the Trial Bundle). Over an 11 year anticipated development programme this equates to some 13.2 million sq. ft of office and industrial accommodation. The capacity of the Grant scheme at say 211,228 sq. ft (excluding Aldi) is a mere 1.6% of the anticipated local marketplace activity. It is in this context that Mr Barefoot is of the view that whilst land sales will be considered from time to time, that [sic] apart from the Aldi ‘pump-priming’ sale, further land sales need not form part of the likely outcome.”

Mr Lockhart’s position is as follows:

“Mr Lockhart, in his original Statement, dated 24th February 2017, sets out in great detail the take-up of industrial/warehouse and office accommodation in the Swindon area. Excluding Highworth Business Park, there are 39 other major employment areas in Swindon and the immediate surrounding areas, all competing for a share of the annual take-up. The majority of this take up has been second hand accommodation.

Mr Lockhart, in section 5 of his original Statement, stated that there appeared to be ‘no appetite’ for speculative commercial property development. Mr Lockhart stated and reiterates in this Joint Statement, that there is no evidence to suggest that any speculative property development will take place and that any development will most likely take the form of individual deals, both freehold and leasehold. In other words, transactions will relate to specific known demand, not speculative development. Mr Lockhart took the view that this process would take 21 years. Mr Lockhart further accepted, in cross examination (see paragraph 89 of the Approved Judgment) that his own timeline was based on releasing profits from pre-sales and pre-lets and a shorter timeline would be applicable if land sales were to be entered into as well. This is why Mr Lockhart included land sales in his scenarios Two and Three, of his Assessment, for both the years 2014 and 2017.”

5.	In my judgment, Mr Lockhart was right to calculate the cost of employment a property development consultant on the footing that part of income from the development would be achieved through land sales. As he said, one of the key issues for determination at trial was the timeline over which the development was likely to yield profits. Mr Barefoot had said 11 years. Mr Lockhart had initially said 21, but accepted in cross-examination that a shorter timeline would apply if land sales were included. I preferred Mr Barefoot’s estimate of 11 years: [87]. I gave three reasons. The first and second were as follows:

“88. First, Mr Barefoot's estimate was based on a comparison of what had been possible in two other projects of which he had direct experience – one at Interface Business Park in Royal Wooton Bassett, the second at Solstice Park in Amesbury. As Mr Barefoot said, these were appropriate comparators for Highworth because the development was managed flexibly, as Highworth would be, through whatever mode would be most likely to yield profit in the market conditions. Another development at Shrivenham that had taken longer to complete was a less useful comparator because in that case the developers, who had several such sites, had stuck rigidly to a single model (which involved building, then securing income from letting and ground rents).

89. Second, Mr Lockhart accepted in cross-examination that his own timeline was based on realising profits through pre-sales and pre-lets; and that a shorter timeline would be applicable to land sales. His concern about land sales was that they were not necessarily profitable. This evidence did not seem to me to fit with what is known about the Aldi transaction. That is structured as a land sale, yet it is projected to yield a significant profit for HBP, even after the Claimant has received from HBP the amount due to her under the option agreement for the land. Although it is only a single transaction, the Aldi deal appears to bear out Mr Barefoot’s view that land sales can yield significant value and profit to HBP. Moreover, Mr Lockhart fairly accepted in cross-examination that, if the Aldi deal completes (as both experts expect), it will act as a ‘pump primer’. In other words, the involvement of a major retailer, and the fact that services have been installed, will attract others to the site.”

6.	It would be wrong as a matter of principle to allow the Claimant, at this stage in the proceedings, to go behind an important premise on which I accepted her own expert’s timeline of 11 years, namely that some of the income from the development would be realised through land sales. That is particularly so when the premise in question was specifically advanced by the Claimant’s expert, put to the Defendant’s expert in cross-examination and accepted by him.

7.	But even if it were possible to re-open the issue at this stage, I consider the premise to be correct on the evidence as a whole, including the expert evidence I heard on 5 December 2017. First, Mr Barefoot fairly acknowledged that land sales are “potentially part of the mix of transactions a developer may consider” (see paragraph 2.5 of the Joint Statement). Second, Mr Barefoot also accepted that, at Interface Business Park, one of the comparator developments on which he based his conclusions, there had been four land sales (see item 2 in the table at paragraph 9.2 of the Joint Statement). I accept Mr Lockhart’s view that this provides good evidence that land sales should be included among the means by which income would be derived from this development. Third, the fact that three of the sales at Interface were contingent on development management agreements, out of which the developer derived a further profit, does not in my view affect the analysis. The present exercise is one of assessing the income that the Claimant has foregone as a result of Mr Grant’s death. That in turn involves assessing how much it would cost to replace his services. I found that the assessment should be based on 50% of the cost of employing a property development consultant on the terms set out by Mr Preece: [85]. His terms distinguish between land sales and lettings in terms of commission, but they also include a monthly retainer to cover other work on the development. The only relevant question at this stage is what proportion of the disposals would be sales and what proportion lettings. Even if it is true that some of the sales might (possibly) have been on terms that included an additional profit element, as at Interface, that would not affect the cost of a property development consultant engaged on Mr Preece’s terms, unless this additional profit element would have led to the consultant requiring an additional commission (which is issue (ii)).

8.	The only remaining issue is what proportion of the disposals should be assumed to be land sales. On this, I accept Mr Lockhart’s suggestion that it is appropriate to assume that income will be generated from the remaining land, after taking into account the Aldi A3 and trade unit schemes, through 50% land sales and 50% built development. As Mr Lockhart said, this mirrored the position at Interface Business Park and Templars Way, Royal Wootton Bassett. 

ii. Commission

9.	For similar reasons, I reject the Claimant’s suggestion that it is necessary or appropriate to consider, at this stage, whether a property development manager would require an additional commission on investment sales. There is no mention of any such commission in Mr Preece’s report, even though he plainly had in mind that the development would include investment sales.

10.	As under issue (i), I do not think it would be right to re-open, at this stage in the proceedings, the issue of the terms that a property development consultant would be likely to require. I have already assessed the value of the income foregone as a result of Mr Grant’s death as “50% of the cost of employing a consultant on the terms set out in Mr Preece’s report”: [89]. That was because Mr Preece’s report was “powerful evidence from an experienced individual, familiar with the market for property development consultancy services in the Swindon area, that those terms would have been sufficient to replace the work that Mr Grant intended to do on the development”.

11.	Even if it were appropriate to re-open the issue, Mr Barefoot’s evidence would not have caused me to doubt the evidential value of Mr Preece’s report. The fact that some property development consultants might require a greater commission does not necessarily suggest that the services sought would be unavailable from others on the terms set out by Mr Preece. In any event, his report remains incontrovertible evidence that those services would have been available from at least one such consultant: Mr Preece himself.

iii. Timeline start date

12.	The Claimant submits that Mr Barefoot’s timeline of 11 years must be taken as running from the date on which planning permission is first granted (which will probably be in the very near future); and that the damages should include an element to compensate for the fees of a property development consultant for work done between Mr Grant’s death in 2014 and now in addition to the 11 years. The Defendant submits that that would be to extend the development timeline to 14 years, contrary to my earlier finding; that the 11 years should run from the date of death; and that in any event there is no evidence that the consultant would have had anything to do (sufficient to justify his fee) in the three years prior to the grant of planning permission for the Aldi development.

13.	I accepted Mr Barefoot’s estimate of the timeline over which development profits would be realised. His estimate was 11 years, but he did not make it clear from what date these 11 years ran. Looking back at his reports, however, it is clear to me that the timeline must have begun from the grant of planning permission. In his original reports, he had estimated a shorter timeline of 8 years in his “Scenario One”. That was illustrated by a graphic of the development timeline showing pre-construction of the first plot in the first quarter of year 1 and construction in the second quarter of year 1. That must have been starting from the grant of planning permission, since neither pre-construction, nor construction phases could have begun without such permission. Mr Barefoot’s estimated timeline changed from 8 years to 11 years, but this was an adjustment in the light of his discussion with Mr Lockhart; it was not designed to allow time for an application for planning permission. 

14.	The foregoing is simply an analysis of what – on a proper reading – Mr Barefoot was saying in his reports prepared for the hearing in May 2017. It is, however, confirmed by what he has said since: the timeline starts from the grant of planning permission. Mr Lockhart’s view to the contrary appears to be based on his understanding of my judgment, rather than on any independent expert view of his own. Indeed, the suggestion that I should assume that the whole development could be completed in 11 years from the date of Mr Grant’s death (including the time take to obtain planning permission) would seem very far removed from Mr Lockhart’s original view (which favoured a significantly longer timeline).

15.	It is a separate question whether the Claimant is entitled to be compensated for the lost income resulting from Mr Grant’s death in the period between his death and now. I consider that she is. The Defendant submits that there is no evidence that work had to be done that would justify engaging a consultant in the period before the grant of planning permission. But in paragraph 10 of his first witness statement, signed in April 2016, Mr Muir estimated that he had put in about 1,000 hours of work over three years on the development. The work included concluding the negotiations with and representations to the Borough council for the re-allocation of land in the Swindon Borough local plan, meetings and commercial negotiations with potential purchasers and tenants, reviewing draft legal agreements, meeting with lawyers, briefing architects, reviewing the highways scheme with the highways engineer, reviewing the outline services infrastructure specification, preparing and presenting proposals for potential funding institutions and agreement of documents to be filed with Companies House. Mr Muir’s evidence (which, as I indicated in my judgment, I accepted as truthful) provides a sound basis for concluding that the services of a property development consultant, engaged on the terms set out by Mr Preece, would have been required from Mr Grant’s death. On the basis of my findings, the Claimant is entitled to be compensated for 50% of that cost.

iv. VAT

16.	When I handed down judgment on 30 June 2017, the parties invited me to express a view on whether VAT should be added to the cost of the property development consultant when valuing the income dependency claim. I said that in principle it should, since any such consultant would almost certainly have been VAT registered, so VAT would have been part of the cost to the Claimant. The Defendant invites me to revisit that issue because, whilst it was correct that the consultant would have charged VAT, it would soon have become commercially sensible for the Claimant herself to become VAT registered or to create a corporate vehicle that was registered and, once this happened, any VAT would have been reclaimable, so that VAT would be cost neutral to the Claimant. The experts, in their second joint report, both agree with this analysis. The only difference between them is as to the stage at which the VAT registration would have occurred if (as I have found) it was necessary to employ a property development consultant in the period between Mr Grant’s death and the grant of planning permission. Mr Barefoot says that it would not have occurred until after planning permission had been granted. Mr Lockhart says that it would have taken place within 3 months of the start of the consultant’s engagement.

17.	Mr Steinberg has two submissions. First, he says that I should not re-open the issue (though he accepts that, because my earlier expression of view was not incorporated into an order, I have jurisdiction to do so). Second, he relies on the reasoning of the Court of Appeal in Welsh Ambulance Services v Williams [2008] EWCA Civ 71 as authority for the proposition that the value of a dependency must be fixed at the date of death. It is agreed that the Claimant would not have been VAT registered at that time; and Mr Steinberg says that it is irrelevant to consider what would have happened after that.

18.	I consider that I should reconsider the question whether VAT is payable given that both parties agree I have jurisdiction to do so. A substantial amount of money depends on the answer. No prejudice would be caused to the Claimant by my reconsidering the issue, which has an obvious overlap with the other issues I have to decide now. 

19.	I summarised the effect of the decision in Welsh Ambulance Service v Williams at [59] of my judgment as follows:

“In Welsh Ambulance Service v Williams [2008] EWCA Civ 81, the Court of Appeal upheld an award in favour of the family of a businessman who had, with some assistance from his family, run a builders’ merchant and property business. It was irrelevant that the dependants had made a success of the business, because the value of the dependency was fixed at the moment of death; and the only post-death events affecting its value were those which affected the continuance of the dependency (such as the death of the dependant before trial) and the rise (or fall) in earnings to reflect the effects of inflation: see per Smith LJ (with whom Lloyd and Thomas LJJ agreed) at [50]...”

Read in context, the Court of Appeal was addressing a very specific question that arises in dependency claims where the deceased ran a business which the dependant has inherited: does it matter how well the business performs after the death? The answer was no. That precludes the court, subject to the stated exceptions, from taking into account factual developments post-dating the death. It does not, however, require the court, in fixing the value of the dependency at death, to assume that the costs of replacing the services of the deceased would remain exactly as they are on the date of death. And it certainly does not require the court to assume – contrary to the position agreed between the experts – that, simply because the claimant was not registered for VAT the time of death, she would never become registered (whether herself or through a corporate vehicle) even if that were obviously commercially sensible.

20.	Approaching the matter from a different direction, the purpose of ascertaining the costs of replacing the deceased’s services is to value the true loss to the dependant of the deceased’s services at the moment of death. If a reasonable and prudent dependant would take steps to enable her to reclaim VAT, I cannot see why VAT should be included as part of that true loss. To include it would be to give the claimant a windfall.

21.	In my judgment, VAT should not, therefore, be added to the costs of the property development consultant save in respect of the first three months’ work (since, as the experts agree, the Claimant would and could have secured the benefits of VAT registration within that period). That applies to the whole of the period during which the consultant would need to be engaged (since, as Mr Lockhart said, the impetus to save some £4,800 per annum would make VAT registration worthwhile from the outset).

v. Dependency ratio

22.	At trial, there was a dispute between the parties about the appropriate ratio to apply to the future income dependency claims. Mr Steinberg argued for 85%, relying on the decision of Simon J in Farmer v Rolls Royce Industrial Power (India) Ltd (26 February 2003). I rejected that, finding at [91] that, on the facts of the present case, there was no reason to apply anything other than the conventional ratio of 66.67%.

23.	At trial, Mr Steinberg did not advance the argument that it was wrong to apply any dependency ratio to the claim for dependency on income from the development of the Highworth Estate. In those circumstances, I doubt whether it is open to him to do so now. But in any event, I am satisfied that, even if it is open to him to advance the argument now, it should be rejected.

24.	Mr Steinberg’s main point was that my method of valuing the income dependency claim (i.e. by ascertaining the costs of replacing Mr Grant’s services) made the claim akin to a services dependency claim, to which no dependency ratio was generally applied.

25.	That, in my judgment, is wrong. The assumption underlying the claim for lost income from the development of the Highworth Estate is that the development will yield a substantial net income. Had he not died, part of that income would have been attributable to work done by Mr Grant personally. I had to assess how much. I did so by reference to the cost of replacing the work that Mr Grant would otherwise have done. That cost is the net income which the Claimant has foregone as a result of Mr Grant’s death. But part of that would have been spent on living expenses for Mr Grant, which expenses the Claimant will not now incur. So it is appropriate to apply a dependency ratio to reflect that. Because the evidence did not substantiate any ratio other than the conventional one, I applied the latter.

26.	Claims for services dependency are not reduced by a dependency ratio because they compensate not for income foregone but for services foregone; and because they are in any event limited to services which the Claimant will herself continue to need. 

Costs of the specific disclosure application

27.	The last matter in dispute concerns the costs of an application for specific disclosure made by the Defendant on 23 September 2015. The Defendant sought disclosure of 21 documents or categories of documents. There were two hearings before Master Gidden on 18 February 2016 and 16 June 2016, the first having been adjourned part-heard. There was a third hearing before Master Davison on 25 November 2016, which also served as a case management hearing, at which he ordered that the costs of and occasioned by the application be reserved to the trial judge.

28.	Mr Steinberg submits that the application did not in substance succeed and that it was unnecessary. He says that, while the circumstances would potentially justify an order that the Defendant should pay some of the Claimant’s costs in any event, an order of costs in the case would be simpler, fair and appropriate.

29.	Mr Limb responds that the application was necessary, as the Claimant had pleaded a claim worth more than £1 million with few documents to support it, and that it was broadly successful. He argues that the proper order is an order for the Claimants to pay the Defendant’s costs of and occasioned by the application.

30.	I am being asked to determine, in the exercise of my discretion, the costs of an application that was not before me. It would not be proportionate for me to consider the evidence and submissions made in support of that application at the level of detail that would be required if I were determining the application myself.

31.	It is convenient to consider, first, the documents sought at the first hearing before Master Gidden on 18 February 2016 and, second, the documents sought at the second hearing on 16 June 2016. 

32.	The first hearing was taken up with discussion about the request for disclosure of the Claimant’s GP records (category 1) and the request for bank statements (categories 3, 4 and 5). The Claimant initially resisted disclosure of her GP records (category 1) in principle, but they were in due course provided to the Defendant’s expert following discussion before Master Gidden and observations or directions by him. In my view, the Defendant was entitled to disclosure of these documents, because they were relevant to the Claimant’s life expectancy, which was likely to be (and was in fact) an important factor in assessing quantum. Master Gidden agreed to a compromise proposal on behalf of the Claimant that they be disclosed to the Defendant’s expert, but this proposal was made only at the hearing. There is no trace of it in the evidence filed by her in opposition to the application. On the papers before me, the Defendant was entitled to these records, had to issue the application to obtain them and in fact obtained them (albeit by way of an order for disclosure to his expert).

33.	As to the Claimant’s bank statements from November 2010 to October 2012 (category 3) and the golf club’s bank statements from November 2010 to February 2015 (category 4), disclosure was again initially resisted by the Claimant, but as a result of observations made by Master Gidden, they were disclosed. They were potentially relevant to the services dependency claim. Category 5 consisted of Mr Grant’s bank statements from November 2010 to his death in November 2014. Initially, it was said that Mrs Grant had provided all she had. Some documents in this category were later sought from the bank and provided to the Defendant, but only after the application had been made. It is true that some of these were not in the possession of the Claimant when the application was made, but it is also fair to say that the Claimant disputed their relevance or made submissions to the effect that an order for their disclosure was disproportionate. In my view these documents were plainly relevant to the claim in respect of payments to golf club staff. The Defendant was entitled to them, had to make the application to obtain them and in fact obtained them.

34.	As to the remaining documents, which were considered at the second hearing before Master Gidden, the fact that some were not in existence when sought does not, of itself, mean that it was unreasonable to request them, though in some cases there is correspondence in which the Claimant’s solicitor made clear that the documents were not in the possession of the Claimant. But the fact that, in respect of many categories, the documents were never provided and the request never pursued suggests that some of the requests were too widely drawn. 

35.	In my judgment the proper disposal is an order that the Claimant pay 50% of the Defendant’s costs of and occasioned by the application. This reflects the Defendant’s broad success in respect of the categories of document discussed in the first hearing before Master Gidden and the inconclusive outcome of the second hearing before him.