[2004] EWLands ACQ_19_2001 (25 June 2003)

ACQ/19/2001
	
	LANDS TRIBUNAL ACT 1949
	
COMPENSATION – compulsory acquisition of former holiday park – whether suitable for use for timeshare development – residual valuations – hypothetical vendor – whether claimant to be considered hypothetical vendor – developer’s profit – whether deduction for developer’s profit – loss of profits – whether compensation to include loss of future profits – alternative valuations as caravan site – compensation awarded £182,500

IN THE MATTER of A NOTICE OF REFERENCE

BETWEEN	CORTON CARAVANS AND CHALETS LIMITED	Claimant

	and

	ANGLIAN WATER SERVICES LIMITED	Respondent

	Re: Former Holiday Park, Stirrups Lane, Corton, Suffolk

	Before: The President and P R Francis FRICS

	Sitting at 48/49 Chancery Lane, London, WC2A 1JR 
	on
3-7 and 10-12 February and 24 March 2003

Barry Denyer-Green and Gordon Nardell instructed by Mills and Reeve, solicitors of Norwich, for the claimant 
Guy Roots QC, Gerald Rabie and Guy Williams instructed by Anglian Water Legal Section, for the acquiring authority.

The following cases are referred to in this decision: 

Horn v Sunderland Corporation [1941] 2 KB 26
Director of Buildings and Lands v Shun Fung Ironworks [1995] 2 AC 111
Richmond Gateways Ltd v Richmond upon Thames Borough Council [1989] 2 EGLR 182
Harvey v Crawley Development Corporation [1958] 1 QB 485
Hobbs (Quarries) Ltd v Somerset County Council (1975) 30 P & CR 286
Pastoral Finance v The Minister [1914] AC 1083
Collins v Feltham UDC [1937] 4 All ER 189
Wimpey v Middlesex CC [1938] 3 All ER 781
D McEwing and Sons v Renfrew County Council (1959) 11 P & CR 306
Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302
Railtrack plc v Guinness Ltd  (unreported [2003] EWCA Civ 188)
Trocette Property Co v Greater London Council [1974] 28 P&CR 408
Ryde International Plc v London Regional Transport (28 March 2003, unreported; LT ref ACQ/174/2000)
Liesbosch Dredger v SS Edison, The Liesbosch [1933] AC 449
Allied Maples Group Ltd v Simmons and Simmons [1995] 3 WLR 1602

The following further cases were referred to in argument

Bailey v Derby Corporation [1965] 1 All ER 443
Co-operative Retail Services Ltd v Taff Ely BC (1979) 39 P & CR 223
Gagenus v Turkey 5 June 2001, 39335/98 E Ct HR
Lady Fox’s Executors v Commissioners of Inland Revenue [1994] 2 EGLR 185
LCC v Tobin [1959] 1 WLR 354 
Lithgow v United Kingdom [1986] 8 EHRR 329
Main v Swansea City Council (1984) 49 P & CR 26
Marcic v Thames Water Utilities Ltd [2002] QB 929 
Matthews v Environment Agency (2002) LT LCA/192/2000 (Unreported)
McDougall v Wrexham Maelor BC  [1993] RVR 141
Minister of Transport v Lee (1965) 17 P & CR 181
Richards v Somerset County Council [2002] RVR 328
Ryde International Plc v London Underground Ltd [2002] RVR 59
Slough Estates Ltd v Slough Borough Council (No2) [1971] AC 958

DECISION
Introduction
1.	This reference concerns the amount of compensation payable to Corton Caravans and Chalets Limited by Anglian Water Services Limited (whom we will refer to as “AWS”) for the compulsory acquisition of land comprising a former holiday park at Stirrups Lane, Corton, near Lowestoft, Suffolk, under the Anglian Water Services (Corton, Near Lowestoft) Compulsory Purchase Order 1999.  The CPO authorised the acquisition of 3.814 ha of the claimant’s land, but AWS agreed to purchase almost the whole of the claimant’s holding, 5.272 ha (13.027 ac), and it is this larger area that is the subject of the reference.  The parties agree that compensation should be determined as if the whole of this land had been included in the CPO.
2.	The claimant company is associated, in the way that we shall describe, to a company called Potters Leisure Ltd that owns and operates Potters Leisure Resort at Hopton, Suffolk, a mile from the subject land.  Although on the coast, Potters Resort is principally an indoor resort having as its principal attraction indoor bowls.  The case for the claimant is that in the absence of the CPO the subject land would have been developed as a timeshare centre, providing facilities for bowls, in association with Potters Resort.  The claimant’s valuer says that the land was worth up to £3,650,000 for such a purpose.  The acquiring authority say that the land was worth no more than £170,000, as a caravan park.
The claimant
3.	The claimant was incorporated as a company in 1953, and was, at all material times, a non-trading entity.  The issued shareholding is held in the ratio of 75 per cent by Potters Leisure Ltd and 25 per cent by Mr Brian Potter, who is a director both of the claimant and Potters Leisure Ltd.  Potters Leisure Ltd is a family owned company (in 1999, the directors were Mr Brian Potter, his wife Judith and their son, John).
4.	The claimant’s net assets were shown in the 1999 trading accounts as £27,328.  A statement to those accounts relating to the value of the subject land, its sole asset, declared that the land was subject to a compulsory purchase order and there were ongoing discussions regarding its disposal.  As the compensation was not agreed, the “carrying amount” of the land was retained at the historic figure of £55,000, as appraised by the directors in the 1993 accounts, although their view was stated to be that the land had a value in 1999 of £2,600,000. 
5.	Potters Resort is a purpose built leisure resort that offers all year round short breaks in hotel and bungalow accommodation for up to 600 guests at any one time.  The facilities, which are based around its focus as the largest indoor bowls centre in the world (from which the world indoor bowls championships are televised annually), include sports halls, leisure and entertainment complexes, restaurants, bars, a theatre and two swimming pools.
The subject land
6.	The reference land is a generally level site, located in a rural position between the north Suffolk coastal villages of Corton and Hopton.  It is about 0.6 miles inland from the sea, and is approached off Stirrups Lane, a minor road connecting the main A12 trunk road to the coast road linking the villages.  Lowestoft is about 3 miles to the south and Great Yarmouth is about 10 miles to the north.  The land is roughly trapezium-shaped.  Stirrups Lane forms the north-east boundary, and the other sides are bounded by agricultural fields.  The claimants own two small, narrow strips of land to the north and south of Stirrups Lane over which easements have been granted to the acquiring authority for pipe-laying in connection with its scheme, but these strips are not part of the reference land.
7.	From some time in the 1950s the subject property had been used as a caravan park.  Between 1980 and 1987, when the caravan and holiday camp business was closed down, there were 144 units of accommodation (106 caravans and 38 chalets) on it together with a large outdoor heated swimming pool, and core buildings including an administration centre.  At the valuation date (7 March 2000) the site was derelict, having been disused for some 13 years.  During that period many of the buildings had been vandalised or burnt out and others had fallen down or had been demolished.  Some fly-tipping had also taken place and, at some time in the past, part of the site had been used for refuse disposal.  A report commissioned by AWS in connection with their proposed works, confirmed a volume of approximately 2,300 m³ of contaminated material, with some 900 m³ of made ground above it. 
The compulsory purchase
8.	The acquiring authority had for some years been seeking a site upon which to construct a biological sewage treatment works.  After considering 13 alternatives, including one that was about 300 metres from the entrance to Potters Resort, AWS opted for the subject land.  An application for planning permission was made on 30 September 1998 and permission was granted on 15 April 1999.  The CPO was made on 12 July 1999 to facilitate the acquisition of the land along with certain other rights.  It was confirmed by the Secretary of State on 14 February 2000.  Notice to treat and notice of entry were served on the claimant on 21 February 2000.  Possession of the land was taken on 7 March 2000, and this is agreed as the valuation date for the purposes of this reference. 
The claim
9.	The initial claim in answer to the notice to treat was submitted by the claimant on 14 April 2000, with a supplemental addendum dated 13 September 2000 quantifying the claim in the sum of £2,850,000.  This was substantially above the acquiring authority’s estimate of value, and, following failure to agree compensation, AWS gave notice of reference to this Tribunal on 13 February 2001, stating an estimated value of claim at £200,000. 
Planning
10.	In 1961 planning permission was granted to use the subject land as a site for 150 caravans.  Subsequent permissions were granted in 1963, 1967 and 1976 for replacement holiday chalets.
11.	An application in May 1990 by Potters Leisure Ltd for permission to construct a retirement village was refused, and an appeal against the refusal was dismissed on 5 November 1990.  On 29 October 1990 a determination under section 64 of the Town and Country Planning Act 1990 was issued by the local planning authority (Waveney District Council) stating that planning permission was not required for the continued use of the subject property as a holiday site, or for the renovation of the existing buildings and the re-siting of the caravans.  However, the certificate stated that “…with regard to the replacement of the facilities which have recently been destroyed by fire, then planning permission will be required for replacement…”
12.	On 25 June 1997, Potters Leisure Ltd applied for outline planning permission for a “time-ownership holiday village”.  The accompanying letters said that the intention was to construct 75 two-bedroom units of accommodation.  The illustrative plan showed in addition a 6-rink indoor bowls centre with an adjacent bar, a 4-rink outside bowls green and an indoor sports facilities/clubhouse building.  Outline permission was granted on 17 September 1998, subject to conditions, and on the same date Waveney District Council and Potters Leisure Ltd entered into an agreement under section 106 of the 1990 Act.  This agreement imposed obligations upon the applicant to widen a section of Stirrups Lane between the site and Coast Road/Church Road; to demolish a wall; to agree a scheme with the council whereby a private transport link would be provided between the development and Potters; to provide the principal reception facility for the development at Potters and to endeavour to encourage visitors to the site to use the Stirrups Lane/Coast Road route between the respective facilities, rather than the main A12.  Any right to claim compensation in respect of limitations or restrictions on the planning use of the land were to be waived.
13.	The parties to the reference agreed that, in relation to the issues between them, if a planning application had been made in similar terms to the 1997 application, (75 units) but with access arrangements that required sight lines over land that was not within the applicant’s or the Highway Authority’s control, such permission would have been likely to be forthcoming without the imposition of onerous planning conditions or obligations under a section 106 agreement.  The same would have applied if different amenity buildings had been specified or if the application (as far as it was necessary under the then extant planning permission) was for use as a caravan site with ancillary facilities.
14.	The relevant local plan under which planning applications would have been determined was the Waveney Local Plan adopted in November 1996.   The subject property was allocated as a tourism site on the map as area TM 1, with the legend: “The Corton/Hopton coastal strip, defined on the proposals map, is allocated for tourism or leisure purposes.  Proposals will be subject to the overall aim of maintaining the strategic gap (Env 4) and the criteria set out in policies TM13 [new, or extensions to existing static caravan, chalet and cabin sites] and TM14 [redevelopment of existing holiday accommodation or leisure purposes].”
Claimant’s case
15.	The principal basis upon which the claim was pursued was that, in the absence of the scheme, either the claimant or a third party purchaser would have implemented the 1998 permission and would have constructed a timeshare village.  Reliance was placed on the evidence of Brian Potter, managing director of the claimant company and of Potters Leisure Ltd, and Brian Routledge FRICS, whose firm O & R Properties had made an offer to buy the land.  Evidence from Hugh Francis Esau Cooper BCom MSc was relied upon to show that there was a market for land for timeshare developments and that the claimant should therefore be compensated on the basis of the value of the site for timeshare purposes.  The proximity of the Potters operation, only 1 mile away at Hopton, was a key factor in determining the value of the land and its attractiveness in the marketplace for a timeshare developer and for the purchasers of individual units.
16.	The claimant relied on the valuations of David Roy Gale-Hasleham FRICS IRRV  Both valuations were on a residual basis due to the lack of comparable evidence.  Mr Gale-Hasleham’s valuation A had been made under rule (2) in section 5 of the Land Compensation Act 1961.  It was based on the assumption that the hypothetical willing seller had all the characteristics of the claimant and was in the same factual position.  In other words the willing seller was a subsidiary of Potters; Potters owned the leisure resort at Hopton and operated it as they in fact did as a bowls-based resort; and Potters had the marketing expertise and wished to progress timeshare development of the site in a way that would be economically advantageous both to themselves, in the operation of their leisure resort, and to the party carrying out the timeshare development of the site.  A vendor in that situation would not sell at a price that did not reflect its ability to develop the land, and make use of the relationship and connections with Potters.  For example, in this scenario there would be a £500,000 saving on marketing costs (those costs being a significant factor in timeshare developments) in comparison with the valuation B approach, due to the substantial experience and marketing lists that Potters possessed.  Similarly there was no deduction for developer’s profit in valuation A because a willing vendor in the position of the claimant would not have incurred this item of cost if it had developed the site itself.  Valuation A gave a value of £3,560,000 and represented the principal basis on which the claimant put its case.
17.	In submitting that Mr Gale-Hasleham was correct in his valuation A to treat as the proper measure of compensation the price below which the claimant would not be prepared to sell, Mr Barry Denyer-Green relied in particular on Horn v Sunderland Corporation [1941] 2 KB 26 and Director of Buildings and Lands v Shun Fung Ironworks [1995] 2 AC 111, which established the principle that the claimant should get no more and no less than his loss.  He submitted that Mr Gale-Hasleham was correct in making no deduction for developer’s profit in valuation A because a willing vendor in the position of the claimant would not have incurred this item of cost if it had developed the site itself.  He relied on Richmond Gateways Ltd v Richmond upon Thames Borough Council [1989] 2 EGLR 182, where the Court of Appeal upheld the Lands Tribunal’s decision that, on the evidence before it, no deduction for developer’s profit and risk in a residual valuation was required if the hypothetical purchaser was likely to be a company very similar to the claimant company, if not the claimant itself.
18.	Mr Gale-Hasleham’s valuation B assumed for the purposes of rule (2) compensation that the willing vendor did not have the factual characteristics of the claimant.  The residual valuation thus made additional allowances for the cost of acquisition and setting up, assumed greater marketing costs and allowed for developer’s profit.  It produced a value of £2,450,000.  Since, however, the consequence of the compulsory acquisition was that the claimant was unable to proceed with its proposed development and had suffered, as a result, a loss of profits that it would otherwise have earned from the development, additional compensation to reflect that loss was payable under rule (6).  He included for this the sum of £1,200,000, which was supported in evidence by Andrew Throssell FCA of H Hebblethwaite and Co, accountant to the claimant and to Potters.  The two amounts gave a total for valuation B of £3,650,000.  Mr Denyer-Green submitted that compensation for loss of profits was payable on the general principle, stated by Romer LJ in Harvey v Crawley Development Corporation [1957] 1QB 485 at 494, that any loss sustained by a dispossessed owner which flows from a compulsory acquisition may properly be regarded as the subject of compensation for disturbance, provided, first, that it is not too remote and, second, that it is the natural and reasonable consequence of the dispossession of the owner.  Mr Denyer-Green relied also on the decision of the Lands Tribunal in Hobbs (Quarries) Ltd v Somerset CC (1975) 30 P & CR 286, in which the Tribunal (Mr Douglas Frank QC and Mr J D Russell-Davies FRICS) had determined compensation for a discontinuance order on quarry land on the basis of loss of anticipated profits.  To award compensation that did not reflect the totality of the claimant’s losses, Mr Denyer-Green said, would be contrary to Article 1 of the First Protocol to the European Convention on Human Rights.
19.	To cover the possibility that his timeshare valuations might not be accepted, Mr Gale-Hasleham produced an alternative valuation of the land for use as a caravan park.  That valuation gave a value of £900,000.  It differed from a valuation prepared on the same basis by the acquiring authority in that it assumed less provision of central facilities.  His view was that all that was necessary for a static caravan park was basic warden’s accommodation and a reception office.
Acquiring authority’s case
20.	AWS’s case was that, at the valuation date, there would not have been any demand or market for a timeshare development in this location.  Reliance was placed on the evidence of Stephen Henry Morgan FRICS, a director of Humberts Leisure Ltd.  Mr Morgan said that the subject land was not suitable for that purpose.  The only realistically profitable form of development that could be undertaken at the relevant date, and thus the only use that might attract a purchaser, was as a site for static caravans.   Even then, the cost of providing on-site facilities that would be required to make the caravan pitches attractive to prospective occupiers in this location was so great as to reduce the open market value of the subject land to £170,000, the value placed upon it in the valuation of Richard William Asher FRICS of Jones Lang LaSalle, also called on behalf of AWS.
21.	As to the claimant’s valuations, Mr Guy Roots QC submitted that valuation A, in assuming that the vendor had the factual characteristics of the claimant, was wrong in law.  Under rule (2) the value of land was the amount which the land if sold on the open market by a willing seller might be expected to realise.  He said that the words “if sold” required the assumption of a sale, which in turn required the assumption that the seller and the purchaser reached agreement on the price.  Valuation A was intended to identify the price below which, in view of the Potters link, the claimant would not have been prepared to sell; but a vendor who had a fixed position in terms of the price below which it would not be prepared to sell would not be a willing seller in terms of rule (2).  It was wrong in making no allowance for developer’s risk and costs.  Valuation A assumed that the claimant and Potters would share the marketing costs, and much of that marketing would be directed at Potters’ then existing client list.  It also assumed that the purchaser and its customers would have the use of the Potters facilities, but that would be a commercial arrangement rather than something that ran with the land.  Such proposed arrangements had not been quantified or valued, and the risk factor of paying to acquire a commercial benefit in addition to the land had not been considered.   
22.	Valuation B did not, as the claimant contended, exclude the Potters factor that had been assumed in valuation A in that Mr Gale Hasleham’s figure of £2,450,000 (rule (2) compensation) included a 10 per cent premium to reflect an anticipated bid from Potters.  Furthermore, it was wrong in law to add a disturbance claim as, if the claimant had sold the land, it would not have been in a position to develop, and thus earn profits from it.  Potters, if they had wished to develop the land were not in occupation of the land and were not the claimant.  If the claimant itself could have obtained the finance to develop the site (which AWS in any event disputed), it could not claim disturbance for loss of profits because that expectation was already taken into account in the value of the land. Mr Roots relied on Pastoral Finance Association Ltd v The Minister [1914] AC 1083, Collins v Feltham UDC [1937] 4 All ER 189, Wimpey v Middlesex CC [1938] 3 All ER 781, and D McEwing and Sons v Renfrew County Council (1959) 11 P & CR 306.  It was the fact that the claimant was not in occupation of the site or running any form of business from it at the valuation date, and it had not, therefore in any event been disturbed.  Also, as was apparent from Mr Potter’s evidence, it had not searched for an alternative site.
23.	Residual valuations might provide a valuer with guidance as to what a prospective developer might pay for the land.  However, little weight should be attributed to the individual steps in the residual valuation unless they could be separately verified.  The evidence of Nicholas Andrews FCA, a partner in KPMG, chartered accountants, demonstrated at what point less favourable assumptions than those made by Mr Gale-Hasleham and Mr Throssell as to the selling the price of the units, the marketing spend and the interest payable would make the development unprofitable.  Two offers had been received by the claimant, but their genuineness was in question and no weight should be placed upon them.  Further factors affecting the value of the land were the perceived problems in implementing the 1998 planning permission and the delays that would be caused by complying with, or renegotiating the terms of the section 106 agreement. 
The issues
24.	The issues that arise are:
(a)	Whether the assumption underlying Mr Gale-Hasleham’s valuation A, that the hypothetical sale would be by a vendor with the precise characteristics of the claimant, is in accordance with the law.
(b)	Whether there should be a deduction for developer’s profit in the residual valuations.
(c)	Whether the element in Mr Gale-Hasleham’s valuation B consisting of prospective loss of profit from the development is in accordance with the law.
(d)	Whether there would have been a demand for the subject land for timeshare development.
(e)	If there had been a demand, what value this would have given to the land.
(f)	If there would have been no demand for a timeshare development, what alternative would have given the highest value to the land, and what such value would have been. 
After summarising the relevant evidence we will consider these issues in turn.
Evidence
25.	During the course of the hearing, the valuation experts produced a statement agreeing the bases of timeshare acquisition in the UK.   Firstly, direct purchase from the resort of choice.   The price list sets out availability (a defined week, a floating season or points) and asking prices which may be the subject of negotiation.   Alternatively, prospective purchasers can approach one of the recognised agencies who mainly deal with second-hand weeks on behalf of existing certificate holders.
26.	Timeshare is a form of ownership of a right to occupy a defined property for a particular period, often, but not exclusively, a week, over a given number of years on an annual basis.   The legal bases of the agreements conferring these rights differ.  For instance, Holiday Property Bond (“HPB”) provides an internal market by way of a points based system allowing the purchaser of a Bond to trade points to occupy an interval at any of its worldwide resorts.  Buyers on other developments can, if those developments are accepted by the relevant organisations (RCI International (“RCI”) and Interval International (“II”)), trade their weeks for weeks in other units available through those companies’ databases.   Hence, provided there was sufficient swap demand for his own unit, a purchaser might never occupy his own unit/week.
27.	It was agreed that holiday villages where a proprietor lets fixed accommodation on sites containing leisure facilities for holiday rent on catered or self catered bases were not appropriate comparators for the purposes of this reference.   However, the method by which units of accommodation in a holiday village with on site leisure facilities are sold on a ground rent basis, and the maturity of the village changes to an investment based upon the ground rents and leisure income, whilst agreed as an alternative to timeshare, was only considered by Mr Morgan in his comparables.   
28.	It was agreed that, in relation to the development that was permitted under the 1998 permission, a purchaser would have been advised that the cost of carrying it out in accordance with the submitted illustrative plan would have been in the region of £5,666,000.   In the claimant’s valuation A, the cost of setting up (£30,000) and the costs associated with obtaining building regulation consent (£32,000) were not disputed.   Similarly, in relation to valuation B, legal fees on acquisition (£5,000), legal fees on setting up timeshare (£30,000), Building Regulations (£32,000) and Land Registry Fees (£1,000) were also not in dispute.
29.	Mr Potter said that the fact that the claimant was Corton Caravans and Chalets Ltd rather than Potters Leisure Ltd did not matter; as far as he was concerned, Corton was a wholly owned subsidiary of Potters Leisure, which was a family business (of which he was chairman) and which would have provided the financial wherewithal to fund the proposed timeshare development.   
30.	Setting out the background to Potters, he explained that it was his grandfather who, on the site of the existing resort, set up the first holiday centre in this country in 1920.   By 1984, the business, which was limited to an 18 week summer season, provided week-long holidays for 420 guests in chalet accommodation.   In 1979, Mr Potter’s father (who was the then managing director) had decided to acquire the share capital of the claimant for the purpose of adding a self-catering arm to the main business.  The subject land was then operated as a static caravan and maisonette holiday venue.  
31.	Mr Potter said that when he took over as managing director following his father’s death in 1984, it was his challenge to ‘re-invent’ the Potters’ product.   Reliance on a short summer season was insufficient to justify substantial capital expenditure, so it was decided to create an indoor resort that would appeal to customers throughout the year.    Identifying the indoor bowls market as a major potential attraction for holidays and short breaks, some £20 million had been invested since 1988 on building programmes, creating the largest privately owned, family run leisure resort in the country.   Now catering for up to 600 residential guests at any one time, (with a capacity of 1,000 in the new theatre) and with a turnover in excess of £10 million per annum, Potters had become the largest indoor bowls centre in the world, with a 52 week season, and hosted the televised World Championships every January.
32.	It was decided to close the Corton site in 1987 as, whilst it continued to be profitable in its own right, a better return on capital was required and Mr Potter wanted to concentrate all his efforts on reinventing the Potters resort.   He said he was aware of other local caravan and chalet parks that had successfully achieved planning permission for residential development, and following discussions with the local planning authority, in which it was intimated that permission for a retirement home development might find favour, an application was made on that basis in 1989.   At the same time a sale, subject to permission being achieved, was negotiated at £2,100,000 to Meridian Housing Association, a subsidiary of Barratt Developments.   The income from that sale would have been used to fund the development of Potters.
33.	Unfortunately, Mr Potter said, the planning application was refused on appeal, the sale to Meridian fell through, and an alternative use for the subject land had to be sought.  As the emerging Waveney District Council’s local plan identified the subject land as a tourism site, the idea of a timeshare development was pursued from 1992, long before the first hint of any interest from AWS, which did not come until a letter from them dated 1 September 1994.   Even that was ‘very sketchy’, and it was apparent that AWS were investigating a large number of sites.   Nevertheless, Mr Potter telephoned AWS on 5 September 1994, and told them that he considered the land had time-ownership potential.
34.	Nothing further was heard from AWS, and so, in October 1996, Mr Potter wrote to them outlining his timeshare plans in detail, having established from Waveney that those proposals would be likely to meet the planning requirements under the tourism use.   That letter indicated that it was the intention of his son (Mr John Potter) to develop the Corton land for timeshare use in 2000, after the development of the hotel complex at Potters was completed.   In March 1997, Mr Potter instructed Mr Keith Rowley, a self-employed draughtsman based in the offices of O&R Properties (a local development partnership) to produce a detailed scheme for a time-ownership development, and following a positive conclusion from his accountant, Mr Throssell, that “the project is extremely viable, with a very short payback period”, a formal application was made on 25 June 1997.   This was one day after a meeting with AWS’s advisers, Jones Lang Wootton (“JLW”), in which it had become apparent that the Corton site had still not been settled on, and no planning application for the sewage treatment plant scheme had been made.   A plan of the proposed development of 75 timeshare units was given to JLW at that meeting. Whilst the planning application was being considered, Potters carried out a marketing exercise with a sample 3,000 of its customers, the results of which, Mr Potter said, were encouraging.
35.	O&R Properties had become aware of Potters’ intentions and approached Mr Potter by letter on 19 June 1997.   In response, he advised them that it was his company’s wish to develop the site, and at the same time told them of AWS’s tentative interest.   Bearing in mind Mr Throssell’s recommendation that, whilst the proposed development would achieve a positive return, the company’s funds and borrowing capabilities were needed for the Potters resort expansion, they should consider selling the site, Mr Potter approached O&R in September 1997 saying he would be prepared to enter negotiations.   By this time, the local council’s planning committee had unanimously supported the application, although there were access matters still to be resolved, as was the question of the link with Potters resort.   
36.	Mr Potter said that there would have been an advantage to them in seeing additional customer accommodation for the main leisure resort on the Corton site, funded by a third party.    An outsourced “Corton Bowls Village” (the plans for which included, in addition to the 75 accommodation units, both indoor and outdoor bowls facilities) would not only be economically fruitful to Potters, in terms of the additional income created by spending within the main resort, but would also provide significant benefits to the purchaser/developer that would not be available on other sites.   With a reception centre at the main leisure resort, and a transport link between the two sites, together with purchasers having use of the Potters resort facilities, there would, alongside the undoubted advantage of access to Potters own huge marketing database, be attractions to the developer in entering a commercial relationship.
37.	O&R had access to Mr Throssell’s feasibility figures, together with the building cost estimate that had been prepared by Mr Powley.    Whilst they were considering the matter, Mr Potter said that he received an approach, out of the blue, from Alfred McAlpine Special Projects (a division of Alfred McAlpine Construction Ltd) who said that they were interested in pursuing leisure opportunities in the east of England. This, he said, had presumably come from the fact that developers employ ‘runners’ to scour registers of planning applications, and following discussions an offer was made by them in the sum of £2,496,000, subject to planning.     O&R Properties then made a formal written offer on 9 October 1997 of £2,600,000 subject to the land being unencumbered and to any section 106 matters being satisfactorily resolved.   This offer was immediately accepted, and solicitors were instructed.   Alfred McAlpine were then informed that a sale had been agreed to a local company.
38.	Mr Potter said that the uncertainty regarding AWS’s requirements came to an end in August 1998, one month before the planning permission for the timeshare was actually granted, and the section 106 agreement was completed.   AWS advised that they had finally decided on the Corton site in preference to another one that they had been considering, from earlier in the year, just 300 metres from the entrance of Potters resort.     This other alternative had been a considerable worry to the Potter family, and until a final decision was made by AWS, the possibility of a massive sewage works close to the entrance of the resort meant that the Potters had put the commencement of the development of the hotel on hold.
39.	Thus, whilst it came as a relief that AWS did not intend to proceed with the site that would, in effect, have meant the demise of Potters resort (hence, as Mr Potter said in cross-examination, the reason for no objection to the Corton CPO being raised), the sale to O&R could not proceed, and their interest was withdrawn following the making of the CPO.     
40.	In cross-examination, Mr Potter said that he had not undertaken specific research into the timeshare market prior to applying for planning permission.   He had relied upon Mr Throssell’s feasibility study and Mr Powley’s development cost projections in calculating the viability of the proposed development, including the proposed price per week of £3,500 which, he said, he was aware was below the national average of about £6,000 per week.  The figures that had been included in the ‘test’ marketing brochure had not, therefore, been scientifically researched.  He had considered likely weekly and annual service charge levels, these being extremely competitive at about £100 per week due to the economies of scale available from utilising staff (such as gardeners and cleaners) from the main resort.   A socio-economic analysis had also been commissioned on the Potters customer base so that mail shots could be targeted to the most appropriate groups.    As to the dispute over whether Potters customer base matched the likely market for timeshare properties in socio-economic terms, Mr Potter had commissioned a further CACI report in January 2003 which proved that the demographic profile of their customers (ABC1s) was higher than the national average.
41.	 He accepted that if the land had been sold to a third party developer such as O&R Properties, continued involvement with Potters through some form of commercial arrangement would have been crucial to any timeshare scheme. However, apart from advising Mr Routledge of O&R that a contribution would be required to the marketing of the development to Potters customer base, he said he had not thought through the mechanics of any cross-charging arrangements that would have to be put in place.
42.	Whilst the ability to exchange weeks was considered to be an additional benefit for purchasers, and it was accepted that that facility is an important aspect of modern timeshare developments, Mr Potter said he did not think many of the purchasers, who would most likely be bowls orientated, would wish to do so.   It was a fact that Potters’ customers came back year after year, and the opportunity to offer them self-catering facilities which they could own, as an alternative to hotel or catered chalet style breaks that were already available, offered real marketing potential.    If purchasers did wish to exchange weeks, it was accepted that the question of value-comparison with other, more expensive timeshares would need to be considered.   
43.	Mr Potter said, in response to the question of whether they would sell the land subject to a commercial arrangement with a third party, or develop out the project themselves, that at the time the offer was received from O&R, the new indoor arena had just been completed and the hotel project was about to commence.   This was a huge capital project, and the money from the sale of the subject land would have been a useful contribution.   However, it was admitted that, by the time planning permission and the section 106 agreement were finalised (which coincided with AWS’s confirmation that the subject land was their preferred site), the situation might have been different.    It had been the family’s intention and desire to build the timeshare project in 2000, when the hotel was completed, and Mr John Potter would have been ready for a new challenge.   They had their own in-house drawing office and teams in place to implement the development themselves, all the other development at the resort having been in-house projects.    A policy decision would have had to be made as to the best way forward, so it was not possible for Mr Potter to say categorically that if it had not been for the AWS scheme, the sale to O&R would have definitely proceeded.
44.	Mr Potter said that the reason he did not try to find an alternative site upon which to build a timeshare development was because he knew, particularly through his position as chairman of the Holiday Centres Association, that nothing suitable was available in the locality.   Asked about the nature and comparability of other local holiday centres, Mr Potter said that Potters was the most upmarket, and any timeshare development would be targeted to that type of clientele.    
45.	Mr Routledge was a director of O&R properties and had dealt with the proposed acquisition of the subject land.   His firm, which had originally been set up as a building surveyors’ practice, moved into development including retirement homes and conversions of properties into holiday flats.   He said that, prior to their interest in the subject land, they had had no involvement with timeshare developments.    When making the offer for the subject land Mr Routledge said they had not done any specific timeshare research, and relied to a great extent on Potters’ cash-flow projections which had been obtained from Mr Throssell, ‘because they knew their market’.  They did however perform their own cash flow exercise, partly to assist Mr Powley in his work for Potters.
46.	He said they ‘could not believe their luck’ when their offer was accepted as the site was local to them, and they would therefore have advantages over other developers.  Their own cash-flow projections indicated that the proposed price per week as suggested by Mr Throssell at £3,500 could be comfortably exceeded, thus increasing potential profitability or providing a very substantial cushion against any unknown variables such as slower than anticipated sales.  However, he did not recall that there were section 106 matters to be resolved, and was unaware of the fact that it would be a requirement of the planning permission that there would be a link (in transportation and reception facility terms) with Potters.   Although nothing had been discussed in detail in respect of the proposed commercial arrangement between the developer and Potters, Mr Routledge said it was part of the agreement to purchase that they would have access to Potters’ database for marketing purposes and it was planned that there would be a sales presence, provided free of charge to the developer, within the resort’s reception area.
47.	The subject of concessions for timeshare purchasers into Potters resort had been discussed, and Mr Routledge acknowledged that the presence of the resort was crucial to a successful timeshare development.   He said that their research showed that a central activity was needed, such as an on site ‘anchor’ and the presence of Potters only 1 mile away gave them the confidence to proceed.   Without that presence, they would not have considered the site.     
48.	Mr Cooper is a member of the Business Graduates Association, the Organisation for Timeshare in Europe (“OTE”) and the American Resort Developers Association (“ARDA”).   He said that, as a business consultant, investor and entrepreneur with over 25 years experience in the commercial and residential property markets, for the past 7 years he had been principally involved in the timeshare industry in the UK and Europe.   He said that this involvement included the preparation of financial appraisals for new and existing projects, valuations of operating companies and evaluation of marketing plans and sales methods.  In addition, he had a standing mandate to find and assess potential sites for timeshare developments and this has resulted in the formation of an extensive private database of relevant information.    
49.	His instructions were to provide his professional opinion as to the market for a timeshare development on the subject land, to consider the importance or otherwise of an on-site leisure anchor, and to consider the relationship and value to the scheme of the link with Potters.  In formulating his views, Mr Cooper said he had considered the valuation reports prepared by both parties, and the views expressed by the respective valuers, and had reviewed Mr Throssell’s projections.
50.	Setting out a comprehensive background to the development of the timeshare industry, including an explanation of the difference between true property timeshare and similar points-based systems such as the Holiday Property Bond, Mr Cooper said that the average resort size in 2001 was 57 units, but the trend now was for larger developments of between 75 and 100 units.   The main growth of developments had been during the late 1980s and early 1990s, although the pace of growth had slowed by the valuation date due to factors including stringent legislation controlling sales and marketing techniques (some dubious sales methods having initially given the industry a bad reputation), and the strong economy that had resulted in an increase in outright purchase of second-homes, rather than timeshare.   However, Mr Cooper said that according to industry research, there was still a large, as yet untapped market for timeshare.    There were currently 1.4 million timeshare owners in Europe (including the UK), owning an average of 1.75 interval weeks each.   The demographic profile suggested that the majority were over 50 ‘empty nesters’.    In the UK, according to ‘The Resort Timeshare Industry in Europe’ report produced by Ragatz Associates in 1995, there were an estimated 286,259 timeshare owners in that year.   The ‘OTE European Timeshare Industry Baseline Study of 2001’ assessed UK timeshare owners at 441,832, and this showed an annual growth rate from 1995 of 7.5 per cent.
51.	Residential units on timeshare schemes needed to be of the very highest quality in terms of finish, fixtures, fittings and furnishings and in the majority of cases two bedroom accommodation (of the type proposed on the subject land) was found to be the most appealing in the marketplace.   The philosophy, Mr Cooper said, was that timeshare was not sold as an investment in property, but as a holiday opportunity.    Initially, when the concept of timeshare was first introduced to the UK, there was no flexibility. A purchaser simply bought one week in one property at one resort.   However, there are now sophisticated systems, like those run by companies such as RCI (to which most new timeshare developments subscribe) whereby  there is the opportunity for owners to trade their weeks for accommodation at other resorts, at the same or different times of the year.    The system operated by resort management companies worked like a bank, where skill and expertise is used to identify, for instance, the Norfolk owner who wants a week in, say, Orlando.     
52.	A key factor in the majority of timeshare developments was the provision of extensive on-site amenities and leisure facilities (usually referred to as an anchor) and these facilities would normally be high-involvement sport related.   The climatic uncertainty in the UK meant that the provision of indoor facilities was an important factor in creating year-round usage.   There had been few timeshare developments, other than those in urban locations where the relevant town or city’s own infrastructure acted as the anchor, where there had not been a major on-site attraction, such as indoor leisure, or an adjacent golf course.  Other key factors that affected the viability and commercial outcome of a timeshare resort development were its location (usually in a popular holiday region or an area of outstanding natural beauty, such as the Lake District), the experience, expertise and commercial integrity of the developer and resort management personnel, professional marketing capabilities and access to appropriate target markets.   Marketing was a significant cost in the overall development scenario and had historically tended to be in the range 25 to 35 per cent of net sales revenues, but often more – up to 50 per cent.
53.	 In considering the suitability of the subject land for such a development, Mr Cooper said that the result of Potters’ test marketing, with a 13 per cent response from its own customers was exceptionally encouraging, the normal response rate to such mailings being only 2 to 3 per cent.    This, together with the fact that the new hotel at Potters was already running to capacity, with waiting lists for certain weeks during the year, indicated that there was an unfulfilled demand.    The CACI demographic reports that had been obtained by Potters showed an upmarket profile evidenced by the high percentage of ABC1s on the customer list.   This background, and the fact that accommodation at Potters was more expensive than average for similar resorts indicated potential for a high level of customer demand for a ‘superior holiday experience’, and a willingness to pay a premium for the benefit of the higher specification that would be inherent in a timeshare scheme linked to the Potters resort.     
54.	Mr Cooper said that the subject land was located in a popular, traditional holiday area which abounded with local attractions that provided a draw; it was only 1 mile from Potters, and just over ½ mile from the sea.    Road and rail access was good with London only 2 ½ hours away by car, and this was important as some 70 per cent of Potters guests emanate from the Greater and Outer London areas.  The proposal for 75 units was in line with current development trends for timeshare resorts, and the projected unit size at 64 sq m was appropriate. 
55.	Firm demand for the land was evidenced by the offers from Alfred McAlpine and O&R Properties.   There was further potential demand in that in 2001 developers had declared plans for 11 new resorts to come on-stream over the next 5 years, totalling 434 units.   These were to add to the 90 existing timeshare resorts in England.    There were also proposals for the provision of 926 additional units on the existing resorts (Source: OTE Baseline Study 2001).   Mr Cooper said that strict planning regimes restricted the number of sites likely to become available and, in his own experience, finding sites for his own clients’ needs was proving difficult.    There were, in his view, 5 major developers who would have been interested at the valuation date, there being no reason to believe that the market was any different in 2000 to what it was, according to OTE, in 2001. 
56.	Mr Cooper said that in his own professional opinion, any one or all of those developers would have been interested in Corton without the necessity for a central anchor.   He said that the existence of an anchor offers opportunities for increased guest flows and reduced marketing and selling costs, but it was not an absolute requirement.   If necessary an anchor could be self-created by the addition of sufficiently attractive indoor facilities to combat the local climate.   The quality of the resort facilities, its accommodation and the ability to exchange elsewhere were the key factors to create and maintain demand.    In his view, the history of growth, occupancy and general success of Potters, together with the proximity and potential of the Corton site meant that there was a prospect of high financial returns from the proposed timeshare development if there was to be a Potters link.   As such, a bid premium to retain the site as an in-house asset was justified.  Potters’ extensive customer database, and its knowledge of their profile, offered a unique marketing opportunity for the development.   Thus, the reduced marketing spend, as estimated by Mr Throssell, at between 24 and 27 per cent of the overall development costs was likely to be achievable.   The extension of Potters’ existing affinity programmes would also help to achieve a successful marketing exercise.    The fact that the bowls season tended to be counter-cyclical to the holiday season was a further benefit in marketing terms, and made it likely that higher average prices would be achieved throughout the year.
57.	A third party developer, without the Potters link or access to its database, could be expected to incur substantially higher marketing costs.   Nevertheless, on the figures available, Mr Cooper felt that even under these circumstances, there were prospects of a successful development.  This was without any allowance for the ongoing profits that a timeshare developer would normally expect to make through the ongoing management of the scheme, commission from resales and the like.   
58.	He said that in coming to this conclusion, one of the factors he had taken into account was the proposed weekly price of £4,500.   In his view this was, on the basis of comparable developments in the timeshare market, too low.   The two best comparables which had also been used by Mr Gale-Hasleham were Pine Lake Resort in Cumbria and Graig Park in South Wales.  Pine Lake, where new chalet style timeshare units had been constructed around a series of worked out gravel pits providing extensive watersports facilities,.was not in an area of outstanding natural beauty and was affected by  motorway and railway noise.  There was also a truck-stop close to the entrance and the watersports anchor was of limited appeal.  The demographic profile of Pine Lake’s customers was also significantly lower, tending to be ‘blue collar’ C1s.   Graig Park had originally been developed as a timeshare resort, but it was not close to a beach and was devoid of surrounding attractions.   There was builders’ yard right opposite the entrance.   Also considered was Clowance Estate and Country Club at Camborne in Cornwall.   Average prices achieved on those developments were, at around £5,500 per week, very much higher than those proposed for Corton.    Thus, Mr Cooper said, in valuation terms the low price upon which the calculations were based on the subject land provided a substantial buffer against such risk factors as slower than anticipated sales.
59.	A third-party purchaser might choose a different market positioning with a higher price point, a slower sales pace and higher marketing and sales costs (reflecting the lack of a Potters link and its in-house marketing advantage).   This need not be any less profitable, although the overall risk factor for the development would be higher, reflecting the premium value to Potters already referred to.    In calculating the viability of the scheme, assuming no Potters link at all, Mr Cooper said he had produced a model based on higher specification (and slightly larger) units, average selling prices to match the ‘top-end’ specification of £6,600 per week, a slower pace of sales (moved out from 5 to 7 years) and a marketing spend of 40 per cent of net sales revenues.   Even this produced a residual site value of £2.7 million which was remarkably close to the offers that had been actually received by Potters from McAlpine and O&R Properties.   Furthermore, the fact that no value was being claimed for the sort of ongoing profitability that a developer would expect to achieve even after all the units had been sold produced, as he had said, an additional cushion against unknown or unpredicted problems.     The only way that the marketing budget, for a third party developer, could be reduced to levels akin to those predicted for Potters, was if there was a significant golf or hotel linkage.      
60.	In conclusion therefore, Mr Cooper said that whether or not the development was to be undertaken by, or had a link with Potters, or whether it was to be a completely separate third-party scheme with no such relationship, the project was viable.   The location, demand for sites as evidenced by developers’ interest, and overall quality of the proposed development meant that, on the basis of the models he had prepared, a developer acquiring the land would achieve the profitability required on the basis of the land acquisition costs promulgated by Mr Gale-Hasleham.   The land was, as he had demonstrated, worth more to Potters and Mr Gale-Hasleham’s valuation A reflected that additional value.
61.	In cross-examination, Mr Cooper acknowledged that no green-field timeshare developments had been undertaken in England for some considerable time – the vast majority having been developments associated with or linked to hotels, country houses, castles or other ‘anchor’ features.   He also accepted that the OTE report upon which he had heavily relied for his background information showed a reducing trend for timeshare developments from 1991.   This, he said, coincided with the publication of the European Directive which had served to tighten up the industry by the imposition of new rules and regulations, particularly in respect of marketing techniques that could and could not, legally, be adopted.   The Ragatz report, also referred to in evidence, showed that although there were estimated to be 441,000 timeshare owners in the UK in 2001, only 70,000 of these owned timeshares in the UK, the rest having properties abroad.   
62.	As to the subject land, Mr Cooper said that he saw it as a run-down site with development opportunities in a quite attractive location.   However, it was outside the area perceived as suitable by timeshare developers and in his view it was the Potters link that “made it an interesting dynamic”.    As a brownfield site there was little else in the vicinity that could be considered an anchor, other than the proximity of general attractions in the area.    It was acknowledged that there were a number of holiday camps in the area that had changed hands over recent years, but Mr Cooper said that former camps of the type which had been sold were not inherently suitable for timeshare developments.    He said that his standing instructions from clients to identify sites was Europe-wide, but he had no specific requests to find sites in East Anglia.
63.	Mr Cooper accepted that the proposal to erect 75 units, together with the indoor and outdoor bowls complexes, bar and other facilities on only 13 acres would fill the site.   There would be no room for the provision of further attractions, such as an indoor swimming pool, without having to reduce the number of residential units.   If there were to be no Potters link, it was agreed that the scheme would have to be redesigned, and Mr Cooper was unable to speculate as to how many accommodation units would have to be foregone.   He also accepted that the majority of the other timeshare developments, as referred to by Mr Morgan, had substantially more land – parkland or golf courses, - as part of the developments.
64.	Regarding the suggestion that £4,500 per week was too low, Mr Cooper had used Clowance at Camborne as a comparable, but acknowledged that that was a far better development in terms of location and facilities.  He also accepted that, in his no Potters link model, an estimated marketing cost of 40 per cent might have been conservative and that whilst a target of 90 per cent of units sold over 5 years was reasonable, rump stock of 20 per cent unsold units on timeshare developments was not uncommon.   In those circumstances, unsold units would be used as show homes, or could be let.   Nevertheless, bearing in mind the buffers he had referred to, he said the models he had prepared were appropriate and the land was an appropriate site for timeshare development, Potters link or not.
65.	Mr Gale-Hasleham is a Fellow of the Royal Institution of Chartered Surveyors, a Member of the Institute of Rating, Revenues and Valuation and a Member of the Rating Surveyors’ Association.  He is a partner in Charles F Jones and Son, of Chester and specialises in valuations of holiday parks and caravan sites, having also been managing director of a company that owned and redeveloped a holiday park in Cheshire.  He has known the Potters resort and the subject land since the 1970s.  In preparing his residual valuations A and B (Appendices 1 and 2 to this decision) he considered that the subject land met the criteria for a timeshare development, being in an acknowledged holiday location close to the Broads and coastal areas, with the added attraction that it is close to Potters resort.   That was a worldwide attraction with a proven track record catering, as it did, for one of the fastest growing sporting activities – bowls.  Whilst he had not specifically used any of the figures derived from Mr Throssell’s appraisal of projected profits, he said it was consistent with his valuation methods and was satisfied that it had regard to all relevant factors.   
66.	In adopting an average sale price of £4,500 per week net of VAT, which he said was highly competitive, Mr Gale-Hasleham had obtained price lists from a number of comparable developments of which had personal knowledge, throughout the UK.  The closest comparisons were Plas Talgarth, North Wales, Clowance in Cornwall and Laugherne in South Wales.    The costs of development, agreed during the hearing at £5,666,000, marketing costs at 27 per cent of net sales revenue, the anticipated pace of sales, interest charges, deferment rates and developers profit used in his residual valuation led him to the conclusion that the land had a value for a timeshare project under both scenarios A and B.  The marketing estimate of 27 per cent was acknowledged to be lower than the market standard, but reflected the fact that the price per week was highly competitive and there would be access to Potters database and marketing expertise.   The costs would be £500,000 higher if there was no Potters link.
67.	He said that the lack of any open-market evidence of sales of land for timeshare developments did not mean that there was no demand.   The reasons that sites did not appear on the market was due to planning restrictions and the fact that such sites were often the expansion of hotels or golf courses.  As with petrol filling stations, leisure centres and hospitals, for instance, the residual valuation was the accepted method for arriving at open market value.    
68.	Mr Gale-Hasleham was critical of the comparables referred to by Mr Morgan, saying that the majority of examples were holiday centres, which were vastly different from timeshare developments in terms of quality and market.   On the question of the necessity for an anchor, he said the alliance with Potters resort would be that anchor.  In any event, a number of the other timeshare developments did not have on-site anchors as such, including Plas Talgarth and Laugherne.    In cross-examination, Mr Gale-Hasleham accepted that if the subject land was totally independent of Potters it could not realistically be developed without an anchor.     It was accepted that Plas Talgarth comprised 77 units on 64 acres part of which was parkland and it was an attractive setting.   Some of the units were in a converted country house, and it had an on-site club in an adjacent building.  
69.	As to the Potters link it was a fact, he admitted, that where there was to be a link a purchaser would be acquiring the freehold of the subject land and, as a separate entity, would need to enter a commercial agreement.   He conceded that the bowls market, in terms of timeshare, was untested.   
70.	Mr Throssell is a Fellow of the Institute of Chartered Accountants and a partner in H Hebblethwaite and Co, Chartered Accountants of Sheffield.  His firm has acted as accountants to the claimant and Potters Ltd for over 25 years, and he has been personally involved for the past 12.  He had been instructed to consider the loss of profits that would be incurred by the claimant on the basis that it was unable to undertake a development for timeshare purposes.   He produced a revised report (following agreement with the acquiring authority’s expert accountant, Mr Andrews on various constituent factors, and the expert valuers’ agreement as to the cost of development of the site (£5,666,000)).  This produced a forecast project profit of £3,522,287 which, on the agreed discounting basis (annual with annual rests) at Mr Throssell’s adopted rate of 10 per cent on cash flows over the 5 year development period, gave a net present value of £1,200,000.   The experts had agreed that the interest cost of funding was to be taken at 8.5 per cent, and interest credits on cash inflows at 4 per cent, but Mr Throssell’s discount rate, which reflected his view of the perceived risks in the development, were significantly less than Mr Andrews’ preferred 15 per cent.  In Mr Throssell’s view, the risks were very much less than the acquiring authority predicted, but he accepted in cross-examination that if those risks were perceived to be greater, a higher discount rate would be appropriate.     
71.	The income and expenditure figures that made up his forecasts were based upon Mr Gale-Hasleham’s assessments.  The projected profits did not include anything for ongoing operational profits following completion of the project, but with the uncertainty of such profits, in the context of the development project as a whole, he did not consider they would be material.   Mr Throssell said that the main area of disagreement was over the treatment of the value of the land (which he had taken at Mr Gale-Hasleham’s £2,450,000 per valuation B).   Whilst it was agreed that with the claimant already owning the land, and not therefore borrowing to fund its acquisition, there would be no actual cash outflow to Corton at the commencement of the development, the treatment of that value on a notional basis was in dispute.
72.	Mr Throssell said he had taken the land value as a notional outflow in month one of year one of the project, to avoid the possibility of double-counting and to allow for the opportunity cost of the interest foregone on any alternative use of the proceeds that would have been achieved upon a sale of the land.   Thus, in his calculations, Mr Throssell had included £2.45m as a notional cost in year one only to which interest was to be added at a compound rate of 8.5 per cent.   On that basis £2,667,000 of the total negative cash movement for year one of £4,664,000 relates to the land.  If that figure was discounted back (on the basis of annual discounting) at 10 per cent, the net present value amounted to £2,424,000, the differential of £26,000 being the difference between the assumed interest cost rate and the assumed discount rate.
73.	There would have been no problem in Corton acquiring the requisite funding to undertake the development, Mr Throssell said, and he had a letter from NatWest Bank confirming that to be the case, but it was accepted that those funds would only be forthcoming on the strength of the holding company’s (Potters) covenant.   There was no question of the development being economically viable without third party support but he did not accept that any third party would necessarily seek to obtain a share of the projected profits.    
74.	Mr Morgan is a Fellow of the RICS and a director of Humberts Leisure Ltd, a national firm that specialises wholly in leisure property including licensed premises, hotels, golf courses and holiday villages (including caravan parks).  He said that, in producing his reports, he had considered the value of the subject land on the basis of the 1998 planning permission in that it was an outline consent for a holiday village (therefore not restricted only to time ownership).   He had also taken into account the provisions of the section 106 agreement, on the premise that it was likely that any onerous obligations regarding access and the links with Potters could be overcome relatively straightforwardly.   
75.	Due to the nature of the planning permission, there were three market sectors which Mr Morgan considered might have existed: timeshare development, development for holiday rent and development for sale of individual holiday homes on long-leases.   The valuations that he had prepared were principally by reference to comparable sales, although due to the lack of transactions relating to properties that bore similar characteristics to the subject land such as location and availability of on-site facilities, he had also prepared a residual calculation.  But, as would be seen, this bore no relation to what might, on the basis of comparable sales, actually be achieved. 
76.	Mr Morgan said that in general terms, the leisure market was in confident mood and there was good demand for high quality leisure-based properties.  However, by their very nature, holiday complexes were a specialist market and there were few available, although 16 holiday parks had been sold through his company on instructions from both Pontin’s and Rank Leisure over the past 4 years.    They were all sold as going concerns and contained central leisure and on-site facilities and were available to the timeshare market.   They had the benefit of existing income, but if they had been considered suitable, they could have been converted to, or redeveloped as, timeshare resorts.
77.	The concept of the timeshare industry in the UK and Northern Europe had developed to a large extent on inland resorts that were anchored to recreational facilities such as golf (St Mellion, Cornwall) or areas of outstanding natural beauty (Langdale, Lake District).   Others were developed as bolt-ons to hotel/leisure complexes or country house estates.   A number of key players had emerged in recent years, perhaps the best known being HPB for whom, Mr Morgan said, he was the lead valuer.   This was a form of shared ownership whereby Bond holders acquired the occupational rights in a points based holiday calculated on the value of their investment in tradeable bonds.   HPB had 12 resorts in the UK containing a total of 323 units of accommodation, and a further 2 resorts were presently under construction.    The site and locational requirements of HPB were very similar to conventional timeshare in that they required sites that would attract the ‘upscale’ end of the market and they had never yet developed, and would not consider, bare sites that did not contain significant anchor facilities.   In fact, Mr Morgan said, he was unaware of any timeshare resorts having been purpose built from a virgin site in the past 15 years.
78.	All 16 of the holiday villages that Mr Morgan’s company had sold were elderly developments close to the sea and in established holiday areas, and to that extent were comparable to the subject land.  However, despite extensive marketing, interest from a timeshare developer was shown in only one of the sites, and that had already been part developed on a timeshare basis.    Mr Cooper’s assertion therefore that there was a shortage of potential sites in the UK was patently wrong.        
79.	There were a number of timeshare resorts on the Norfolk/Suffolk coast including Blakeney Timeshare, a small development of 1, 2 and 3 bedroom cottage style properties recently constructed in a courtyard setting adjacent to the Blakeney hotel.  There were some new weeks still available in the range £2,000 to £5,600 and some second-hand weeks (the owners having borne the losses sustained in the first year by the premium that was payable in this market to cover the initial set-up and marketing costs) at £1,200 to £4,500 per week.   Blakeney was a very small development in a pretty and popular north Norfolk coastal village and within a few yards of the harbour.    Cromer Country Club was a mature resort where no new availability was currently apparent.   Again, Cromer was a popular coastal resort in a more attractive part of East Anglia.    Barnham Broom Hotel and Country Club was also a mature development of 39 Holiday Property Bond apartments with a further 6 timeshare linked units affiliated to a major hotel, leisure facilities and two 18 hole golf courses.  A number of second hand units were available in the £2,500 to £4,000 per week range.  Richmond Park Golf Club at Watton, Norfolk, is a very small timeshare development based upon a par 71 golf course with pub and restaurant and units are available at £1,600 to £2,700 per week.
80.	As to the properties that Mr Cooper had referred to as comparable, Mr Morgan said he did not agree with that opinion.   Pine Lake in Cumbria was originally established in 1987 on a site of 100 acres, of which 79 were worked out gravel pits that became lakes for extensive watersports activities (which was the principal focus of the development) including water skiing and windsurfing.   By 1995 there were 32 lodges that had been sold on long leases, and 97 set aside for timeshare purposes.   There were major central amenities including bars, restaurant, indoor pool and shop.   The resort was not originally set up for timeshare purposes, but had evolved partly as such and was in a much more attractive location than the subject land with excellent access, nearby woodland walks and a bird sanctuary.   It was acknowledged that there was some noise from the motorway and nearby railway line, and that the adjacent lorry-park was not an attractive part of the surroundings but, in cross-examination, Mr Morgan stressed that, as an overall development, it was incomparably better than the land at Corton. 
81.	Graig Park, in North Wales had accommodation based upon luxury timber lodges and the facilities include an indoor leisure complex with swimming pool, gymnasium, sauna/solarium, restaurant and bar/bistro.   It was on rising ground behind Prestatyn with views of Snowdonia and was easily accessible from Merseyside and other major centres by the M56 and recently completed A55 North Wales Expressway.   Mr Morgan said he believed Graig Park had originally been built for holiday letting purposes, and, as with Pine Lake, was only part used for timeshare.
82.	Clowance Estate and Country Club at Camborne in Cornwall was in a beautifully landscaped parkland setting of 98 acres with its own fishing lake and a lovely manor house as the anchor. 
83.	All of the sites that Mr Cooper had mentioned were larger and either did, or could, accommodate on-site amenities that could not possibly fit onto the subject land if there was going to be a development of 75 units.  The 5 developers that Mr Cooper had said would be likely to be in the market at the relevant time had not developed any bare sites in the past ten years, and Mr Morgan said that he, even in his position in the leisure market, was not aware that those organisations were in the market for bare sites.   In short, he said, there was no evidence that they were, indeed, active in the market as had been suggested.
84.	As to Mr Gale-Hasleham’s comparables, Mr Morgan said these were also inappropriate.   Laugherne Park in Carmarthenshire stood in approximately 40 acres of mature grounds and woodland that had been the inspiration for Dylan Thomas’s “Under Milk Wood”, and was in an elevated position overlooking Carmarthen Bay.    There were extensive on-site facilities and of the 98 accommodation units only some were timeshare, the rest being sold on long leases.   Plas Talgarth was a Barratt Timeshare development, again in a spectacular position within Snowdonia National Park, and with low-density accommodation units set out in undulating parkland and woods extending to some 50 acres.   Both of these comparables were considered by Mr Morgan to be significantly better than the subject land.  
85.	Having carried out an analysis of asking prices over a number of the developments that had been mentioned, Mr Morgan said that the average came out to £3,114 per week, which was substantially less than the £4,500 per week upon which the valuations of Corton had been prepared by the claimant’s expert.  He acknowledged however, that many of these were second-hand prices and that historically these would be significantly lower than asking prices for new units. Nevertheless he said that where second-hand weeks had actually sold, that was a valuable comparable and should be taken into account. It was also of relevance that there had been virtually no new timeshare developments within the past 10 years, so all comparable prices therefore needed to be considered.   It was also relevant, he said, that quoted prices for new units (which, where they were available, were all on existing developments that were being extended), were asking prices and they were always subject to negotiation.   Asking prices as comparables were meaningless if they were not achieved.  Mr Morgan accepted, in cross-examination, that he had not specifically analysed the figures, many of which were obtained through the internet, on the basis of the differences between high-season and low-season weeks.
86.	Mr Morgan said that the availability of an on-site or immediately adjacent anchor is the real key to whether or not a particular piece of land is suitable for the type of development that would appeal to the timeshare market.   On the basis of his experience, he said, the simple fact was that Corton was not suitable.   It was not a large site and although near to the sea was in a relatively featureless area which, apart from Potters, had no other inherent leisure anchors that a timeshare development would require.   The question that had to be asked was whether Potters itself would be sufficient to attract timeshare use as augmented by other attractions in the area.    Mr Morgan said he had no knowledge of any such resort that had been developed on the back of a specialist indoor attraction such as Potters bowls focus.    He felt that Potters customers were more geared to holiday lettings and would be unlikely to be interested in timeshare, even if the facilities that were proposed on the subject site were there.  A timeshare project by Potters would, therefore, be a high-risk strategy, and there would be a similar high risk to a third party developer.   For instance, Potters could compete in the same market by converting some of their own stock, or could undertake a timeshare scheme on other land if it had it available.
87.	Since the site had no inherent attributes for a development of the type sought by timeshare purchasers, Mr Morgan concluded that there would be no demand in the market for that purpose and did not, therefore, provide a valuation on that basis.   
88.	In cross-examination on the subject of specific suitability for timeshare, Mr Morgan said he did not think the provision of indoor bowls complexes as proposed on the site could, on its own, be considered a suitable anchor.  He said he had difficulty with the concept of a commercial relationship with Potters, but without that relationship a bowls related timeshare complex would be in direct competition.   Bearing in mind the success of Potters existing resort, any such competitive scheme would be exceptionally high-risk.
89.	If there were to be a formal link with Potters, the possibility of which he accepted had to be taken into account in valuation terms, that would be a commercial venture which nevertheless had benefits to both sides.   However, it would be Potters who were in a position of strength and a prospective developer’s financiers would undoubtedly be uncomfortable with the risks of such a commercial relationship breaking down.    A developer would normally wish to be in control of his own destiny, and not to be reliant upon third parties, which would be the case here if such a commercial link were to exist.   It was reasonable to assume that Potters would be in the market themselves to buy and develop the land, and Mr Morgan accepted they would pay market value (if there was any value for that purpose), but not more.    It was accepted that the provision of an on-site sports anchor was not necessarily critical to the success of a timeshare development, so long as there was a package of other facilities or interests nearby.  However, in this case, those other interests consisted basically of Potters, which was acknowledged to be a high quality operation but focused on a sport that, whilst currently fashionable, might not remain so.   Even Potters was one mile away, and not, therefore, by any stretch of the imagination, adjacent.   It was most important that in encouraging purchasers, who for timeshare were mostly ABC1s, over 50s and required accommodation and surroundings of the highest quality, there should be a range of facilities to appeal to all members of the family – not just a limited, single focus activity.   The subject land just did not offer sufficient by way of attractions to make it viable.
90.	If the area, let alone the prospect of a link with Potters, had been one for which a timeshare operator felt there was a market, why was it, Mr Morgan said, that none of the defunct local holiday parks that had been sold went to timeshare developers?
91.	In response to questions regarding the actual offers received for the land, Mr Morgan said that, to a valuer, these were not actual transactions and, in any event, since neither Alfred McAlpine or O&R Properties had any experience of the timeshare market, there must be some doubt as to whether or not such a transaction would have proceeded.
92.	Mr Morgan also considered the possible development of the land as a holiday village with letting units.  The fact that the subject land had been used previously for this purpose but remained derelict for 13 years following its closure in 1987 added considerable weight to the conclusion that there was no real market demand for a holiday letting village.  There were a large number of other mothballed and derelict holiday camps around the country, and all the major plcs had withdrawn from the market. The trend now was towards major developments such as Centre Parcs.    There was more interest in the marketplace for going-concerns that had a track record, but there was no going-concern here.
93.	Finally Mr Morgan considered development as a holiday village for the sale of individual holiday homes.  This was a small but vigorous market where developers constructed homes that were restricted in planning terms to occupation for holiday use and on sites that were usually anchored to a key leisure facility.   Examples of recent developments included The Harleyford Estate near Marlow in Buckinghamshire, where timber lodges have been constructed in a parkland setting on the banks of the River Thames and facilities included a marina and an 18 hole golf course.   Cotswold Water Park and Buckden Marina near Huntingdon had both been developed with timber lodges around extensive lakes for watersports, and the latter was also on the River Ouse.     Individual properties were normally sold on 99 year leases with an annual service charge for grounds and facilities maintenance.    Mr Morgan said that the vast majority of these developments were located within the critical two-hour motorway drive from London, or based upon tourist ‘hot-spots’ such as Cornwall, and all had some form of on-site or nearby leisure anchor.
94.	In his view, the Corton site was neither large enough nor did it offer sufficient attractions to be of interest to this type of developer.    On the basis of all the analyses that had been undertaken, Mr Morgan prepared a residual valuation for long-leasehold holiday homes and this showed a loss on development of almost £500,000.   In cross-examination on the constituent figures in that calculation, and particularly the claimant’s contention that individual units would have achieved nearer £125,000, Mr Morgan maintained that his knowledge of the market and the background to the individual comaparables proved his analyses right.   Even if fairly substantial alterations were made to his figures towards those suggested by the claimant, that development loss on the residual approach was so high as to prove beyond doubt that the site did not hold the potential for such a development.
95.	Nevertheless, Mr Morgan had referred to the unreliability of residual valuations and, looking at the matter on the basis of actual market transactions he felt that if the land was to be sold on any of the three bases, long leasehold holiday homes was the most likely to find a market.   There were only a limited number of actual transactions, including Barnham Broom, Norfolk which analysed to give plot values of £9,500 each for 2 bed, and £7,750 each for 1 bed units; Pleasurewood Hills, Corton, a rent review on 22 acres of land forming part of a major theme park that, on the basis of 10 YP, gave a capital equivalent of £20,000 per acre; and Burn Park, Bude, Cornwall, a substantial existing holiday centre with 29 cottages, central facilities and planning consent for a further 19 accommodation units, sold to a timeshare developer with the price analysing to £3,000 per plot for the yet undeveloped area.  
96.	In his view, these transactions suggested a plot value at Corton of £4,000 each, giving a capital value of £300,000 for 75 units, from which needed to be deducted the cost of site clearance and decontamination leaving a market value of £200,000.    The £4,000 plot value, whilst being less than figures achieved on some other sites, reflected Mr Morgan’s considered view that Corton bore no relation in terms of attractiveness or suitability for timeshare to any of the comparables he had considered.
97.	Asked about his views on Mr Asher’s contention that any development value in the site was solely related to the prospects for a static caravan park, Mr Morgan said that in his experience, whether it was proposed to let pitches annually for owners’ caravans, or provide fleet caravans for weekly lets, the trend for operators was to provide on-site leisure facilities.   He did not agree with Mr Gale-Hasleham’s view that facilities would only be needed on sites of 250 or more pitches, and gave examples of a number of comparable sites from 100 pitches upwards where such facilities as clubhouse, bar, shops and swimming pools were provided.   Although good leisure and entertainment facilities on sites where owners occupied only on a sporadic basis were accepted to be less viable than on a fleet park, Mr Morgan said some form of facility would be essential especially in an out of the way location.   In his view, it was reasonable to allow £500,000 for facilities on the subject land but the projected income from the provision of them would be reflected in the value of the land.    He also said that on-site warden’s accommodation would be essential.          
98.	Mr Asher’s report, in terms of opinion as to the suitability of the subject land for residential development, mirrored and endorsed much of what Mr Morgan said.   In his view, all timeshare developments needed to enjoy central anchor facilities to provide the necessary core attractions.   The planning consent that existed would not, therefore, have been viable and a purchaser for that purpose would not have been forthcoming.   The development prospects were far too risky and, although the Potters link could be taken into account for valuation purposes, he considered it had no affect on value.   Any prospective purchaser would have to enter into a commercial arrangement with Potters, and the risks of being subservient to them outweighed any potential advantage.
99.	Other potential uses for the site were therefore considered by Mr Asher, including low density leisure use, such as paint-ball war games or grass-track racing, agricultural use, building plot for single dwelling or a static/touring caravan site.    In his view, the highest value and therefore the best use of the site in financial terms, would be achieved by the creation of a caravan park with associated on-site leisure facilities.  This would give a capital open market value of between £150,000 and £200,000.    We turn to this valuation, and Mr Gale-Hasleham’s assessment on this basis later.
100.	Mr Andrews is a partner in KPMG, Chartered Accountants, based in its office in London EC4.   He is a Fellow of the Institute of Chartered Accountants in England and Wales, a Member of the Expert Witness Institute and has 20 years accountancy experience.   He had been instructed to comment on the accountancy aspects of the dispute between the parties, and particularly the calculations and underlying assumptions prepared by Mr Gale-Hasleham and Mr Throssell.    In his view Mr Gale-Hasleham’s valuation A would have been more accurately assessed if it had been calculated on a discounted cash flow (DCF) basis rather than by a straight residual.  As to valuation B, where it was assumed that the land was developed by a third party rather than, as in ‘A’, by Corton itself, there was no rationale for adding the profits allegedly lost by Corton in not being able to develop the site.   Where the development value of the land had already been received in the sale price obtained from the developer to obtain loss of profits as well would, in effect, be double-counting.   The vendor either received the enhanced value of the land resulting from its development potential on sale, or the profit that the development would achieve if it retained and developed the land itself, but not both.
101.	In his loss of profit calculations, Mr Throssell had treated the land value as a year 1, month 1 deduction.  Mr Andrews said that this had two effects.  Firstly, Mr Throssell applied a full years discount to Mr Gale-Hasleham’s assessed land value of £2,450,000 in making the deduction in respect of the land.  Using, as he did, a 10 per cent discount rate, gave the ultimate net present loss of profits value of (rounded) £1,200,000.   Secondly, as regards interest charges, Mr Throssell started making deductions on £2.45m in year 1, month 2.   In Mr Andrews’ opinion (whilst not accepting the principle that loss of profits was claimable), the deduction for the land in that calculation should have been made at full gross value to avoid any double-counting.  That could only be achieved by deducting it at “year nought”, not year 1.   By Mr Andrews’ reckoning, deducting the land value in full without discounting, gave a net present value of the loss, using all Mr Throssell’s other assumptions of £108,615 on his preferred discount rate of 15 per cent.
102.	The price of £4,500 per week that Mr Gale-Hasleham had used in preparing his residual valuation was, Mr Andrews said, on the basis of the evidence that had been relied upon to determine that figure, and from his own research, much too high.  He had used £3,250 per week in his own calculations and this was a mid-point between the highest and lowest of the comparables referred to and reflected his view that those examples were not strictly comparable, bearing in mind Corton’s location and the fact that it did not have an anchor.   He also thought Mr Gale-Hasleham’s marketing spend of 27% of net revenues was too low, his view being that 35% would have been more appropriate.  Mr Andrews said that he considered that developer’s profit should be taken into account in the residual valuation, but in his opinion, a general benchmark would be 20% rather than Mr Gale-Hasleham’s 17.5%.   Mr Andrews considered that in carrying out a DCF analysis it was appropriate to take a discount rate of between 12-15% since this was a development project of high risk.
103.	Mr Andrews produced two valuations to reflect his view of the parameters.  He applied discount rates of 12% and 15% and took as his valuation the mid-point between the end figures.  Valuation 1 excluded any adjustment for developer’s profit.  Taking a selling price of £3,250, it gave a negative value of £407,000.  With a selling price of £3,500, it gave a positive value of £65,000.  His valuation 2 made an adjustment for developer’s profit.  With a selling price of £3,250, it gave a negative value of £1,687,000; and with a selling price of £3,500 a negative value of £1,314,000.
Conclusions: general
104.	We must preface our conclusions by saying that, for the reasons that we shall later set out, we do not think that the timeshare development for which planning permission had been given, or any other timeshare development of the subject land, would have had any reasonable prospect of being profitable.  The claimant’s concept was a development linked to Potters, with Potters providing its expertise in the bowls-related holiday market and with facilities at Potters being made available to timeshare occupants.  It is, we think, necessarily the case that, if the timeshare development had been viable at all, no one would have paid more for the land than Potters.
Conclusions: the hypothetical seller and purchaser
105.	Mr Gale-Hasleham’s valuation A was based on the assumption that the hypothetical willing seller had all the characteristics of the claimant and was in the same factual position.  In other words the willing seller was a subsidiary of Potters;  Potters owned the leisure resort at Hopton and operated it as they in fact did as a bowls-based resort; and Potters had the marketing expertise and wished to progress timeshare development of the site in a way that would be economically advantageous both to themselves, in the operation of their leisure resort, and to the party carrying out the timeshare development of the site. 
106.	Mr Denyer-Green submitted that since the principle was that the claimant should get no more and no less than his loss (and he relied in particular, as we have said, on Horn v Sunderland Corporation [1941] 2 KB 26 and Director of Buildings and Lands v Shun Fung Ironworks [1995] 2 AC 111) the proper measure of compensation was the amount below which he would not be prepared to sell.  There was nothing, he suggested, in the words of rule (2) or the cases referred to be Mr Roots, to suggest that such an approach was not a proper one.
107.	Mr Roots referred to the terms of rule (2), which provides:
“The value of land shall, subject as hereinafter provided, be taken to be the amount which the land if sold on the open market by a willing seller might be expected to realise”
He said that the words “if sold” required the assumption of a sale, which in turn required the assumption that the seller and the purchaser reached agreement on the price.  Rule 2 concerned the valuation of the land taken and not any commercial benefits that might be on offer simultaneously.  He referred to Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagpatam [1939] AC 302 (often referred to as the Indian case) where at 312-313, Lord Romer said that compensation for the value of the land taken must be determined 
“…by reference to the price which a willing vendor might reasonably expect to obtain from a willing purchaser … It may also be observed in passing that it is often said that it is the value of the land to the vendor that has to be estimated.  This, however, is not in strictness accurate …  The vendor is to be treated as willing to sell at ‘market price’ … [The] arbitrator will have to ascertain as best he may from the material before him, what a willing vendor might reasonably expect to obtain from a willing purchaser, for the land in that particular position and with those particular potentialities.”
108.	The wording of rule (2) makes clear, in our judgment, that the seller in contemplation is a hypothetical one.  He is simply “a willing seller”, and although he will have such characteristics as any owner of the subject land would have (see Railtrack plc v Guinness Ltd  (unreported [2003] EWCA Civ 188 at para 28) the personal characteristics of the actual owner are irrelevant: see Trocette Property Co Ltd v Greater London Council (1974) 28 P & CR 408 per Megaw LJ at 416.  Mr Gale-Hasleham’s valuation A was wrong in law in assuming a sale by a vendor with all the characteristics of the claimant.
109.	There is, however, in the hypothetical transaction no reason to exclude the claimant as a possible purchaser.  Indeed it is by permitting the assumption that he could be a possible purchaser (together with the operation of rule (6)) that section 5 does in fact ensure that what the claimant receives is the value of the land to him.  (We deal below with the question of rule (6) compensation.)  When considering him as a possible purchaser, the claimant’s personal characteristics (his motivations, his resources, and so forth) would become relevant, as would the characteristics of anyone else who in the real world would have been a potential bidder for the land if it had been offered for sale.  If the facts show that the claimant would have paid more for the land, if it were offered for sale by a willing vendor, than any other potential bidder, then the amount that he and the seller would have agreed upon is the amount that the land would have fetched in the open market.  What is envisaged in the claimant’s case is a joint exploitation of Corton’s asset (the land) and Potters’ assets (the expertise and the Potters resort).  Viewed in this way we cannot see that Corton would have paid more for the land than Potters or that any independent purchaser would have paid as much.
Conclusions: developer’s profit
110.	Mr Gale-Hasleham made no deduction for developer’s profit in his valuation A.  The reason for this was said to be that a willing vendor in the factual position of the claimant would not have incurred this item of cost if it had carried out the development itself and would therefore not sell for a price that took such a deduction into account.  In submitting that this was the correct approach, Mr Denyer-Green placed reliance on Richmond Gateways Ltd v Richmond upon Thames LBC [1989] 2 EGLR 182.  In that case the Court of Appeal upheld a decision of the Lands Tribunal, which had made no deduction for profit and risk in a residual valuation.  The claim was for compensation for the refusal of planning permission for Third Schedule development consisting of the addition of a penthouse to an existing block of flats.  Compensation was payable under section 169(2) of the Town and Country Planning Act 1971, to the extent that the claimant’s interest was worth less than it would have been if the permission had been granted; and section 178(1) provided for the application to the assessment of such compensation the rules in section 5 of the 1961 Act “so far as applicable and subject to any necessary modifications.”  The Lands Tribunal approached the matter on the basis of a residual valuation of the penthouse flat without making a deduction for developer’s profit, on the basis that the claimant owner would itself be a potential bidder in the market.  It is clear from the judgment of Glidewell LJ (with whom Russell and Dillon LJJ agreed) that, in holding that the Lands Tribunal had made no error of law, the court attached significance to the fact that the residual valuation was carried out for the purpose of establishing part only of the purchase price of the block (see 183 K-L) and to the possibility that, since the sale price of the flat assumed a 125-year lease, the enhancement of the freehold value might be sufficient to induce a purchaser to pay the difference between this sale price and the cost of construction without making a deduction for profit (see 183M-184A).  In addition Dillon LJ evidently thought it important that section 178(1) effected a qualified application of section 5 in that it did not require an assumption that the hypothetical purchaser would wish to resell at a substantial profit as soon as he had built the penthouse.
111.	In our view, Richmond Gateways is authority for no more than that, on the particular facts of the case and the particular valuation that was there carried out, it was not wrong in law to make no deduction for developer’s profit in the residual valuation carried out by the Tribunal.  Whether a deduction is properly to be made for developers’ profit must necessarily in our view depend on the facts of the case and the particular valuation that is being carried out.  Usually it will be appropriate to make such a deduction since the purchaser will not want to pay the seller more than the land with all its characteristics is worth.  Unless he is going to make a profit out of the development, he will not spend time and effort and take the financial risks in carrying it out.  So he will only pay an amount for the land that reflects the remuneration he considers to be appropriate for the time and effort that he will devote and the risks that he will take in carrying out the development.  Mr Denyer-Green’s submission that in the present case no deduction for profit should be made flowed from his contention that a person with all the characteristics of the claimant must be assumed to be the vendor, and we have already rejected this submission.  In our view any purchaser, whether Potters or anyone else, planning to carry out a timeshare development of this site costing millions of pounds would undoubtedly make a deduction for the time, effort and risk involved in the development in assessing how much it would be worth his while to pay for the land.  Although it was suggested that Potters might have derived financial benefit from their facilities at the Potters Resort being used by Corton timeshare owners, there was no attempt to quantify how much, if anything, this would have been worth to them.
Conclusions: rule (6) and loss of future profits
112.	Mr Gale-Hasleham’s valuation B included an amount to reflect the loss of profit that he said Corton would have made by carrying out a bowls-related timeshare development of the land.  Mr Denyer-Green submitted that compensation for such loss was payable on the general principle, stated by Romer LJ in Harvey v Crawley Development Corporation [1957] 1QB 485 at 494, that any loss sustained by a dispossessed owner which flows from a compulsory acquisition may properly be regarded as the subject of compensation for disturbance, provided first that it is not too remote and, second, that it is the natural and reasonable consequence of the dispossession of the owner.  Mr Denyer-Green relied also on the decision of the Lands Tribunal in Hobbs (Quarries) Ltd v Somerset CC (1975) 30 P & CR 286, in which the Tribunal (Mr Douglas Frank QC and Mr J D Russell-Davies FRICS) had determined compensation for a discontinuance order on quarry land on the basis of loss of anticipated profits.  Mr Roots submitted that the rule (6) claim was contrary to the established principle that where development land is compulsorily acquired the developer cannot claim, in addition to the development value of the land, loss of the profits that he expected to earn by carrying out the development, because the expectation of such profits is already reflected in the market value of the land.  Since the value of the land reflected its development potential, to add an assessment of loss of profits which would have been made from the land would amount to double-counting.  He relied on Pastoral Finance Association Ltd v The Minister [1914] AC 1083, Collins v Feltham UDC [1937] 4 All ER 189, Wimpey v Middlesex CC [1938] 3 All ER 781 and D McEwing and Sons Ltd v Renfrew CC 1960 SC 53.
113.	We agree that these cases are the relevant authorities.  In Pastoral Finance land in New South Wales had been compulsorily acquired from a company that carried on the business of dealers in wool and freezing meat for export.  They had bought the subject land, which fronted onto Darling Harbour, intending to erect new buildings there to which their business could be transferred.  Evidence was given at the trial in the Supreme Court of New South Wales as to the savings and additional profits that the claimants would have been able to make if their business had been transferred to the proposed new premises.  It was common ground between the parties that the site had a special suitability for the use to which the claimants proposed to put it, and the only question was the amount of the savings and increased profits that would result.  The jury returned a verdict for the claimants, awarding them £23,550 and adding of their own accord a rider that they valued the land at £9,950.  Judgment was entered in the sum of £23,550, but on appeal to the Full Court this amount was reduced to £9,950 on the ground that the claimants were not entitled to anything beyond the market value of the land by reason of the fact that they had not as yet erected any buildings there.
114.	The claimants appeal to the Judicial Committee of the Privy Council succeeded.  In his summing-up to the jury the judge had referred to the evidence on savings and profits and had said:
“Then you will consider what capital amount fairly represents those savings and those profits and you will add that to the amount that you consider fairly represents the market value of the land independently of these special questions.”
Giving the opinion of the Board, Lord Moulton said (at 1088) that this direction was seriously at fault.  He went on:
“That which the appellants were entitled to receive was compensation not for the business profits or savings which they expected to make from the use of the land, but for the value of the land to them.  No doubt the suitability of the land to them, and the prospective savings and additional profits which it could be shewn would probably attend the use of the land in their business furnished material for estimating what was the real value of the land to them.  But that is a very different thing from saying that they were entitled to have the capitalised value of these savings and additional profits added to the market value of the land in estimating their compensation.  They were only entitled to have them taken into consideration so far as they might fairly be said to increase the value of the land.”
115.	Collins v Feltham and Wimpey v Middlesex were both decisions of the Divisional Court on appeals by case stated from Official Arbitrators.  Awards of the Official Arbitrators contained no reasons and in such appeals the court also gave no reasons, confining itself to short answers to the questions posed in the case stated.  Each case concerned compensation for land acquired as open space from house-builders.  In the case of Collins the land had been acquired pursuant to a purchase notice, but nothing in the event appears to have turned on this.  In each case the court was asked whether compensation was to be confined to the market value of the land or whether the claimant was entitled to the loss of profit that he would have made from developing the land for housing.  In each case the court held that the award must not include compensation for loss of profits.  These two decisions were followed by the Court of Session in McEwing, a similar case where undeveloped land (as well as land that had already been developed) was acquired from a house-builder.  The court held that the claimants were not entitled to compensation reflecting the profits which they expected to make from selling the house in addition to the market value of the land.  At 310-311 Lord Clyde said:
“It would, in my opinion, be wrong in principle if this third head of claim regarding future profits were to be allowed as a legitimate addition to the market value of the land.  This is not even a case of a firm’s business premises being compulsorily acquired in whole or in part.  So far as the claimants are concerned the site in question is part of the stock or raw material of the business.  By their processing of this raw material and selling the result they anticipate making a profit.  They are entitled to the market value of their raw material, so that they may use the surrogatum for making profits in other ways, but if they get the price of their raw material they cannot also get something in respect of the profit they hoped to make upon it.  For, if so, they would have the means of securing that profit twice over.  Prospective future profits on future prospective developments cannot therefore be claimed in addition to the market value of the land.”
116.	The reasoning of Lord Sorn, who gave the only other reasoned judgment can be seen in the following  passages (at 315 and 317 respectively):
“….  The particular adventure that the claimants were engaged upon has been terminated but their business remains as before and they are free to turn in other directions and engage upon other profitable work.  It would be going beyond anything contained in the idea of compensation to give them the profits they would have made if they had actually completed the project over the next two or three years and, at the same time, leave them free to switch the resources of the business which would have been locked up for that period to other profit-making activity…
It may be that no precisely corresponding activity is open to the claimants in Greenock, but the claimants are builders and their business as builders had not been brought to a stop.  When the Balclutha project was terminated they became free to engage in other work.”
117.	All these cases appear to us to be consistent with each other.  The claimant is entitled to compensation for the value that the land has for him.  That value may be no more than the open market value, but it may be more than this if the land has a special value or suitability for the claimant.  Where the land has such a special value or suitability, so that the claimant might have expected to make a profit in consequence of his developing it, such prospective loss of profit can be taken into account but only to the extent that it increases the value of the land to the claimant.  He is not entitled to compensation for loss of profit per se.
118.	In Hobbs Quarries, the claimants had bought a partially-worked quarry for the purpose of extending the workings under a planning permission that had been granted many years earlier, but the planning permission was then revoked.  The compensating authority contended that compensation must be limited to the depreciation in the market value of the land (agreed at £72,000).  The claimants sought compensation based upon the loss of the profit that they would have made from the quarrying and they received an award on this basis (£192,168, after allowing for tax).  Under section 118(1) of the Town and Country Planning Act 1962 they were entitled to compensation for “loss or damage … directly attributable to the revocation.”  The Tribunal’s reasoning is to be seen in the following passage ((1975) 30 P & CR 286 at 291):
“We find this case very difficult because we see some force in the argument that the loss to the claimants cannot be more than the depreciation in the market value.  That argument, however, pre-supposes that there was another quarry available to be bought at market value which could serve the claimants’ purposes and provide them with an equal profit; but there was no evidence to that effect.  Thus, it is clear that the claimants have been deprived of the profits they would have earned and that much is not disputed.”
119.	It appears, therefore, that the quarry was considered to have a special value to the claimants because there was no evidence that there was any other quarry available to them.  The Tribunal effectively treated as the measure of that special value the loss of profit that the claimant would have made.  Pastoral Finance does not appear to have been cited.  The recent decision of the Tribunal in Ryde International Plc v London Regional Transport (28 March 2003, unreported; LT ref ACQ/174/2000) was, by contrast, a case in which the land acquired had no special value to the claimant beyond the value that it would have had to any property company that might have bought it and marketed the development.
120.	In our judgment, therefore, Mr Gale-Hasleham was wrong to include in his valuation B the loss of prospective profits.  The claimant was not a company that was actively trading.  Its sole asset was the subject land.  As assessed by Mr Throssell the profits lost were those that it would have made by developing the land, but the expectation of such profits is reflected in the development value of the land.  In place of the land that was compulsorily acquired the claimant received an entitlement to compensation for the value of the land plus interest from the date of entry until payment.  We would add that, in our judgment, no question arises about the availability, or lack of it, of an alternative site.  Mr Potter said that he had not carried out a search for an alternative site because he knew that nothing suitable was available, but we are not satisfied, in view of the extensive areas in use as caravan sites and other leisure uses in the locality, that a search would not have identified a suitable alternative site.
Conclusions: other matters of law
121.	Mr Denyer-Green, in support of his contentions on the issues of law that we have dealt with, advanced three further arguments which we can deal with quite shortly.  Firstly he said that the statutory rules as to compensation must now be construed in the light of Article 1 of the First Protocol to the European Convention on Human Rights so as to ensure that a claimant receives by way of compensation no less than his actual loss.  As to this, rules (2) and (6) operated in the way that we have described do indeed in our view provide for compensation that represents the claimant’s actual loss.  Secondly, Mr Denyer-Green relied on the law of tort, citing passages in McGregor on Damages and Liesbosch Dredger v SS Edison, The Liesbosch [1933] AC 449, in support of his contention that an award of compensation should include the loss of future profits in addition to the value of the profit-earning asset.  It is sufficient we think, to say that we agree with Mr Roots that it is unnecessary to refer to principles of tort since the principles of compulsory purchase compensation are well established; and that in any event, properly analysed, The Leisbosch does not support Mr Denyer-Green’s contention.  Thirdly, Mr Denyer-Green said that if the Tribunal was not satisfied that Corton had lost the profits on which the rule (6) claim was based, the end figure of the valuation should be discounted to reflect the degree of chance that the loss would have been suffered.  He referred to Allied Maples Group Ltd v Simmons & Simmons [1985] 1 WLR 1602.  We do not think that the approach which Mr Denyer-Green urges in this respect would have been correct if we had concluded that compensation should have been paid for loss of prospective profits.  Nor does Allied Maples, which was not a case on the law of compensation, appear to us to support such an approach.
Conclusions:  the timeshare market and the site
122.	In the course of the evidence there was extensive discussion of the timeshare market and the qualities of a number of timeshare developments in England and Wales.  Mr Morgan’s evidence that there had been virtually no new timeshare development in England and Wales in the last 10 years was not disputed.  Such timeshare developments as there have been have taken the form of extensions to existing holiday centres.  This suggests clearly to us that the market views timeshare developments on bare sites as risky and avoids them.  As we shall say, we see nothing in the suggested scheme for the subject land that would have made it so exceptionally attractive a proposition that it would have become the only, or almost the only, timeshare development on a bare site to be carried out for a decade.
123.	The evidence establishes to our satisfaction that a successful timeshare is likely to be located in a generally attractive area and to contain or have available to it some particular attraction (or “anchor” as this feature was referred to by the witnesses).  The subject land lies in a relatively featureless area.  It has itself no inherently attractive qualities.  It is surrounded by flat arable land, and it can safely be concluded that it was only its established use as a caravan camp that led to the permission for timeshare development.  It is not immediately adjacent to, nor does it have views of, the sea; and the coastline in the area of Corton and Hopton is characterised by extensive caravan parks.  The Norfolk Broads are some distance away, and we do not think that anyone choosing to make them the focus of a holiday would choose to stay at the subject land rather than in the area of Broads themselves.  Under the proposals the land itself (or the part of it on which planning permission was granted, 4.381 ha or 10.83 ac) would be very fully developed with bowls and leisure facilities in addition to the 75 timeshare units.  No extensive landscaped open spaces could be provided, and the plans indicate to us that the development would be rather cramped.  We think that the site and the development proposed would have no attraction at all for the general timeshare market.  We do not think there would be any interest from any quarter in developing the land for general timeshare purposes, and we reject Mr Cooper’s view that there would be such interest.
127.	It is as a specialist bowls-related timeshare resort that the development was designed, with the provision of on-site facilities for indoor bowls and access to the more extensive facilities at Potters Resort.  In evaluating the prospects of such a development, we assume, as we have said, that Potters would be the developer, because they control access to the Potters resort facility and have the expertise in the indoor bowls holiday market.  No one would pay more than they would for the land for this purpose.  Mr Gale-Hasleham’s basic assumption is that all the timeshare weeks would be sold within 5 years at a price of £4,500.  We consider this to be an unrealistically optimistic assumption.  We say this because of the large number of weeks that would need to be sold, the specialist nature of the resort, and what we consider to be the comparative unattractiveness of the proposed development.  
128.	There would be 50 weeks in 75 chalets to be sold, a total of 3750 weeks.  The chalets would each have two bedrooms, so that the development would provide a total of 300 bedspaces.  Mr Potter said that the Potters resort can accommodate 600 guests at a time.  Corton, therefore, would have a capacity of 50% of this.  No doubt the bed occupancy rate would be substantially lower than at the Potters resort (where it is in excess of 80%), but this comparison gives an idea of the impact that sales would have to make in this specialist market.
129.	The only substantial attraction that would be provided in the development would be bowls facilities.  We cannot envisage anyone buying a timeshare there other than for the purpose of enjoying a bowls holiday, so that the market would be a limited one.  The evidence established that the ability on the part of timeshare owners to exchange weeks at different resorts is an essential element of the timeshare concept.  Someone buying a timeshare at Corton would in practice have to find a person with an enthusiasm for indoor bowls with whom to exchange his week.  This obvious limitation in the potential for exchange would, in our view, constitute a further difficulty in the way of marketing the units.  In addition the average stay at the Potters resort was 3.69 days in 1999 and 3.27 in 2000, so that a week-long timeshare would probably be more than most people would want for a bowls-related holiday.  Moreover any prospective purchaser would be buying his week or weeks either off plan or at least before the development had been completed and seen to be successful, and this would be a further concern to him.  While we note the results of the mailshot to Potters’ existing customers, it would not in our view be right to conclude that the interest expressed on the basis of scanty facts about what was proposed would be likely to translate into significant timeshare sales.
130.	When faced with the decision whether to buy a timeshare week at Corton, a prospective purchaser would, we think, be very conscious of the difference in the on-site facilities provided at the Potters resort and those that would be available at Corton.  Those who go to the Potters Resort have immediately available to them on site, besides the very extensive bowls facilities, a large theatre giving nightly entertainments of West End standards, restaurants, swimming pools, and a wide range of other attractions.  By comparison with the Potters Resort the on-site facilities at Corton would be extremely limited and, even though the Potters Resort facilities might be available to timeshare occupants, any prospective purchaser would be acutely aware of the difference between having these facilities immediately available on site and having them a bus or car journey away.
131.	It is difficult to derive from the evidence of prices at timeshare developments of more general appeal the sort of price that might be obtainable for the Corton units, but we feel sure that it would not be possible to achieve the number of sales required at anything like the £4,500 assumed by Mr Gale-Hasleham.  We accept Mr Morgan’s evidence and evaluation of existing timeshare developments.  All of them, with the exception of Blakeney (which for the reasons given by Mr Morgan is not comparable with the proposal here), are on very much larger sites, many of them with extensive areas of parkland and/or golf courses, all with some particular attraction other than the quality of the units, and all with more general appeal.  Mr Gale-Hasleham had based his price of £4,500 on prices at timeshare developments at Laugharne Park, Clowance and Plas Talgarth.  None of these are in the eastern region.  Nor were they new developments.  We do not think they are comparable to what was envisaged for the subject land, and we consider that Mr Gale-Hasleham’s £4,500, being based upon them, is very substantially higher than Potters could ever have achieved on the subject land.  
132.	Mr Morgan identified a number of timeshare developments in Norfolk, including Blakeney, Cromer, Barnham Broom and Richmond Park.  Mr Andrews had averaged the price information on these at £3,233, but the prices were asking prices and some were for re-sale weeks, which tend to be lower than for new weeks.  We attach little significance to this figure in consequence.  Mr Morgan’s view was that a proper price for a standard 2-bed unit on the subject land would be similar to those at Richmond Park, where a small number of chalets had been built at a golf course.  The prices averaged about £2000.  We think it quite possible that prices for the Corton development would have been no greater in view of the large number of units that required to be sold, and we think that it would have been optimistic to base any assessment on an assumption of prices in excess of £3000.
133.	Some reliance was placed by the claimants on two offers to purchase the land that had been made in 1997.  The first came from Alfred McAlpine Special Projects in a letter dated 8 September 1997.  They had written to Mr Potter previously to say that it had come to their attention that a planning application had been made, and they had discussions with Mr Potter.  They offered £2,496,000.  The second offer came from Mr Routledge’s firm O & R Properties, who wrote to Mr Potter on 9 October 1997 offering £2,600,000 subject to contract.  Mr Potter replied the same day accepting the offer.  A statement of Mr Routledge explaining his interest was appended to Mr Gale-Hasleham’s report.  In it he described the timeshare proposal as a venture that could not fail and a one-off opportunity which O & R were disappointed to be denied.  As, however, the claimant did not propose to call Mr Routledge to give evidence AWS obtained a witness summons to require his attendance.
134.	As we have recorded, Mr Routledge’s firm had only had very limited involvement in leisure-related projects.  They had done nothing in the way of timeshare development.  We do not consider that Mr Routledge’s offer was based on any expertise or any sufficient investigation of the timeshare market, and we see no reason to think that the agreement that was made subject to contract would have become unconditional.  The offer does not in our judgment constitute any evidence of the suitability of the land for a timeshare development or its value for that purpose.  The same goes for the McAlpine offer.  There is no evidence that McAlpines had any experience of or genuine interest in timeshare development.
Conclusions: timeshare residual valuations
135.	In the absence of any comparable transactions, and neither party suggested that there were any, residual valuations can provide the best guide to the open market value of the land.  But, in seeking to reproduce the sort of calculations that a developer would carry out as an aid to his judgement as to how much he ought to be prepared to pay for the land, the valuer must proceed with caution.  A relatively small alteration in one or more of the parameters can make a large difference to the end result.  For this reason it is important in our view in a case such as this to consider a range of variations in the assumptions and to make a judgment in the light of the different outcomes.  We are in no doubt on the material before us that Potters (who, as we have said, could be expected to pay more for the land than any other potential developer if the timeshare proposal was viable) would not have bought the land for a timeshare development.
136.	We have rejected the basis of Mr Gale-Hasleham’s valuation A because it made no allowance for developer’s profit.  His valuation B, which does make such an allowance (of 17.5%), gives an end figure of £2,450,000.  It assumes a price per week for each unit of £4,500, with all the timeshare weeks being sold within 5 years.  It assumes marketing costs of 27%.  It allows for interest on the cost of development at 8.5%.  It does not, however, make any allowance for interest on the cost of the land (and interest at 8.5% for 5 years would add 50% to such cost).  It has a 10% addition at the end to reflect the special value that Mr Gale-Hasleham said the land would have to Potters as a purchaser.  
137.	We have said that we consider the price of £4,500 that Mr Gale-Hasleham assumes to be unattainable and that to take any higher price than £3,000 would be optimistic.  We think that 27% is a more realistic percentage to take for marketing costs than 24%.  We think that 8.5% interest may be too low; and that interest ought also to be applied to the cost of the land also; and that 20% would be a more realistic percentage than 17.5% to take for developer’s profit.  If, however, we simply substitute £3,000 for £4,500 in the valuation and make no other alterations than those that are consequential on this change (so that marketing costs fall to £3,000,000, interest on marketing expenditure becomes £177,200 and developer’s profit becomes £856,900) the value before any overbid allowance falls from £2,203,154 to £173,000.  Making further allowances for higher interest rates and interest on land would erode this value still more.  The value of the land for timeshare development thus would not compare favourably with its value as a caravan park as we assess this below.  We consider moreover that this conclusion holds good when account is taken of the factors that Mr Gale-Hasleham’s 10% overbid is intended to reflect.  Such additional value as the land might have to Potters would adequately be reflected in our view by retaining in the calculation the 17.5% allowance for profit rather than the more usual 20%, which would otherwise have been appropriate.
138.	Mr Cooper produced three cash flow financial models.  They were not valuations.  It is sufficient for us to say that the assumptions on which they were based are such that we do not think that their outcomes are realistic.  In relation to the third model, which assumed sales of 90% of the timeshare weeks over a period of 7 years at an average price of £6,619 with an allowance of 40% for marketing, Mr Cooper accepted that, if simply the price were altered to £4,500, the net cash flow would be negative.  Mr Andrews’ calculations, which were done on a DCF basis and assumed higher interest and discount rates and 20% (rather than 17.5%) for developer’s profit, showed negative end figures of between £1,314,000 and £1,687,000.  We do not think that Potters, if faced with the decision as to whether to spend perhaps £10m on developing the site and marketing the units, would have regarded as implausible potential outcomes such as these.  We cannot believe that, faced with this sort of range of possibilities, they would have decided to buy the land in order to develop it for timeshare, and we do not think that anyone else would have done so.
Conclusions: holiday village
139.	We accept Mr Morgan’s evidence that the other holiday village uses that he had considered would not find a market.   If there had been a demand for holiday letting units (the use to which the land had been put until 1987) there would not be the number of redundant holiday camps that Mr Morgan said there were around the country.  As to the construction of holiday homes for sale on long leases, we accept that Corton is wholly unsuitable for such a development.  The examples that Mr Morgan quoted (Cotswold Water Park, Buckden Marina and Harleyford to name but three) are, as with the majority of the timeshare developments that were mentioned, based in very substantially superior locations and have anchors which serve as the main attraction.
Caravan site
140.	Mr Gale-Hasleham, who said that he had been involved with the valuation and sale of caravan parks since 1978 acting, as he did, for most of the major park operators, and was Chairman of the National Caravan Council, produced an alternative valuation assuming the development of the subject land as a caravan site.  For AWS Mr Asher produced a valuation on this basis.  The valuers agreed that the following costs would be appropriate to such a valuation:
(a)	Reception and administration (if no other leisure facilities provided)	£  48,000
(b)	Reception, admin, clubhouse and indoor swimming pool 	£475,000
(c)	Two houses for staff 	£  72,000
(d)	Provision of services, caravan pitches, fencing, security etc	£480,000
(e)	Pumping station	£  75,000
(f)	Landscaping	£  50,000
(g)	Pitch fees 	£1,300 pa, gross, excluding VAT
It was the claimant’s case that neither of (b) nor (c) was necessary.
141.	Mr Gale-Hasleham’s valuation was as follows:
Holiday Caravan Site for 150 Pitches
150 @ £1,300pa site fee 	£  195,000
add sales: 30 @ £3,500 profit per sale	£  105,000
	£  300,000
less outgoings @ 35% of site fee income	£    68,250
			£  231,750
Y P @ 14%	         7
			£1,622,350
Allow costs of development
Cost of bases, services and roads	£450,000
Reception facility			£  48,000
Site clearance				£  50,000
Fencing & signage			£  40,000
Pumping station				£  75,000
Landscaping				£  50,000
			£  713,000
			£  909,250
			Say      £  900,000
142.	Mr Gale-Hasleham said that in preparing this valuation, he had adopted the formula that he had used in the past, that is to say, the capitalisation of the expected income to be derived over a phased development.  An important factor, he said, was that the potential income to be derived from sales of caravans largely offset the development costs of the site.  It was a fact that caravans were renewed every 4-5 years and it could be assumed, therefore, that the commission that the operator earned from the manufacturer, at £3,500 per van, would be ongoing rather than ceasing when the development is complete.  The pitch fee that had been used was based upon the quoted fees from two local caravan sites, and it had been agreed with Mr Asher as appropriate. 
143.	The main reason, he said, for the disparity between his valuation and Mr Asher’s was that he did not think, on a site where the vans were owner-occupied, that it was necessary for there to be central facilities other than a reception and administration office.  This was, in his view, a small site and unless the units were going to be occupied more (for instance, if they were being provided as letting units) there would be no demand for a swimming pool and bar.  A site warden could be accommodated in one of the caravans.  Also, as the site would be run as a going concern by the developer, there was no need to deduct a 10 per cent developer’s return, as Mr Asher had.  If Mr Asher’s valuation was adjusted to take account of his own views, Mr Gale-Hasleham said it would become £852,650 – very close to his own assessment.
144.	Mr Asher produced a valuation on the basis of development as a caravan park in the sum of £170,000 [Appendix 3].  He said that, in his professional opinion, a caravan site that did not provide accommodation for the owner/manager to live on site would be seen by a prospective purchaser of the business as inferior, particularly in terms of security.  He had allowed for the provision of two houses at a cost of £72,000.  As to his allowance of £475,000 for on-site leisure facilities (which figure he said he adopted after considering Mr Morgan’s evidence, and also checking with his own firm’s quantity surveyors), he said that bearing in mind that the subject land was located in a position inferior to those of the two comparable units referred to by Mr Gale-Hasleham, it would be essential to provide at least comparable facilities.   The £1,300 pitch fee that he had agreed as appropriate was based upon the provision of those facilities, and that figure could certainly not be sustained if, as Mr Gale-Hasleham had presumed, no such attractions were necessary.      
145.	Both Hopton Holiday Village at Hopton (which had 900 pitches, a percentage of which were holiday lets) and Seashore Holiday Park at Great Yarmouth (about 800 pitches) were by the sea, and had indoor swimming pools and other facilities.  Although he accepted that the Hopton pitch fee was £1,600 in 2000, Mr Asher said that was in an infinitely better position, and said that Seashore, also being “at the seaside” was £1,300. 
146.	Mr Asher said that he did not agree with Mr Gale-Hasleham that the receipt of commissions from the sale of caravans should be treated as an income in perpetuity.  Whilst he accepted that there would be some ongoing commissions once all 150 pitches had been filled, there was no guarantee that the turnover would be equivalent to the projected sales rate over the first 5 years (30 per year).   After the first 5 years, the sales rate was likely to fall off substantially, there being no renewals, in volume terms, for some time.    There were so many imponderables as to the likely level of long-term commissions that it was impossible to calculate and, in any event, he said he had reflected this unknown future income stream in the multiplier he had used for the commission income over the first 5 years whilst the site was being filled up.   
147.	Recalculating Mr Gale-Hasleham’s commission income figures for 5 years, rather than in perpetuity, and using his multiplier (14%) reduced his valuation from £900,000 to £550,000.  But, Mr Asher said, that figure would needed to be reduced further to allow for the fact that the rental sum of £1,300 per pitch should not be initially multiplied by 150 as the agreed assumption was that only 30 pitches per year would be filled.  Furthermore, there would be an additional reduction to allow for the developer’s profit which, whilst he accepted that most developers of this type of site would also be operators, in calculating the value any person undertaking the project would wish to allow for the development risk.  For instance, if the developer decided to sell-on as soon as the project was completed, and he had not allowed for developer’s profit, there would be nothing in it for him.
148.	Mr Asher also pointed out that Mr Gale-Hasleham had not accounted for finance on the costs of the development, legal and other costs that would be incurred in site acquisition and surveyors fees in connection with the project.   Finally Mr Asher said he had allowed £50,000 for remediation in connection with the contamination that had been found.
Conclusions on caravan site valuation
149.	We agree with Mr Asher that, even on the basis this is to be an owners park rather than one where all the units are available year-round for holiday lets, the provision of some on- site leisure based facilities would be essential, bearing in mind the location.  As we have said in connection with the question of suitability for timeshare, the site has nothing in particular to commend it as a holiday destination, other than its reasonable proximity to the sea.  Both of the comparables that had been referred to were on the coast and, although they were very much larger than Corton, had extensive facilities including shops, bars, cafes and swimming pools.   
150.	In our judgment, any prospective purchaser of one of the pitches upon which he is planning to place a new caravan costing, as the experts agreed, anything up to £40,000, would be most unlikely to favourably consider an inland site like Corton, at the same or similar annual cost as a seaside location, if there were no facilities provided.  Whilst undoubtedly a smaller and arguably more exclusive site on the lines of that proposed might well have some attractions over the vast, sprawling, seaside sites, we cannot envisage that attraction being sufficient if, as we have said, there is nothing on site to occupy the residents.
151.	 Mr Asher’s figure of £475,000 for the provision of indoor swimming pool and a clubhouse includes amounts for reception and administration, and there was no evidence suggesting that that figure was inappropriate.  For the reasons given above, therefore, we accept it.  As to the projected income, we note that although the experts have approached this in slightly different ways, they have arrived at £1.622m and £1.653m respectively.  Whilst there were arguments on both sides as to the appropriate way to deal with the projected commission income from caravan sales in terms of the sustainability of the income, and an appropriate multiplier, there was no firm evidence upon which to determine one way or the other.  Bearing in mind that the higher figure was produced by Mr Asher, and noting also that he made no allowance for future income from the on-site facilities, we therefore adopt his £1.653m.          
152.	As far as other matters are concerned we prefer Mr Asher’s development appraisal approach as it was evident from Mr Gale-Hasleham’s valuation that not all factors had been accounted for – such as finance costs (land and development), marketing and fees.  However, we are not convinced that a small site such as this warrants the provision of two on-site houses for owner and manager, and in that regard we prefer Mr Gale-Hasleham’s suggestion that a double-pitch could be provided for staff.  In this respect, we do not propose to recalculate the number of available pitches as both valuers agreed on 150 whether or not on-site facilities were provided, despite their different assumptions about on-site houses.
153.	We have assumed, on the basis that the valuers agreed new caravans could be from £15,000 to £40,000, that two fairly basic units would cost £40,000.    This reduces the sub-total on development costs by £32,000 to £1,211,000 and adjusting the construction fees, developer’s profit and finance on costs (correcting a mathematical error in Mr Asher’s valuation) figures to reflect this change results in a value of £182,500 [Appendix 4]
154.	Accordingly, we determine that the acquiring authority shall pay compensation to the claimants in the sum of £182,500 together with interest at the standard rate from 7 March 2000.
155.	This decision determines the substantive issues in this reference and will take effect when the question of costs is decided.  An accompanying letter sets out the procedure for making written submissions on costs.

						Dated 25 June 2003 

						George Bartlett QC, President

						Paul Francis FRICS

ADDENDUM
156.	We have received representations from the acquiring authority in relation to paragraph 154 of our decision where we included in our determination the payment of interest on the compensation determined from 7 March 2000.  They say that they paid £180,000 to the claimant on 27 July 2000, so that interest ought only to be payable in respect of the balance of the compensation sum from that date.  They also say that there is no need to include any reference to interest in the decision because there is a statutory entitlement to it.  We accept this.  The words following “£182,500” in paragraph 154 will be deleted. 
157.	We have also received representations on costs.  The acquiring authority made two sealed offers, one of £500,000 on 24 May 2001 and another of £750,000 on 6 December 2001.  Both offers, therefore, exceeded the amount of compensation we determined.  The claimant submits that it should have its costs of the reference; alternatively that it should have its costs up to the date of the second of the sealed offers, and that each party should bear its own costs after that date; and, that if the claimant is entitled to any costs, no part of such costs should be disallowed on the ground that it failed on one or more issues.  The acquiring authority submit that they should have their costs from the date of the first offer; and that there should be no award of costs against them before that date in relation to the timeshare issue. 
158.	The claimant bases its principal submission – that it should be awarded all its costs – on a contention that the acquiring authority are not entitled to rely on either of the sealed offers since neither made any reference to the question of costs.  It says that the claimant was not to know whether the acquiring authority’s offers included or excluded the claimant’s costs.  Reliance is placed on the decision of the Tribunal (Mr P H Clarke FRICS) in Tague v Lancaster City Council [1999] 2 EGLR 103.
159.	In Tague the acquiring authority a few days before the hearing made an offer that was expressed to be in full and final settlement of the disputed elements of the claim exclusive of any costs.  The Member found that the offer had two defects, the first being that it was made too close to the hearing.  He went on (at 108 B-C):
“The second defect is that the offer is expressly stated to be exclusive of costs.  In my view, it was reasonable for the Claimants to defer their response until the question of costs had been clarified.  The Council could have included an offer as to costs in their letter, thus dealing with both outstanding issues.  An offer during proceedings in this Tribunal should have the dual purpose of settling the outstanding claim and compromising the reference.  The general rule is that an acquiring authority should normally bear the costs of proceedings in the Lands Tribunal and therefore an offer that makes no reference to costs is defective in that respect.”
160.	The same Member, in a similar case, Shevlin v Trafford Park Development Corporation [1998] 1 EGLR 115, had put the matter similarly (at 119L):
“After proceedings have commenced in the Lands Tribunal, a sealed offer should be both an offer of compensation in respect of the compulsory acquisition and an offer to compromise the proceedings.  The general rule is that an acquiring authority should bear the costs of proceedings in the Lands Tribunal (see Emslie & Simpson Ltd v Aberdeen City District Council (No 2) [1995] RVR 159) and therefore a sealed offer which omits any reference to the claimant’s costs is weakened in effect and reduced in amount.”
161.	Section 4(1) of the 1961 Act provides that, where the acquiring authority have made an unconditional offer in writing of any sum as compensation and the sum awarded does not exceed the sum offered, the Tribunal shall unless for special reasons it thinks proper not to do so, order the claimant to bear his own costs and to pay the costs of the acquiring authority so far as they were incurred after the offer was made.  Two points in particular are to be made about this provision.  The first is that pre-reference costs, if they are awarded, form part of the compensation under rule (6) (see LCC v Tobin [1959] 1 WLR 354).  Any offer of a sum as compensation must, therefore, be taken to be inclusive of such costs (if any), unless the offer suggests otherwise.  Here there was nothing to suggest otherwise.  The amounts offered were to be taken as inclusive of any pre-reference costs that might be claimed, and no clarification of this was required.
162.	The second point is that reference costs do not form part of the compensation.  The section treats the two separately.  Thus the fact that an offer of compensation says nothing about reference costs does not prevent it from being an offer of a sum as compensation within the section; and the effect of such an offer that is not exceeded by the award will be the costs consequences prescribed by subsection (1).  Therefore the failure of the offer to mention reference costs incurred before the date of the offer will only go to the question of special reasons.  
163.	If an offer that is silent as to costs is accepted, the agreement produced by the offer and acceptance will imply that the question of costs, if not subsequently agreed, will be determined by the Tribunal.  The normal rule, confirmed by the Court of Appeal in Purfleet Farms Ltd v Secretary of State for Transport [2002] RVR 368, that the claimant is entitled to his costs in the absence of exceptional circumstances, would apply to any determination by the Tribunal of a disagreement about pre-offer costs.  But a claimant who accepts an offer that is silent as to costs cannot be sure that he will get his pre-offer costs: the acquiring authority may say that there are exceptional circumstances that make it appropriate to deprive him of all or part of his costs.  In the present case the acquiring authority do urge that there are such circumstances in relation to the claimant’s pre-offer costs.  It would have been open to them to advance such a contention, albeit on different facts, if the offer had been accepted.  Unless, therefore, an offer makes clear what the authority proposes about the pre-offer costs of the reference, the claimant cannot be sure of what, if anything, he will receive in respect of such costs.
164.	The consequence of this, in our judgment, is that an authority who make an offer that is silent as to pre-offer costs and which exceeds the sum awarded by the Tribunal run the risk that a claimant may argue that the failure to mention those costs constitutes special reasons why the authority should not get their costs under section 4(1).  But since the particular shortcoming of the offer is its lack of clarity, the failure to mention costs could only constitute a special reason for the time reasonably required for the claimant to request and to receive the clarification that is needed.  An offer that is made shortly before the hearing date, as in Shevlin and Tague, may allow insufficient time for such clarification, so that failure to mention costs may constitute special reasons for not awarding the authority their costs of the hearing.  On this basis there is no reason to doubt the correctness of those decisions, although we respectfully think that the Member expressed the general considerations too widely.  We would add that, of course, if the offer as originally made or as clarified is expressed to exclude all or part of the claimant’s pre-offer costs and the Tribunal considers such exclusion to have been unjustified, this would almost certainly constitute special reasons for the purposes of section 4(1).
165.	In the present case, where the offers were silent as to costs, if the claimant had wished for clarification it could have asked for it.  No clarification was sought, and the only conclusion that can be drawn from this is that the lack of clarity was a matter of indifference to the claimant.  There is, in our judgment, no special reason for departing from the order prescribed by section 4(1), that the claimant should pay the acquiring authority’s costs from the date of the first offer, 24 May 2001.
166.	As far as pre-offer costs are concerned, the acquiring authority say that the claimant should not have its costs in relation to the timeshare issue on the basis that we had concluded that the claimant’s case on this was “fundamentally erroneous”.  We did not characterise the claimant’s case in this way, and we do not consider its weakness was such as to constitute the sort of exceptional circumstances that would, in the light of Purfleet Farms, justify depriving the claimant of its pre-offer costs.
167.	The acquiring authority must pay the claimant’s costs of the reference incurred before 24 May 2001 on the standard basis.  The claimant must pay the acquiring authority’s costs on the standard basis from that date.  In each case the costs if not agreed will be subject to detailed assessment by the Registrar.
					Dated 12 September 2003

					George Bartlett QC, President

					Paul Francis FRICS

APPENDIX 1

D R Gale-Hasleham FRICS IRRV			
Valuation A				
SALES income based on 75 units
for 50 weeks @ £4,500pw	
75 x 4,500 x 50	
£16,875,000		
Less: Cost of development
including fees of £291,500 (agreed)		
£ 5,666,000		
Setting up costs		£    30,000		
Marketing costs		£ 4,000,000		
				£7,179,000	
Less:  Interest on development costs				
Setting up costs		£ 30,000 (agreed)			
Building regulations		£ 32,000 (agreed)			
Design/build contract fees		£291,500 (agreed)			
		£353,500 			
Interest 4 yrs @ 8.5% compound		     0.386 			
		£  136,451		
Less:  Interest on construction and fitting out costs
(£5,666,000 - fees £291,500 and bldg regs £32,000)			
		£  5,342,500			
Period 3 yrs after 9 months later
average 2 yrs to allow sales income	
	         0.166	
		
		£  890,061		
Less:  Interest on marketing
in years 1 & 2 thereafter self-funding
from sales.  Take £1.5m @ 8.5%
compound 2 yrs.	

	£1,5000,000			
Amount of £1		             0.1772			
		£  265,800		
		£1,292,312		£5,886,689	
Less:  Interest on land value				
£2,450,000 for 5 yrs @ 4% compound		£2,450,000			
		           0.2167			
		£5,309,915		£5,355,774	
Value deferred 5 yrs @ 8.5%			        0.665	
				£3,561,589	
				
		Say		£3,560,000	

				

APPENDIX 2

D R Gale-Hasleham FRICS IRRV			
Valuation B				
SALES income based on 75 units
for 50 weeks @ £4,500pw	
75 x 4,500 x 50	
	£16,875,000		
Allow cost of development – (Agreed)
figure inc. fees		
	£ 5,666,000		
				£11.209,000	
Allow costs of acquisition and setting up (Agreed)			
Stamp duty		£80,000			
Legal fees		£ 5,000			
Land Registry		£ 1,000			
Legal fees in setting up timeshare		£30,000			
			£116,000		£11,093,000	
Allow marketing costs				
Based on stand-alone operation
at 27% of sales income £16,875,000	
	£4,556,250 say	
	£4,500,000	
	£6,593,000	
				
Allow interest on cost of development			
Setting up costs		£150,000			
Building regulations		£  32,000 (agreed)
	£291,500 (agreed)		
Design/build fees			
		£473,500			
Interest 4 yrs @ 8.5% compound		     0.386			
		£182,771		
Construction & fitting out costs
(£5,666,000 less fees £291,500
and bldg regs £32,000)	

	£5,342,500			
Period 3 yrs commencing month 9, average
2 yrs 8.5% compound, deferred 9 months offset
by sales income in period from 18 months	

       0.1666	

£890,141	

Interest on marketing expenditure in years 1 & 2 thereafter self-funding from sales - £1.5m @ 8.5% compound 2 years	

	£1,500,000			
		      0.1772			
			£  265,800		
			£1,338,712		£5,254,288	
Allow developer’s profit
on £11,093 @ 17.5%		
	£1,941,275		
				£3,313,013	
Value deferred 5 years @ 8.5%				£2,203,154	
Add overbid of 10%, say £250,000				£2,453,154	
		Say		£2,450,000	
APPENDIX 3
R W Asher FRICS

Valuation on basis of Caravan Park as at 7 March 2000
Holiday Caravan Site of 150 pitches
Gross Development Value
Caravan pitches	150 @ £8,500	£1,275,000
Sales commission on caravans	150 @ (say) £3,500 at 30 per annum
							£105,000
Y P for 5 years @ 12%	        3.60478
	£   378,502
TOTAL CAPITAL RECEIPTS	£1,653,502
Development Costs
Indoor swimming pool, reception, admin and clubhouse	£   475,000
Two houses @ £36,000 each	£     72,000
Caravan pitch bases @ £800 each	£   120,000
Caravan pitch services @ £800 each	£   120,000
Fencing  700metres @ £28	£     19,600
Gates, security, signage	£     20,000
Construction roads and sewers 600 metres @ £320	£   192,000
Site clearance/demolition – say	£     50,000
Remediation – say	£     50,000
Pumping Station	£     75,000
Landscaping	£     50,000
Sub Total	£1,243,600

Construction fees @ 5%	£     62,180
Planning and Building Control fees - say	£       2,000
Marketing – say	£       5,000
Legal fees	£       1,000
TOTAL COSTS	£1,313,780

Developer’s return @ 10%	£131,378
Finance on costs 6 months @ 7%	£  20,586
	£   151,964
	£1,465,744
	£   187,758

Surveyors fees @ 1%	£       1,700
Legal fees @ 1%	£       1,700
Stamp duty @ 1%	£       1,700
Finance on land cost @ 7% for 1 year	£     11,900
		£     17,000
	£   170,758

	Say   £   170,000

APPENDIX 4

Lands Tribunal’s valuation
Valuation on basis of Caravan Park as at 7 March 2000
Holiday Caravan Site of 150 pitches
Gross Development Value
Caravan pitches			150 @ £8,500					£1,275,000
Sales commission on caravans	150 @ (say) £3,500 at 30 per annum
								£105,000
Y P for 5 years @ 12%						3.60478
											£   378,502
TOTAL CAPITAL RECEIPTS							£1,653,502
Development Costs
Indoor swimming pool, reception, admin and clubhouse		£   475,000
Two staff caravans							£     40,000
Caravan pitch bases @ £800 each					£   120,000
Caravan pitch services @ £800 each					£   120,000
Fencing  700metres @ £28						£     19,600
Gates, security, signage						£     20,000
Construction roads and sewers 600 metres @ £320			£   192,000
Site clearance/demolition – say					£     50,000
Remediation – say							£     50,000
Pumping Station							£     75,000
Landscaping								£     50,000 
Sub Total								£1,211,600

Construction fees @ 5%						£     60,580
Planning and Building Control fees - say				£       2,000
Marketing – say							£       5,000
Legal fees								£       1,000 
TOTAL COSTS							£1,280,180

Developer’s return @ 10%			£128,018
Finance on costs 6 months @ 7%		£  44,806 
									£   172,824
											£1,453,004
											£   200,498

Surveyors fees @ 1%							£       1,800
Legal fees @ 1%							£       1,800
Stamp duty @ 1%							£       1,800
Finance on land cost @ 7% for 1 year				£     12,600
											£     18,000
											£   182,498
										Say	£   182,500