The House considered a claim for compensation in the form of loss of profits.
Held: The loss of profits in the shadow period, being the period after the possibility that the claimant’s site might be resumed became known and which had a paralyzing effect on its operations, were awarded.
Lord Nicholls held that such losses might be recovered if they satisfy three conditions, namely, that the losses were causally connected with the resumption; that they were not too remote; and that they were not losses which a reasonable person would have avoided.
Lord Nicholls said: ‘The purpose of these provisions, in Hong Kong and England, is to provide fair compensation for a claimant whose land has been compulsorily taken from him. This is sometimes described as the principle of equivalence. No allowance is to be made because the resumption or acquisition was compulsory; and land is to be valued at the price it might be expected to realise if sold by a willing seller, not an unwilling seller. But subject to these qualifications, a claimant is entitled to be compensated fairly and fully for his loss. Conversely, and built into the concept of fair compensation, is the corollary that a claimant is not entitled to receive more than fair compensation: a person is entitled to compensation for losses fairly attributable to the taking of his land, but not to any greater amount. It is ultimately by this touchstone, with its two facets, that all claims for compensation succeed or fail.’
‘The law expects those who claim compensation to behave reasonably. If a reasonable person in the position of the claimant would have taken steps to reduce the loss, and the claimant failed to do so, he cannot fairly expect to be compensated for the loss or the unreasonable part of it. Likewise if a reasonable person in the position of the claimant would not have incurred, or would not incur, the expenditure being claimed, fairness does not require that the authority should be responsible for such expenditure.’
Lord Nicholls
[1995] 2 AC 111
England and Wales
Updated: 15 October 2021; Ref: scu.250977