Understanding Compensation When Your Business is Taken for Public Projects: A UK Tribunal Decision

Neutral Citation Number: [2026] UKUT 207 (LC) LC-2024-812 IN THE UPPER TRIBUNAL (LANDS CHAMBER) IN THE MATTER OF A NOTICE OF REFERENCE Royal Courts of Justice, Strand, London WC2A 2LL 25 June 2026 TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007 COMPENSATION – COMPULSORY PURCHASE – dog training business extinguished – assessment of shadow losses – requirement to prove losses caused by scheme rather than by Covid pandemic or other causes – extinguishment value – allowance for notional salary of sole director – management time – s.5, Land Compensation Act 1961 – compensation determined at £4,907,348 BETWEEN: WKD TRAINED DOGS LTD Claimant -and- SECRETARY OF STATE FOR TRANSPORT Respondent Brookhouse Farm, Stone, Staffordshire ST15 Martin Rodger KC, Deputy Chamber President and Mr Mark Higgin FRICS FIRRV 2-6 March 2026 Isabella Tafur and Jeffrey Chu , instructed by Town Legal LLP, for the claimant Mark Westmoreland Smith KC and Michael Rhimes , instructed by Eversheds Sutherland (International) LLP, for the respondent © CROWN COPYRIGHT 2026 The following cases are referred to in this decision: Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111 Lancaster City Council v Thomas Newall Ltd  [2013] EWCA Civ 802; [2013] RVR 309 Transport for London (formerly London Underground Ltd) v Spirerose Ltd [2009] UKHL 44; [2009] 1 WLR 1797 Quyoom & Ors v The Borough Council of Middlesbrough [2025] UKUT 274 (LC) Introduction 1. The claimant, WKD Trained Dogs Ltd, successfully carried on its business of training and selling dogs from Brookhouse Farm, near Stone in Staffordshire between March 2014 and January 2023. On 13 January 2023 the business was extinguished, and Brookhouse Farm was taken by the Secretary of State for Transport in connection with the proposed Birmingham to Crewe leg of the High Speed 2 (‘HS2’) railway project. The Tribunal is now asked to determine the compensation payable to the claimant.

2. The parties agree that the claimant could not have continued to trade after the acquisition. Brookhouse Farm was its only place of business, and although its sole director and shareholder, [NAME], searched diligently for alternative premises, none that were suitable and within the budget set by HS2 could be found.

3. The claimant is entitled to be compensated for the value of Brookhouse Farm itself, which is agreed to have been £362,000. Various other heads of loss are also agreed. The principal matters remaining in dispute are the losses sustained by the business while it was under threat of relocation or closure, and the loss of the business on its extinguishment.

4. The claimant maintains that had it not been for the threat of compulsory acquisition it would have achieved additional profits of £1,651,412 between April 2019 and January 2023. These have been referred to as the claimant’s “shadow losses”, sustained while it was forced to trade in the shadow of the HS2 scheme. The Secretary of State accepts that losses were incurred during that period as a result of the scheme, and that the claimant should be compensated for them but quantifies the shadow losses at £905,736, suggesting that other factors, including the Covid-19 pandemic, may have distorted the claimant’s trading performance during the relevant period.

5. The claimant also claims that, but for the HS2 scheme, the value of the business to it when it was extinguished on 13 January 2023, would have been £5,435,344. The Secretary of State assesses the value of the business at £1,669,218.

6. The significant gap between the parties’ assessments of the compensation to which the claimant is entitled for its shadow losses is attributable to disagreements over a small number of variables. These relate to the way in which the business was run, and the way it would have been run had [NAME] not been obliged to devote his time and energy to the search for alternative premises.

7. The parties’ disagreement over the value of the business when it was extinguished turns partly on the assumed earnings it would have achieved but for the scheme, and partly on their different assessments of how the loss of those earnings to the claimant should properly be accounted for.

8. Factual evidence, including about the claimant’s business and the acquisition, was given by [NAME] and [NAME]. Expert evidence on matters relating to the training and selling of dogs was given on behalf of the Secretary of State by [NAME]. Forensic accountancy evidence was given by [NAME] FCA of Baker Tilly for the claimant and by [NAME] FCA of Quantuma Advisory Ltd for the Secretary of State. We are grateful to them all for their evidence. Legal framework 9. There was no disagreement over the applicable legal principles between Ms Tafur, who appeared for the claimant with Mr Chu, and Mr Westmoreland Smith KC, who appeared for the Secretary of State with Mr Rhimes. The claimant is agreed to be entitled to be compensated under rule 2 and rule 6 in section 5 , Land Compensation Act 1961 . The claim under rule 2 is in respect of the value of the land taken and has been agreed. The claim under rule 6 is intended to compensate the claimant for disturbance and any other matters not directly related to the value of the land.

10. The guiding principle in determining the amount of compensation payable is the principle of equivalence. That is, that so far as money can achieve it, the claimant is entitled to be put into the same position it would have been in if its land had not been taken and its business had not been adversely affected and then extinguished by the HS2 scheme.

11. The measure of the value of the land is its value to the owner. In principle, a claimant’s business losses are part of the same assessment of the value of the land to the owner and are quantified in the same way. This was explained by Lord Nicholls in Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 11 at page 125 E: “Land may, of course, have a special value to a claimant over and above the price it would fetch if sold in the open market. Fair compensation requires that he should be paid for the value of the land to him, not its value generally or its value to the acquiring authority. As already noted, this is well established. If he is using the land to carry on a business, the value of the land to him will include the value of his being able to conduct his business there without disturbance. Compensation should cover this disturbance loss as well as the market value of the land itself. The authority which takes the land on resumption or compulsory acquisition does not acquire the business, but the resumption or acquisition prevents the claimant from continuing his business on the land. So the claimant loses the land and, with it, the special value it had for him as the site of his business. The expenses and any losses he incurs in moving his business to a new site will ordinarily be the measure of the special loss he sustains by being deprived of the land and disturbed in his enjoyment of it. If, exceptionally, the business cannot be moved elsewhere, so it simply has to close down, prima facie his loss will be measured by the value of the business as a going concern. In practice it is customary and convenient to assess the value of the land and the disturbance loss separately, but strictly in law these are no more than two inseparable elements of a single whole in that together they make up the value of the land to the owner: see Hughes v. Doncaster Metropolitan Borough Council [1991] 1 A.C. 382 , 392, per Lord Bridge of Harwich.” 12. The Privy Council’s decision in the Shun Fung Ironworks appeal also provides guidance on the assessment of the value of a business to its owner where that business has been extinguished. In that case the Lands Tribunal of Hong Kong had valued the claim on the extinguishment basis, but the Court of Appeal of Hong Kong ruled that compensation should be assessed on the assumption that the business could be relocated. Both approaches required the determination of a discount rate to be applied to the anticipated future profits of the business. The claimant’s expert gave evidence at the Lands Tribunal that the discount rate should have regard to the market’s perception of the claimant’s business as an investment, but before the Privy Council the claimant wished to repudiate that approach and to argue that its loss was not to be measured by the price obtainable had it sought to sell the stream of expected profits in the open market. The Privy Council considered that it was not open to the claimant on appeal to advance a radically different case, which ought to have been explored in evidence. As a result, Lord Nicholls was able to deal with the basis of assessment quite briefly, At page 134E-H, as follows: “Since the claimant's appeal on this point must fail for this reason, it is unnecessary for their Lordships to express their views on the claimant's contentions regarding the correct manner of valuing lost profits in this type of case. They will make only one general observation. When a tribunal is determining the amount of the loss sustained by a claimant such as the claimant company, the market perception of the risks attached to the type of business is likely to be of assistance in arriving at an appropriate discount rate. However, this must not lead the tribunal into the error of equating the amount of a claimant's loss with the price he could obtain if he sought to sell the future profit stream to an outside commercial investor. Even on the willing seller basis, a prudent landowner running his own business might be prepared to pay more to keep his land and business and the expected profits than would an outside investor to acquire them. He might be prepared to accept a lower rate of return than an outsider who has no personal links with the business. In appropriate circumstances a tribunal may properly recognise this and make a modest allowance accordingly.” 13. It is apparent, therefore, that in principle, compensation for the loss of the claimant’s business caused by the taking of its land should be assessed on its value to the claimant, which may be different in some respects from the value of the business on the open market.

14. In relation to the recovery of business losses pursuant to rule 6, we were reminded of the three conditions identified by Lord Nicholls in Shun Fung Ironworks at page 126. To be recoverable such losses must have been caused by the scheme; they must not be too remote (there is no remoteness issue in this case); and they must not be losses which a reasonable person would have avoided.

15. Shun Fung Ironworks, at page 137G, is also authority for the proposition (which is agreed) that losses incurred in anticipation of compulsory acquisition and because of the threat which it presented are to be regarded as losses caused by the acquisition. Lord Nicholls said that this involved “giving the concept of causal connection an extended meaning, wide enough to embrace all such losses.” Mr Westmoreland Smith KC suggested that particular care should be applied when determining whether or not causation has been demonstrated in the shadow period because causation had already been given an extended meaning. We do not agree that shadow losses require any different approach to their assessment than any other type of loss. It is for the claimant to prove the amount of its loss caused by the acquisition to the civil standard. If an acquiring authority wishes to suggest that the claimant could have reduced or avoided that loss by taking steps which a reasonable person in their position would have taken, as the Secretary of State wishes to do in this case, it is for her clearly to identify the steps which it is said ought to have been taken and then to prove both that the suggested steps would have reduced the loss and that they would have been adopted by a reasonable person. Factual background 16. Brookhouse Farm is next to the M6 in Staffordshire and comprises 3.4 acres of land including several small paddocks and a three-bedroom farmhouse with a single brick outbuilding. It vested in the Secretary of State on 13 January 2023 pursuant to a general vesting declaration made on 29 September 2022. 13 January 2023 is therefore the valuation date for the purpose of determining the compensation payable to the claimant.

17. When it was taken by the Secretary of State, acting through its agent, HS2, Brookhouse Farm had the benefit of a licence granted to [NAME] under the Animal Welfare (Licensing of Activities Involving Animals) (England) Regulations 2018 which authorised its use for the sale of animals as pets and for the provision of accommodation for dogs.  The licence permitted up to 40 dogs to be kept at the premises and for most of the period we are concerned with 44 kennels were present on the land. By the valuation date this number had reduced to 35 kennels in anticipation of the compulsory purchase.

18. The core business carried on by the claimant was the purchase, training and sale of trained dogs as pets. Its customers were wealthy individuals, schools, organisations and families. The claimant would import young dogs aged between 10 and 24 months, usually from Hungary or neighbouring countries, but later from Ireland, and would train them intensively at Brookhouse Farm for a limited period before selling them on. The training of the dogs would be carried out by a small team, usually of between four and six trainers, each of whom would usually be allocated five dogs.

19. The dog training side of the business was begun by [NAME] in 2010 and came to be located at Brookhouse Farm in 2012, when he took a tenancy of the property and moved to live there. The claimant was incorporated in March 2014 and purchased the freehold of the property in 2016.

20. The scale of the claimant’s core business was constrained by the capacity of the premises and the limitations imposed by [NAME]’s licence. The business was able to diversify to some extent to include residential dog training (i.e. training dogs belonging to other owners); online training and webinars from 2019; one-to-one consultations; and the sale of food, equipment, and other products. 21. [NAME]’s previous experience had been in selling cars. He has no formal training or qualifications in the keeping and training of dogs and set little or no store by these when he recruited staff for the business. He explained that he had developed his own methods of training which prioritise the assessment and selection of suitable dogs, not by reference to their breed, but by individual temperament testing. [NAME] undertook this temperament testing himself, using opaque criteria which he was unwilling to share in any detail with the Secretary of State’s canine expert, [NAME]. His preference was to travel to Hungary to test and select dogs, making up to five trips a year before 2019, each of up to seven days. The last of these trips was in October 2019, but from then on [NAME] would arrange for dogs to be sent by a supplier in Ireland for testing and selection at Brookhouse Farm, with those deemed unsuitable being returned to the supplier within seven days. [NAME] explained that temperament testing was less reliable if it was undertaken in an unfamiliar environment for the dogs, and after they had travelled long distances. These considerations contributed to a higher failure rate in the training of dogs sourced from Ireland compared to Hungary.

22. Having personally selected dogs for their suitability, [NAME] then handed them over to his training staff, who followed the training regime which he had prescribed. The training period might be as short as four weeks, although dogs would typically remain on the premises for seven or eight weeks in total before being collected by the customer for whom the specific animal had been sourced and trained. [NAME] undertook very little of the core training himself, but attended instead to the selection of suitable animals, one-to-one consultations, and business development.

23. Only a handful of businesses operated in competition with the claimant’s core business (although the same is not true of the online dog training market, which is highly competitive). One feature of the claimant’s business which reflected its bespoke quality, was the claimant’s willingness to provide a guarantee of satisfaction. If a dog trained by the claimant was not to the standard which had been represented, the customer could either return the animal for remedial training, or [NAME] would provide remedial training at the customers’ home, or the customer could have a full refund. As [NAME] refined his temperament testing techniques the number of dogs who were returned by customers reduced.

24. Dogs which had passed the temperament testing stage but failed to complete their training successfully and so could not be sold as trained dogs, or which were returned by customers and their purchase price refunded, were referred to in the evidence as “failed dogs”. Dogs which successfully completed their training and were sold (and not returned) were referred to as “trained dogs”. Both trained dogs and failed dogs could be sold, but at very different prices; the claimant made a profit on trained dogs, while failed dogs were sold at a loss. A key measure of the success of the claimant’s business was the “trained dog rate” i.e. the proportion of the total number of dogs sold in a year (either trained or failed) which were sold as trained dogs. In the two years before the commencement of the shadow period in April 2019, the claimant achieved an average trained dog rate of 65%. That is within the range of 60% to 70% which [NAME] considered a competent professional trainer should expect to achieve. It is agreed that the trained dog rate fell during the shadow period from April 2019 to January 2023, and one of the issues we will have to determine is the extent to which that fall was a consequence of the HS2 scheme.

25. It is difficult for us to form a view of the success of the claimant’s business, other than by reference to its financial performance. Whether the training regime designed by [NAME] differed from training methods used by his competitors is unclear. [NAME] did not believe a dog trained for as little as four weeks could reach the standard set by the leading dog training programmes, such as the Kennel Club’s “Good Citizen Dog” scheme, but he acknowledged that it might nevertheless make a satisfactory pet. [NAME] also doubted the significance of the guarantee offered by the claimant and suggested that once a dog had been with a family for a few weeks the emotional bonds formed would make it unlikely that they would wish to send the dog back, and they would instead tolerate a certain amount of poor behaviour. [NAME] was impressed by the claimant’s achievement in building a successful business and did not doubt that it would have continued to be successful. We accept [NAME]’s assessment, which supports the view that the claimant was capable of achieving results comparable to those achieved by competent professional trainers.

26. The claimant kept minimal business records until it was emphasised by its advisers that these would assist in proving its case for compensation. No management accounts were kept before 2018, no board meetings were held or minutes taken, and no forecasts or business development plans were written down. [NAME] explained that he always had plans for the business, some of which he would write down on pieces of paper, but none of which were intended for anyone but himself.

27. Although [NAME] is an enthusiast, who described himself in his own witness statement as obsessive, it is clear that there were aspects of the business which he left almost entirely to others. He did not appear to us to have a detailed knowledge of how some parts of the business were conducted. Whether, as he believed, he would have been able to grow the business further is a topic to which we will return. The acquisition 28. In November 2015 the Secretary of State issued safeguarding directions for Phase 2a of the route of the HS2 railway, between Birmingham and Crewe. Brookhouse Farm was on the route and was one of the safeguarded properties. The High Speed Rail (West Midlands to Crewe) Bill was introduced into Parliament in July 2017 and obtained Royal Assent on 11 February 2021. Before Royal Assent the claimant had already begun to engage with the HS2 acquisition team.

29. On advice from its former agent, Hinson Parry, the claimant served a blight notice on the Secretary of State on 24 October 2018, which was accepted. As a result, Brookhouse Farm was deemed to be the subject of a notice to treat served by the Secretary of State on 24 December 2018. The notice to treat was extended by agreement in October 2021 and a general vesting declaration was eventually executed on 29 September 2022, with possession being taken on 13 January 2023.

30. In his written evidence [NAME] said that he was advised that following the deemed service of a notice to treat the Secretary of State could give as little as three months’ notice before taking possession. This knowledge, [NAME] explained, had affected his mindset and the way he managed the business. We were not told who had given this advice, or when it was given, but we assume that it came from the claimant’s agent. We assume that an experienced agent would also have informed [NAME] that it was extremely unlikely that he would receive as little as three months’ notice. The earliest document we were shown from Hinson Parry was a letter of advice dated 12 November 2019, more than a year after the blight notice, which included the agent’s views on the value of Brookhouse Farm and the compensation claim. This stressed the importance of demonstrating to HS2 that a detailed search had been undertaken for alternative premises.

31. Hinson Parry’s valuation of Brookhouse Farm was provided to HS2 at the end of 2019, and a [NAME] of Lambert Smith Hampton, the Secretary of State’s agents, visited the property in January 2020 to prepare his own valuation. At around this time a claim for compensation on the basis of extinguishment of the business was submitted by Hinson Parry. We have not been shown this document, but it is referred to in intermittent correspondence which followed, culminating in an online meeting on 24 September 2020 at which the potential for relocation and for extinguishment were both discussed. Although the extinguishment of the business appears to have been uppermost in the minds of the claimant and its advisers at least from the end of 2019, it was no part of the Secretary of State’s case that the claimant had acted prematurely or that it had made insufficient efforts to relocate.

32. The first indication of a timeline for possession to be taken was given to the claimant at the meeting on 24 September 2020, followed up in an email of 2 October 2020 from HS2. The best available estimate at that time was that possession might be required in May 2023 and it was suggested that, having regard to the 18 months which were likely to be needed to acquire a replacement property and to secure planning permission, the latest date by which a relocation site would have to be identified was October 2021. In the following years, changes of personnel at HS2 and amongst its advisers led to delays and repeated requests for the same information which caused extreme frustration for [NAME] as he continued to search for replacement properties. In December 2021 it was confirmed that possession would be required in January 2023. We have no reason to think that [NAME] misunderstood the proposed timing or thought that he might have to complete a move (rather than identify a suitable property) by as early as October 2021; that is not what he was told at any time and by continuing his search throughout 2021 he did not behave as if he had been. He was informed by [NAME] of HS2 in September 2021 that the October target for identifying a new property could be extended and that he should continue searching, which is what he did. No progress was made on two properties which [NAME] considered suitable, but which were larger and more valuable than Brookhouse Farm, and in January 2022 a consensus was reached that it was now too late to consider relocation and that the closure of the business was inevitable.

33. It is not necessary to recite the parties’ exchanges during this period in detail, nor to form a view on the claimant’s complaint that the Secretary of State’s representatives were dilatory in responding to its questions, unreasonable in their expectations of what might be secured and at what price, and indifferent to the pressure experienced by [NAME] personally and by the claimant’s staff in general as a result of the uncertainty over the survival of the business. The parties agree that the claimant’s business was adversely affected by the prospect of relocation or closure from April 2019, that there was uncertainty over the prospect of relocation until January 2022, and that for the remainder of 2022 the claimant was winding down its core business in anticipation of possession being taken at the start of 2023. The contemporaneous correspondence supports [NAME]’s evidence that he was left in a state of uncertainty, which caused him anxiety, and it is not difficult to understand how these might easily have been exacerbated as time passed and critical dates were changed. We accept the claimant’s case that one contributor to the acknowledged deterioration in performance was damage to the morale and commitment of some of its staff and a dilution of effort and loss of focus on the part of [NAME]. That proposition was not seriously challenged by the Secretary of State. The issues 34. The contentious elements of the claim are the loss of profits incurred by the claimant between 1 April 2019 and 13 January 2023 (the shadow losses), and the extinguishment value of the business.

35. By the start of the hearing, [NAME], the claimant’s expert forensic accountancy witness, assessed the claimant’s shadow losses at £1,652,472, while for the Secretary of State [NAME] valued them at £804,446. These figures narrowed slightly during the hearing as concessions were made on smaller points of disagreement, with [NAME] adjusting her shadow loss assessment to £1,639,764 and [NAME] tweaking his to £826,166. The difference between the experts is largely attributable to the different assumptions they adopted for the trained dog rate which the claimant would have achieved had it not been under threat of extinguishment.

36. In reaching a conclusion on the shadow losses we will also have to address some smaller issues which divided the experts. These concerned the probable course which the claimant’s online business would have taken had it not been for the threat of acquisition and extinguishment; the allocation of advertising and consultancy costs between different income streams; and whether an allowance should be made for additional income derived from residential training, which was a side of the business to which the claimant was able to deploy training resources as the core business was wound down.

37. The second major area of disagreement concerns the extinguishment value of the business. The experts agreed that this should be assessed by applying a multiple to the sustainable earnings of the business before allowing for interest, tax, depreciation and amortisation (EBITDA).

38. The rival maintainable EBITDA figures were largely a product of the experts’ previous workings on shadow losses, and they agreed the weight which should be attributed to successi