Dog Training Business Compensated for HS2 Compulsory Purchase

Businesses whose premises are compulsorily acquired are entitled to compensation for loss of profits and any reduction in the value of the business, as well as the value of the premises themselves. Recently, the Upper Tribunal (UT) found that compensation of nearly £5 million was due to a dog training company after its only place of business was compulsorily acquired in connection with the HS2 railway project.

The company imported young dogs, trained them intensively at its premises and sold them on as pets. Dogs that successfully completed their training attracted much higher prices than failed dogs, which were sold at a loss. In January 2023 the dog training business was extinguished and its premises acquired by the Secretary of State for Transport. The UT was asked to determine the compensation payable to the company.

The value of the premises was agreed to be £362,000. It was also agreed that the company could not have continued to trade after the acquisition: although its sole director and shareholder had searched diligently for alternative premises, none that were suitable and within the budget set by HS2 could be found. The company maintained that, but for the threat of compulsory acquisition, it would have made additional profits of £1,651,412, and the dog training business would have been worth £5,435,344. The Secretary of State quantified the loss of profits at £905,736, suggesting that other factors, including the COVID-19 pandemic, may have distorted the company's trading performance during the relevant period. The Secretary of State assessed the value of the business at £1,669,218.

The difference in the parties' figures for loss of profits was largely attributable to their assessment of the number of dogs that would have been successfully trained had the business not been under threat of extinguishment. The figure had fallen to 43.1 per cent in the business's last four years, compared with 65.2 per cent in the two years to the end of March 2019. At around that time the director had stopped travelling to Hungary to select dogs, regarding it as more important for him to be available to visit suitable premises to which he might be able to relocate the business, and the company had instead imported dogs from Ireland which had not undergone any temperament testing beforehand.

The Court was satisfied that the change in sourcing was attributable to the HS2 scheme and had contributed directly to the decline in performance. The Court accepted the argument that there was no causal link between the number of dogs trained and the training success rate, and found that the decline predated the COVID-19 pandemic. Overall, the Court assessed the loss of profits at £1,330,524.

After adjusting the company's profit figures to take account of the loss of profits, the Court concluded that the value of the dog training business to the company on its extinguishment was £2,701,419. Including the value of the premises and other losses, the company was entitled to compensation of £4,907,348, plus interest.