Negligence
In 1990 S, a
partner in the defendant firm of valuers, provided the plaintiff, a company in
the business of mortgage lending, with a report and valuation of £175,000 on a
property in Nottingham, which was being remortgaged by Mr and Mrs R In
consequence of the report the plaintiff lent £120,020 to Mr and Mrs R secured
by a first charge completed in March 1990. Mr and Mrs R defaulted in their
repayments and the plaintiff repossessed and then sold the property for £81,500
in January 1992. The plaintiff claimed damages for negligent valuation.
acceptable range within which a competent valuer should approach the true value
of the property is 15% on either side. On the basis of the evidence, the true
value of the property at the date of the report was £155,000. As the
defendants’ valuation was just under 13% in excess of the true value, it was
within the range of valuations which a reasonably competent surveyor could have
arrived at with reasonable care and skill. There was no breach of duty.
The following
cases are referred to in this report.
Corisand
Investments Ltd v Druce & Co [1978] 2 EGLR 86;
[1978] EGD 769; (1978) 248 EG 315
Mount
Banking Corporation Ltd v Brian Cooper & Co [1992]
2 EGLR 142; [1992] 35 EG 123
This was a
claim by BNP Mortgages Ltd against Barton Cook & Sams for breach of duty of
care in relation to a valuation report.
Michelle
Stevens-Hoare (instructed by Eversheds, of Cardiff) appeared for the plaintiff;
Ian Holtum (instructed by Dibb Lupton Broomhead, of Sheffield) represented the
defendants.
Giving
judgment, JUDGE HICKS QC said: I shall for ease of reference and
cross-reference use section headings.
Introduction
The plaintiff
is in the business of lending money to houseowners secured on their homes. The
defendants were, in 1990, on the plaintiff’s panel of surveyors and valuers
retained to provide reports and valuations on residential property offered as
security.
In February
1990 a Mr and Mrs Ridealgh applied to the plaintiff for a loan of £120,000 to
be secured on their home, 3 Elston Hall, Elston, Nottingham. Their application
stated that: they had bought the property in 1986 for £120,000, estimated its
value at £175,000; there was an existing mortgage debt of £90,000 to Lloyds
Bank; and the purpose of the remortgage was home improvements. It was implicit
that that would be after the discharge of their existing mortgage, since the
plaintiff required a first charge.
The defendants
had already been instructed in January 1990 by a firm of mortgage brokers to
survey the property and prepare a report and valuation for another prospective
lender and Mr Peter Sams [ARICS], of the defendants, had carried out a survey
accordingly and prepared a report and valuation on January 12 1990. That
valuation was in the sum of £175,000. He did a second report for the same
brokers on behalf of different lenders on February 6 and a third, again for the
same brokers, on behalf of the plaintiff on February 14. There was no further
inspection and the valuations were the same.
The plaintiff
lent £120,020 to the Ridealghs, secured by a first charge on 3 Elston Hall, the
mortgage being completed on March 16 1990. The Ridealghs were in default from
the outset and in the event made only two payments. The plaintiff obtained an
order for possession on April 4 1991, repossessed the property on September 6
1991 and sold it in October 1991 for £81,500, subject to contract. Contracts
were exchanged at that price on January 3 1992 and the sale was completed on
January 24.
The plaintiff
commenced this action on October 30 1992, claiming damages from the defendants
for breach of contract, the damages being quantified in substance as the amount
of the loan plus interest paid or foregone less recoveries.
At the opening
of the trial on January 12 1994 the defendants sought and obtained leave to
reamend the defence. The principal amendment was the addition of a plea that in
so far as the plaintiff’s loss was caused by a fall in the property market the
defendants owed no duty to protect the plaintiff against such a loss; the
plaintiff did not rely on the defendants for such protection; the alleged
breach did not cause such loss; and it was too remote in law.
Miss Michelle
Stevens-Hoare, for the plaintiff, then applied for an adjournment of the trial
so that further evidence could be obtained on the issues raised by the
reamendments. I stood that application over then and again when it was renewed
at the close of the plaintiff’s evidence, so far as covered by previously
served witness statements and reports, on the latter occasion reserving the
plaintiff’s right to apply to reopen its case in order to adduce any further
evidence which became available. At the close of the defendants’ case that
application was not further renewed. Instead, counsel for the plaintiff and the
defendants jointly invited me to hear closing submissions and give judgment on
the issues unaffected by the reamendment, on the basis that whether or not
further evidence was required might turn on my conclusions on those issues.
After
discussion it was agreed that they are:
(i) whether
the defendants were in breach of duty,
(ii) what was
the true value of the property at the date of the defendants’ report,
(iii) if the
defendants were in breach, whether in the absence of that breach the plaintiff
would have made any, and if so what, loan to the borrowers?
Evidence
I therefore
turn to address those issues. The relevant evidence was that of Messrs Fawcett,
Briggs and Stephen Hall [FRICS] for the plaintiff and Peter Sams and John
Brailsford [FRICS] for the defendants. Mr Fawcett tried to sell the property
for the borrowers from March 1990
September 1991 and thereafter provided a valuation of £75,000 and acted as
selling agent for the plaintiff in the sale already referred to. Mr Hall also
valued the property at £75,000 at that time for the plaintiff.
All these
witnesses, as well as Mr Sams and Mr Brailsford, were experienced in property
values and transactions in the area and all except Mr Briggs were
professionally qualified in that respect, but only Mr Hall and Mr Brailsford
were tendered as expert witnesses within the directions given in that respect.
No question was raised or objection taken to either the content or status of
any of Mr Sams’ evidence and in so far as it contained expressions of
professional experience and opinion I take it into account. Neither side wished
to rely on Mr Briggs as an expert, so I have regard only to the factual element
of his evidence.
That leaves Mr
Fawcett. His witness statement records as a fact the advice as to value which
he gave to the borrowers in March 1990, namely £130,000, but Miss Stevens-Hoare
disclaimed any reliance on that as expert evidence in chief. He was
cross-examined as to his view of Mr Brailsford’s experience and reputation as a
valuer and his opinion as to whether the resale price obtained by the plaintiff
in October 1991 was low. He said it was, basing his opinion in part on his own
valuation in March 1990, which he believed to be correct. He also gave evidence
in cross-examination and re-examination about valuation methods and price
movements. In my view, since he was cross-examined on valuation matters without
objection by the plaintiff, his opinion on matters within his expertise as to
which he was cross-examined and re-examined, was admissible and I take it into
account.
Both Mr Hall
and Mr Brailsford refer in their reports to the quarterly indices published by
Halifax Building Society and Nationwide Building Society. They are referred to
by Mr Brailsford as ‘property price’ indices including ‘all types of property’,
but in evidence and argument it was, in my understanding, accepted that they
are confined to residential property and indeed, both tables as produced, are
headed ‘All Houses’. They are analysed regionally and there is no dispute that
the property falls fairly centrally within the East Midlands region in both
cases. The witnesses agree, and I accept, that even within such a region there
are local differences. Overall averages also necessarily take no account of
differences between different price ranges or other categories. Even within
such substantial organisations the number of transactions per region per
quarter cannot be large enough to eliminate some random variation and indeed
the movements of the two indices differ in detail from each other. Nevertheless
these indices, if admissible, are of some help in assessing price movements.
The direct evidence of the witnesses is more local and specific, but has its
own drawbacks of imperfections of recollection and of even greater limitation
in sample size. Although Miss Stevens-Hoare objected unsuccessfully on other
grounds to Mr Brailsford’s third supplementary report commenting on these
indices she did not, despite repeated invitations, object to my looking at the
indices themselves, and I have done so as indeed was unavoidable, given the
extent to which they were cited by the expert witnesses and the number of
questions based on them.
Defendants’
duty
By para 4 of
the defence, which has not in this respect been amended, it is admitted and
averred that it was an implied term of the defendants’ engagement by the
plaintiff that the defendants would produce their report and valuation with the
reasonable skill and care to be expected of reasonably competent surveyors.
Miss Stevens-Hoare, for the plaintiff, accepted that as a sufficient
formulation of the duty upon which she relies and I therefore proceed on that
basis. There were no submissions based on any separate cause of action in tort.
Allegations
of breach
The
particulars of breach of contract pleaded are as follows. They are in paras
10.1 to 10.3 of the amended statement of claim:
10.1 The
report and valuation valued the property in its then condition in the sum of
£175,000 when it was worth at most £130,000.
10.2 The
defendants indicated that property values in the area of the property were
stable and that demand was in balance with the available properties, when
property values were falling and there was a lack of demand for similar
properties.
10.3 The
defendants did not inform the plaintiff of a material consideration that
affected the value and suitability of the property, namely that the property
was part of a development that had a history of dry rot and therefore a full
survey would be advisable.
The first item
is a simple allegation of over-valuation and to that I must return in due
course.
The second and
third items were not the subject of any separate submissions by Miss
Stevens-Hoare in her closing address and I can therefore deal with them very
briefly.
The allegation
in 10.2 arises from a section of the plaintiff’s standard report form in which
the valuer is required to choose one of three boxes for each of two
characteristics of the general area as follows:
Residential
values (and the three choices are ‘increasing’, ‘stable’ and ‘reducing’).
Demand (where
the three choices are ‘over-demand’, ‘in balance’, ‘lack of demand’).
The defendants
marked the boxes for ‘stable’ and ‘in balance’. Immediately below, against the
printed words ‘Estimated resale time’ they inserted ‘Six months’. Under ‘Other
remarks’, extended to a second sheet, they wrote, inter alia:
Demand for
individual properties of this nature is generally considered fairly good under
normal market conditions, although currently slow in line with current market
trends.
Read together,
as they clearly should be, these indications are, in my view, ones which a
reasonably competent surveyor acting with reasonable care and skill could
properly have given.
Mr Sams’ own
evidence, in his witness statement, included the following:
It is apparent
that demand had started to fall away from peak boom times through 1989 bringing
an end to gazumping and a stability to values. Whilst in retrospect it is now
felt that values started falling in the first quarter of 1990 there was
certainly no specific evidence that this was occurring at the time.
Mr Hall, the
plaintiff’s expert, although he now criticises the report, had issued a press
release at the end of 1989, which included the following passages:
Towards the
middle of 1989 activity began to increase slightly, new buyers and sellers
appearing who had not been soaked up during the boom years. Stabilising prices
began to restore confidence.
and under
‘Conclusion’:
From this
point the outlook is reasonably good. Further increases in interest rates would
have a more depressing effect on the market, but there is obviously very strong
and widespread pressure against this.
The market
can be expected to improve into the spring, but strict realism in pricing will
continue to be essential.
Mr Brailsford,
the defendants’ expert, in his report considered the defendants’ comments
correct and in another context considered that the valuation was likely to have
remained unchanged from January 12 to February 14 1990.
I conclude
that the allegation of breach of duty under para 11.02 of the statement of
claim is not made out.
The situation
as to dry rot is that there was no sign of any in the property at the date of
Mr Sams’ survey, nor has there been any since. The property, no 3, had no
history of dry rot, although there was some evidence that at one stage rot of
some kind had been treated in no 4, and some even vaguer evidence of rumours
about two other properties at Elston Hall. There was no evidence that Mr Sams
knew of those matters. In those circumstances I see no reason why the
defendants should have made any reference to dry rot and that allegation is not
made out.
Mr Sams’
method of valuation, as applied at 3 Elston Hall, involved as one element
taking the gross external area of the premises and applying what he regarded as
an appropriate rate. For this purpose he divided the ‘L’ shaped floor plan into
two rectangles, the larger of which he measured, I find with sufficient accuracy,
as 44 ft by 25 ft. He
of multiplying 44 by 5 he made the simple, but manifest error of writing the
answer as 440 instead of 220, giving 1,320 sq ft instead of 1,100 sq ft for the
area of that rectangle. This, with a smaller error of not deducting the area of
what was called a ‘recess’ or corner excluded from the building, resulted in a
total overstatement of area of about one-sixth, 3,686 sq ft instead of 3,156 sq
ft.
Had these
errors been corrected there would undoubtedly have been an alteration in his
valuation, although the extent was in dispute. At the same rate of £30 per sq
ft his original £172,900, which he rounded up to £175,000, would have come down
to £157,180, which is the figure for which the plaintiffs contend, but Mr Sams
says that he used higher rates for smaller areas and at 3,156 sq ft he would
have used £32.50 per sq ft, giving about £165,000. Moreover, he also says that
after consideration of other evidence he might have provided a valuation of as
much as £170,000.
Approached as
a question of principle it might be thought that to make a straightforward
error in simple arithmetic, which produced a material difference in the
valuation reported, was a plain breach of the duty of reasonable care and
skill. Mr Ian Holtum, for the defendants, however advanced the proposition that
the issue of breach turns solely on whether £175,000 was within an acceptable
bracket of the true value and that errors of this kind, on the way, are not
negligent in law unless they result in a valuation outside that bracket. For
this proposition he relied on Corisand Investments Ltd v Druce &
Co (1978) 248 EG 315* and Mount Banking Corporation Ltd v Brian
Cooper & Co [1992] 2 EGLR 142.
*Editor’s
note: Also reported at [1978] 2 EGLR 86.
Those cases
undoubtedly contain passages which, on the face of it, support Mr Holtum’s
proposition. Had this ground been available to the plaintiff it would have been
necessary to consider those authorities in some detail, although they are not
strictly binding on me. There is, however, no pleaded allegation apt to cover
the point, as Miss Stevens-Hoare conceded and she made no application to amend
to add one. This point, therefore drops out of consideration too.
That leaves
the one ground of simple over-valuation and it is common ground that the normal
and correct procedure here is for the court to determine on the evidence what
the true value of the property was at the date of the defendants’ valuation, on
the same basis as that valuation, namely open market value with vacant
possession, and then to consider whether the defendants’ valuation was within
the range of valuations which a reasonably competent surveyor could have
arrived at with the use of reasonable care and skill, given that that was the
true value at the time.
What was
the acceptable range?
It was not in
dispute between the expert witnesses that a common or conventional margin or
bracket within which a competent valuer should approach the true value is 10%
on either side. Mr Hall, for the plaintiff, however said that it depended on
the property and that on a uniform estate 10% would be too wide. Mr Brailsford,
for the defendants, gave evidence to the same effect and indeed quantified the
acceptable margin on a standard estate house at 5%. Conversely, he said an
unusual property made precision more difficult and for this property, which he
described as ‘unique’, 15% would be appropriate. When this was put to Mr Hall
he did not comment on the principle, but merely replied ‘I gave it a lot of
thought and decided 10% would be legitimate’. His report, however, gives an
acceptable margin of only £10,000 each side of his valuation of £120,000 which amounts
to 81/3%.
I find Mr
Brailsford’s evidence the more satisfactory on this point. Since it is common
ground that 10% is not universally applicable and that uniformity (as on an
estate with many similar houses) will reduce the acceptable margin, I find Mr
Hall’s reluctance to accept that the converse is true of an unusual house
unconvincing. That this was an unusual house is not in dispute; it is reflected
in the consensus of all the surveyor and estate agent witnesses that
satisfactory comparables were difficult to find and was in the forefront of the
plaintiff’s attack on Mr Brailsford’s reference to council tax banding as
supporting his valuation. I therefore consider that Mr Brailsford’s 15% is a
better guide than Mr Hall’s 10%.
What was
the true value of the property?
The open
market value of a property is the amount at which it would sell in the open
market at the relevant date, allowing for reasonable time to find a buyer in
the prevailing market conditions and disregarding any exceptional reason the
buyer may have for purchase. I take that from the Royal Institution of
Chartered Surveyors manual of Valuation Guidance Notes, accepted by both
expert witnesses as authoritative.
When there is
no actual sale, as at the date of the defendants’ valuation, evidence of value
is necessarily indirect. Even if there is a sale, as when Mr Hall valued this
property immediately before it was offered for sale by the plaintiff, questions
may be raised as to its openness and reliability.
In these
circumstances the expert witnesses have both approached the matter by seeking
comparables, which Mr Hall defines as ‘similar contemporary transactions’ and I
am invited by counsel, on both sides, to approach my task primarily by deciding
which of the two experts is the more convincing witness and/or which of their
competing lists of key comparables, there being no overlap, is the more
impressive.
I do not
accept that I am constrained in that way. It is certainly right to give effect
to any evidence, or other proper considerations, which go to the relative
weight to be attached to the opinions of the expert witnesses and I shall
address that point in due course. I must also consider the comparables upon
which they rely, but there are, in my view, two major difficulties in the present
case in placing them in the forefront of the process.
The first is
the unsatisfactory and conclusive nature of this part of the evidence. Mr Hall
says that in selecting a relevant comparable the valuer will seek transactions
which are as close as possible in timing, location, age, construction, site,
orientation, size, accommodation, layout and degree of attachment to other
buildings. Condition and fittings also have a direct bearing on value, but are
comparatively easy to adjust for. He also says that the information provided by
the comparables is ‘weighed and adjusted’ according to these criteria. I do not
understand Mr Brailsford to dissent from these general propositions. The facts
are however, first, that apart from timing none of the comparables chosen by
either of them was at all similar to the property in more than a small
proportion of the respects listed and, second, that there was no evidence from
either of them of how they ‘weighed and adjusted’ for the differences to arrive
at their valuations of the property, except that, under pressure from me, Mr
Brailsford did give global percentage assessments of the differential up or
down of value between each of his key comparables and the property.
The second
major difficulty is that this approach excludes, or at best relegates to a
subordinate role, other evidence which may in some circumstances be more
significant in particular, evidence of earlier or later transactions involving
the property itself and closely associated properties. To put it another way,
it implicitly isolates one factor, timing, from among those listed by Mr Hall
and elevates it to an overriding importance which no evidence presented to me
justifies at the expense of the other factors, all of which, except condition
and fittings, are ex hypothesi identical in the case of the property
itself and most of which are likely to be very close for associated properties.
Mr Hall said that historic evidence can be of use, but must be treated with
caution in a rising or falling market. No doubt, but so by common consent must
sales of modern houses (which most of his comparables were in relation to a
period property) and those of houses in very different locations or of very
different size, accommodation, layout or character. There was, in fact, much
more evidence before me, not less, of how other transactions should be adjusted
for price changes over time than for differences of these other kinds. Mr Hall
himself begins his study of the valuation issue by analysing 14 transactions at
Elston Hall to ‘create a framework within which the value of the property can
be seen’.
In some
circumstances transactions which are closely comparable in most if not all the
relevant factors, including time, will be plentiful. That
valuations will be narrower, as I have found above. In other circumstances they
will be rare or non-existent and I find that this was such a case. I do so for
the reasons already given and also because Mr Fawcett, whom I found an
impressive witness, said in re-examination that one could not find a realistic
comparable and that he considered it better to work from the last known sale of
the property itself. Mr Hall, too, speaks in his report of a ‘scarcity of direct
contemporary evidence’.
Mr Sams
started with comparables only for small terraced houses, but used them to check
and adjust his calculations from floor area. It is clear, however, that he
found it difficult to obtain useful comparables in the present case. Mr
Brailsford said that he formerly used Mr Sams’ method and that, although he had
now developed other methods, it was a perfectly satisfactory method if used on
a regular basis to keep abreast with plot values (one of the components
evaluated by Mr Sams). Without immediate comparables available, Mr Brailsford
said it was a good method to provide a basis of valuation. His own reason for
not following it was that in his present practice he does not feel sufficiently
in tune with current plot values. That supports my conclusion that working from
‘comparables’ in Mr Hall’s sense is not the only acceptable way of valuing
residential property and that its merit depends heavily on the availability of
truly comparable transactions.
I start my own
approach to the issue of value with some factual evidence which concerned the
property itself and was very close in time to the defendants’ valuation. Mr
Fawcett’s firm in Newark was instructed by the borrowers at the end of March
1990 to market the property at an asking price of £165,000 and did so. There is
no suggestion that it was not properly ‘exposed to the market’, to use the
expression employed by Mr Hall. There was little interest in the property and
although there were a few viewers no offers were received. On September 14 1990
the price was reduced to £149,950, but there was still no sale. I place no
reliance on the September figure because of the length of time the property had
already been on the market, the fact that on Mr Fawcett’s evidence the
borrowers almost immediately left and the fact that in consequence of those two
circumstances Mr Fawcett’s firm was doing no active marketing. There is
nevertheless, in my view, strong evidence that at the end of March 1990 the
property was not worth significantly more than £165,000 and may well have been
worth less. This evidence, of course, helps only as to the upper limit not the
lower. As to the difference of time from February 14 1990 to the end of March,
Mr Sams had made no alteration between January 12 and February 14 and
considered prices to be stable at the latter date. Mr Hall considered that by
February they were generally falling. Mr Fawcett said there were hopes of
recovery through the spring of 1990. The Halifax Building Society index of
property values for the East Midlands rose by 1½% from the first to the second
quarter of 1990 and the Nationwide index fell by the same percentage. On
balance it seems unlikely that the property was worth significantly more on
February 14 1990 than the price at which it was unsuccessfully marketed at the
end of March.
Mr Fawcett’s
advice at the time, as I have said, was that the value was £130,000 and in
cross-examination he said that he believed it to be correct. It was, however,
only a free agent’s valuation for marketing purposes. Moreover, it emerged in
re-examination that he was working from the last sale known to him, that for
£55,000 in 1986. There had, however, been a subsequent sale and it is helpful
to look at that and some other transactions at Elston Hall.
As I have
already said, Mr Hall considered a number of those transactions in his report
and particulars of others were added during the hearing. In many cases they
were of little help, being of other units than no 3 and at different times, so
that no conclusions can be drawn. The most germane, in my view, are those of no
3 itself and of no 8. As to no 3 there was a sale in September 1986 at £57,500
reduced to £55,000 after a survey, then the one to the borrowers for £120,000
in May 1988 and the resale by the plaintiff in October 1991 for £81,500. No 8,
about two thirds of the size of no 3, was sold in October 1986 for £35,000,
reduced to £33,000 after survey, and in November 1990 for £94,000.
It was common
ground that the sales of nos 3 and 8 in the autumn of 1986 were open market
sales and directly comparable and that they show the value of no 8 as being
then 60% of that of no 3. The next sale of no 3 showed a very large rise in
price and one substantially greater than the rise of the building society
indices. The question arises whether it was over priced. The sale at £120,000
in May 1988, however, was in close accord with Mr Hall’s own evidence that
prices in the immediate area doubled between 1986 and 1988 and that in turn was
supported by his own contemporary press releases, which recorded a rise of
20%–25% in 1987 and 44% in 1988, a total of 73%–80% over those two years, so
that a modest rise of 11%–16% in 1986 would have produced a doubling overall.
He gave reasons in those press releases and in evidence for this exceptional
local surge, in particular an influx of commuters following electrification of
the main east coast rail route. I conclude that the sale price of £120,000 for
no 3 in 1988 is reliable.
As to the 1990
sale of no 8 and the relationship between the two properties, Mr Hall said that
relative values might change at different price levels. When, however, I asked
him directly whether there was a ‘closing of the gap’, for example between
two-bed and three-bed properties between 1986 and 1990/91 he replied that there
was the possibility of some telescoping, but that he could not say
categorically. There was no evidence from any witness that price movements in
the area between May 1988 and November 1990 differed significantly from the
regional trend. Mr Hall’s press release for 1989 did indeed refer to falls of
15%, which would not accord with the indices, but he agreed that that passage
was, in his words, ‘not very carefully worded’, and it is out of line with the
evidence of Mr Sams and Mr Fawcett, which generally accords with the indices
for that period and which I accept. If the sale price of £94,000 for no 8 in
November 1990 is adjusted for the average movement of the two indices to an
equivalent at May 1988, the result is about £74,000 or 62% of the £120,000 for
which no 3 was sold. On this basis the sales of nos 3 and 8 in May 1988 and
November 1990, which bracket the valuation date, are consistent with each other
and with a stable relationship between the values of the two properties.
Given this
consistency, working forwards from the May 1988 sale of no 3, or backwards from
that of no 8 in November 1990, will give much the same result for a valuation
date in the first quarter of 1990. It lies approximately in the bracket £155,000–£165,000
depending on the starting point and index used.
In this survey
of the conclusions to be drawn from the dealings with nos 3 and 8, I have
hitherto omitted the sale of no 3 in October 1991 by the plaintiff. That is
intimately connected with the question of the weight to be given to Mr Hall’s
valuation, based on his comparables, to which I now turn. Mr Briggs in
September 1991 took possession of no 3 for the plaintiff and provided a
marketing valuation of £75,000. As requested by the plaintiff he obtained a
second valuation from Mr Hall, which was also £75,000. In cross-examination Mr
Hall was asked whether he talked to Mr Briggs about the valuation. He replied
‘not about the valuation itself’, but said that they did discuss comparables
and had a broadly similar perception of the value, namely £70,000 to £80,000.
The property
was put on the market at £75,000 following instructions to that effect from the
plaintiff’s solicitors on October 17 1991. A sole agency agreement was signed
on October 21 and that seems to have been the date when marketing effectively
began. At 9.22am on that day an offer of £72,500 was received from Mr Woodhouse
and Miss Buckingham, who were living at 7 Elston Hall, as tenants. That offer
was declined. At 5.35pm on October 22 an offer of £75,000 was received from Mr
and Mrs Rogers, which at 9.35am on October 23 was increased to £78,000. At
10.05am on the 23rd the first couple increased their offer to £80,000. At
10.30am the second couple went up to £81,000 and at 10.35am the first couple
offered £81,500, at which price the sale proceeded to contract and eventually
completion.
It was put to
Mr Fawcett, in cross-examination, that this was a low sale price and he agreed
that it appeared low. He said that when it was advertised the comment in his
office was that it was ‘incredibly low’. What others said is, of course,
hearsay, but I infer from what Mr Fawcett said, and the way he said it, that
this was a view which he shared at the time. Mr Hall says in his report that
‘assuming the
that the price was the highest which could reasonably be obtained. In
cross-examination, however, he accepted that it was not on the market long
enough to be correctly exposed. Mr Brausford considered that the property was
undersold by many thousands of pounds. On the basis of Mr Fawcett and Mr
Brailsford’s evidence, which I accept, I find that the property was undersold
and that Mr Hall’s valuation was substantially too low.
Mr
Brailsford’s valuation at the date of sale, based on comparables, was £135,000
in reasonable condition, or £125,000 as sold. Mr Fawcett put a figure of
£107,000 to £110,000 on it in reasonable condition, but that is based on his
own valuation of £130,000 in 1990 when he did not know about the 1988 sale and
is, therefore, likely to be low. He would have allowed £5,000 for the amount
required to freshen it up. I do not, at this stage, have to reach an exact
assessment of the true value at that date, but at £100,000, which seems to be
at the very bottom end of the range, Mr Hall was 25% out. Even the sale price
of £81,500 put him 8% out, virtually on the margin which he himself applies in
criticising the defendants.
In my view,
this must seriously detract from the weight which I can attach to Mr Hall’s
opinion, not only because it shows him to have been so much in error himself
but, more specifically, because he asserts a consistency between the valuation
which he made in September 1991 and that which he now advances for February
1990.
As to Mr
Brailsford, Mr Fawcett agreed that he was a respected and responsible local
valuer. In cross-examination some weaknesses were exposed in his justification
of the relationship between his February 1990 value and that at the date of
resale, in the light of the relevant price movements, in part because he had in
his report taken the date of completion of the resale instead of the date when
the price was agreed. Nor was I at all clear what conclusions he drew from the
calculations he had done of valuation per square foot. I take those matters
into account, but in general I formed a fairly favourable opinion of his
professional judgment.
As to their
respective comparables themselves, I have noted and taken into account what has
been said on each side about each of them. In general I find Mr Brailsford’s
the more acceptable, in particular as to character. But in view of what I have
already said about their wide disparity, the lack of any quantification of the
individual differences between them and the property and my own lack of any
qualification to form an independent judgment based on experience or the feel
of the market, I do not consider that it would be helpful to catalogue them or
set out the evidence about them in extenso.
In summary, in
arriving at the value of the property as at February 14 1990 I take into
account in the following order of cogency (although not with any mathematically
explicit weighting):
(i) the
failure to obtain a buyer from March 1990 at £165,000;
(ii) the
history of sales of nos 3 and 8 Elston Hall, between 1986 and 1990, suggesting
a bracket of £155,000–£165,000;
(iii) Mr
Brailsford’s comparables and his valuation on the basis of those comparables
and other considerations of £170,000;
(iv) Mr
Fawcett’s free valuation at the end of March 1990, without knowledge of the
1988 sale, of £130,000; and
(v) Mr Hall’s
comparables and his valuation on the basis of these comparables and other
considerations of £120,000.
On this basis
I arrive at a value for the property at February 14 1990 of £155,000. The
defendants’ valuation of £175,000 was just under 13% in excess of that and, for
the reasons given above, I consider that to be within the range of valuation
which a reasonably competent surveyor could have arrived at with the use of
reasonable care and skill.
I therefore
conclude that the plaintiff has not established the alleged breach of duty and
in those circumstances need not consider the third question as to what they
would have done in other circumstances.
Judgment for
the defendants.
For further cases on this subject see p119
