Negligence — Surveyors — Mortgage loan report — Valuation on 90-day sale basis by mortgagee in possession — Whether presumption that discount applies to sale on such basis
On 30 April
1999 the second respondent surveyor, on the instructions of the appellant bank,
made a valuation of commercial premises for mortgage loan purposes. The report
gave the open market value of the freehold as £665,000 on a 90-day sale basis
with the bank as mortgagees in possession. Based on the valuation, the bank
made a loan of £532,000. The mortgagor fell into arrears and the bank took
possession; they expected to sell the property for £325,000. The bank claimed
damages for negligence against the respondents. In the court below, the judge
concluded that the valuation was not negligent; he found that the actual open
market value was £644,000 and that the appropriate margin of error was 10%. The
valuation was therefore within the ceiling. The bank appealed, contending that
the judge was wrong in not allowing any discount from the open market value and
the value in accordance with the retainer of a valuation on a 90-day sale basis
with the bank as mortgagee in possession.
dismissed. The common ground in the court below, taken as result of the views
of the experts, was that whether or not a discount to reflect a 90-day sale by
a mortgagee in possession was to be allowed depended upon the market conditions
at the time. Although there were primary facts about the state of the sale of
various properties on the estate in which the property was situated at the
relevant time, the evidence that was before the court included the opinion
evidence of experts. The trial judge was entitled to prefer the evidence on
behalf of the respondent surveyors. He had not erred and must have had in mind
the state of sales on the estate. The judge was entitled to accept opinion
evidence that it was perfectly reasonable for the second respondent to have
made no discount to allow for a 90-day sale by a mortgagee in possession. There
is no irrebuttable presumption that a 90-day sale value will be less than that
of the open market value.
This was an appeal by the claimant, UCB Corporate
Services Ltd, against a decision of Judge Green QC, sitting as a High Court
judge, in proceedings for negligence against the defendants, Halifax (SW) Ltd
and Keith Andrew Ralphs.
David Phillips QC (instructed by Speechly Bircham)
appeared for the appellant; Edwin Johnson (instructed by Williams Davies
Meltzer) represented the respondents.
Giving the first judgment at the invitation of
Roch LJ, WARD LJ said:
This is an appeal by the disappointed claimants from the order of Judge Green
QC, sitting as a deputy judge of the High Court, when, on 15 July 1998, he
ordered that judgment be entered for the defendants on a claim for damages
brought by the UCB Bank (the bank) against Halifax (SW) Ltd for an allegedly
negligent valuation of a property for mortgage purposes.
The appellant bank lend money on a mortgage of
commercial property. The respondent surveyors value property for that purpose.
The retainer is expressed in these terms:
To provide our opinion as to the open market
value of the unencumbered freehold interest in the above mentioned properties
with the benefit of full vacant possession being available. Our valuation to be
on a 90 day sale basis with UCB Bank Plc as mortgagee in possession.
On 6 March 1990 a company (which, I think, is now
in liquidation) applied to the bank for a loan of £550,000 to be secured by a
first mortgage over property known as units 11 and 12 , Ashway Centre, Elm
Crescent, Kingston upon Thames, Surrey. The application for that mortgage
stated that the property had an estimated value of £675,000, that the purchase
price was £666,000 and, as I have indicated, the borrowing was £550,000. The
bank instructed the respondents (whom I shall call the surveyors). A Mr Ralphs,
who is, in fact, the second respondent, carried out the survey and made the
valuation. He viewed the property. He made due inquiries in the locality. He
conducted all the checks and balances that are ordinarily required. On 30 April
1990 he made a valuation in which he set out various aspects of what he had
done. First, he recited his instructions and set out the terms of the retainer
as I have already stated it.
Then he set out (but I need not recite) the
situation of the property, its description and condition, its construction, the
accommodation, the services, the local authority position with planning, tenure
and fire insurance. He came finally to valuation, which he expressed in these
terms:
We are of the opinion that the open market value
of the unencumbered freehold interests in the above mentioned properties, with
the benefit of full vacant possession being available, would amount to:
£665,000 (SIX HUNDRED AND SIXTY FIVE THOUSAND
POUNDS)
In arriving at our valuation figure above we have
had regard to the marketability and demand for this type of property in this
location, which we consider to be reasonable at the present time, in particular
due to Kingston’s increasing popularity as a business location due to
environmental and communication advantages.
Our valuation figure above is on a 90 day sale
basis with UCB Bank Plc as mortgagees in possession.
He made quite detailed notes of the investigation
he had conducted, and there is a good record of his thinking. The judge recited
them, and I repeat part of the material observations that he recorded. They
included matters such as:
Located close to centre of town and close to
polytechnic – with recent incorporation should boost demand from that source.
Demand in general should be and is good due to geographical factors (the
river, etc) and Kingston Borough Council’s restrictive policy as Local Planning
Authority, towards office/B1 development. There are currently only four other
developments of this kind.
As there are few developments, there is little
hard comparable evidence.
He then dealt with matters affecting his valuation
and noted his conclusion in these terms:
Asking price is £145 per square foot. There is a
limited supply of this type of space in this location. It is centrally located
with potentially good demand. Units are selling (two sold — two under offer)
although demand appears to have peaked. Local agents seem to think that a
well-located building will sell well.
Bearing in mind the limited supply of this
type of building, I see no reason to derogate from the asking price on a 90 day
sale basis, ie open market transaction best evidence available and supported by
developments elsewhere. I am satisfied with £665,000.
The evidence, which was largely agreed, showed
this state of affairs on that little development. The developer, Molans, was
apparently seeking a price of £140 per sq ft across the board for this new
commercial centre. There were 12 units built by them, and the properties in
question (being 11 and 12) were well situated at the entrance to the centre.
They were the largest properties there. They were adjacent, but capable of
being easily converted into a single unit. At the time of the valuation, unit 9
had been sold in September 1989 at a price close to the asking price. Unit 7
had been sold in December 1989, again at or about the asking price, and, by the
time that the valuation was sought, the mortgagor had ambitiously (which may
explain the subsequent bankruptcy of the venture) exchanged contracts to
purchase the property, even though it appeared not to have had the finance
available to complete it.
In addition, therefore, to those four sales (as I
shall describe them), it was known at the time of the valuation that two other
properties were under offer, again all at the £140 per sq ft asking price, and
we know with the benefit of hindsight that unit 10 was completed a good deal
later, in August 1990. The other property that was then under offer appears to
have fallen through, and no more is known about it than that.
Based upon the valuation they had received, the
bank lent 80%, amounting to a loan of £532,000. The detail is immaterial, but
the fact is that the mortgagor fell into arrears and at some time the bank took
possession. The bank, perhaps not noted for the speed with which it commences
litigation, managed to serve their writ the day before the limitation period
expired, which would have been in 1996. I note at the time of judgment, Judge
Green was recording that the bank expected shortly to sell the property for
£325,000. It therefore sought to make up at least part of its loss by bringing
this action against its surveyors, alleging their negligence in conducting the
task they were assigned.
The trial before the judge was a trial of
liability only, it having been indicated to him that if he found the defendants
liable, damages in the region of £100,000 might well be agreed. The approach he
was invited to follow, and did follow (and in this court it has been agreed was
right to follow), was to approach the question of valuation in four stages, and
ask these questions:
(i) What was the actual open market valuation as
at April 1990 on the basis of the information that a surveyor, using all proper
skill and care, should have obtained?
(ii) What is the discount (if any) from the open
market valuation that should be made to comply with the 90-day clause?
(iii) Having arrived at the actual open market
value as above, what is the margin of error that should be permitted before the
defendant could be found negligent?
(iv) On the foregoing basis, was the valuation
negligent?
His conclusion was that the valuation was not
negligent. He arrived at that conclusion by finding (and there is no challenge
to that finding) that the actual open market value was £644,000; that the
margin of error was 10% and so, adding 10% to £644,000, the ceiling was
£708,400, which was well above the valuation actually made of £665,000. Hence
the claim failed. The challenge to his judgment is his finding in answer to the
second question that there was to be no discount from the open market value and
the value in accordance with the retainer of a valuation on a 90-day sale basis
with UCB Bank plc as mortgagee in possession.
Mr Phillips QC, for whose arguments I am grateful,
put his case in this way. It was, he acknowledged, an appeal against a finding
of fact. He said the judge was wrong to have found that a 90-day sale by a mortgagee
in possession valuation could be, or was, the same as an open market valuation.
I am bound to say that it struck me from the moment I read these papers, and
even now, as surprising (if not, indeed, even bizarre) that there should not
be a difference between open market value and 90-day by mortgagee in possession
value. But Mr Johnson, in submissions equally eloquently couched, submits to me
(and all will appreciate that this is a very free translation of his courteous
submission) that I do not sit here as a man in the street, still less as an
expert valuer. I am here to apply the law, and not what I might like to think
is common sense.
So, suitably chastised, I shall try to do just
that. I am therefore to start with the retainer. What does it mean? Left to
myself, I would have thought, naively and wrongly, that a valuation on a 90-day
sale basis, with the bank as mortgagees in possession, involved two elements
that would distinguish that valuation from an open market value. We have a
definition of the open market value taken from the institution’s guidance, and
which, for this purpose, I am perfectly happy to adopt:
‘Open Market Value’ means the best price at which
an interest in the property might reasonably be expected to be sold at the date
of the valuation, assuming:
(a) a willing seller;
(b) a reasonable period in which to negotiate the
sale taking into account the nature of the property and the state of the
market;
(c) that values will remain static during the
period;
(d) that the property will be freely exposed to
the open market; and
(e) that no account will be taken of any
additional bid by a purchaser with a special interest.’
The guidance also draws attention to what they
call a ‘forced sale value’, which is defined to be:
the ‘Open Market Value’ as defined above with the
proviso that the vendor has imposed a time limit for completion which cannot be
regarded as a ‘reasonable period’ as referred to [above].
I would therefore have expected that the valuation
with which we are concerned, which may in fact be a kind of forced sale value,
but one as defined in the retainer, justified two discounts: first, for the
90-day sale restriction that is being imposed, but also for the fact that the
willing seller in this case is not an ordinary willing seller but a particular
one, namely a mortgagee in possession, and that the price at which he is
willing to sell is not the best price that might reasonably be expected to be
obtained in the open market, but merely the reasonable price that it is his
duty as mortgagee in possession to obtain. In my naive expectation, I would
have thought that all of those advertisements that seduce the innocent like me
with ideas that this is a property being sold cheaply by the mortgagee and that
I am going to get a whacking great discount for it, if only I could afford to
buy it to supplement my pension, all of that mattered something. But that is
the error of my way. It is quite plain, in this case, that the valuers have all
approached the case on the basis that the only element that may lead to a
discount is the restriction in valuation that the sale has to be within 90
days.
So the judge, perfectly properly looking at the
case on that limited basis, interpreted the retainer in this way. He construed
it in accordance with Mr Phillips’ submission to him that what was necessary
was a price that the valuer could be reasonably sure that the property would,
not could, be sold within 90 days; it being common ground that the 90 days was
the period that ran from putting the property on the market and ending with an
exchange of contracts. That there was therefore an element of urgency and
certainty to get the price was accepted by the judge, and he considered that
that aspect should be allowed for as lying somewhere on the spectrum, which is:
significantly less than a warranty that it will
sell at the valuation and significantly more than a statement that, on the
balance of probabilities, it will sell at the valuation.
Although I articulated my surprise at the limited
construction placed upon the clause, Mr Phillips very realistically and
properly accepts that he was bound by the evidence that his experts (in common
with the defendants’ experts) led, that the fact that it was a mortgagee in
possession selling was not a matter that was relevant in considering the
definition of the duty, though it may have an effect, as his expert indeed said
to the judge, that:
A sale by a mortgagee in possession tends to
blight a property.
The common ground in the court below, taken as a
result of the views of the experts, was that whether or not a discount was to
be allowed depended upon the market conditions pertaining at the time. So there
is not any presumption of the valuation on a 90-day sale by mortgagee in
possession being lower than open market value. It can be; it may usually be.
But the answer always depends upon the actual market conditions that prevail.
In their respective statements, which stood as
their evidence-in-chief, the claimant’s surveyor put the case in this way:
This was a development of new small industrial
unit, located in a strong inner suburban town, close to Central London. It is
the sort of location which is likely to be in good demand in normal market
conditions. Indeed, the Centre is currently fully occupied and there is only
one unit available for re-letting. No other comparable modern units are
available for letting or sale in the immediate vicinity at the present time.
In April 1990 Ashway Centre had been available
for sale and occupation since at least September 1989 — a period of over six
months. Despite this, only five of the 12 units constructed had been purchased
or were subject to offers (including Units 11 and 12). This was less than half
of the development. I consider that this demonstrated a very slow rate of
take-up for such a development particularly compared with the previous 24
months, which had seen a very strong property market.
The defendants’ surveyor expressed his conclusions
in his report in these terms:
This valuation takes into account the stipulation
that the valuation should be on a 90 day sale basis. Bearing in mind the market
conditions at that date together with the recent sales that had occurred means
that I do not believe I would have considered it necessary to make any further
discount from the comparable evidence shown by the earlier sales of Units 7 and
9…
This was a new development and at the time of the
valuation there were other units vacant and available. In my view it would not
have been appropriate to have suggested a discount in value for this reason.
Furthermore, Units 11 and 12 comprised a single detached building (albeit
comprising 2 units) located at the front of the estate comprising perhaps the
most attractive and prominent part of the development. In my view these were
more attractive than the other vacant units comprising part of a terrace.
The trial lasted days and days. A great deal of
evidence was given by valuers in which the judge played a lively part and the
judge summarised that evidence in this way. He referred to Mr Shores, the
claimant’s expert, who was adamant that 10% had to be deducted from the open
market valuation to comply with the retainer. He was firm in that view because,
as he put it, half of the estate remained to be sold at the relevant date.
There was the blight to which I have referred, and his opinion was essentially
this:
When that is coupled with
the tight period for 90 days, that indicates to the market that this is a
forced sale and, with new property around, it is unlikely to sell at full
valuation.
Given the circumstances
of the market and of that estate, I do not believe it would have been prudent
for a valuer to have made such an assumption. [That its value was £145 per
square foot.] For that reason, I do not believe that a competent valuer would
have made that asumption.
Mr Honeywill, the defendants’ surveyor, took the
opposite view. He believed that a valuer experienced in dealing with smaller
business units would have known that as a strong demand from owner occupiers.
He was quite firmly of the view, which the judge recorded in these terms:
I believe that there was a lull in the market in
the period before and after Christmas. The valuer could expect a post-Christmas
fresh impetus to marketing.
He also was of the view that the centre was the
best estate of its type in the area, that it was achieving the best price of
what was found in the area, and that these were in fact the best units on the
estate, both by reason of their size and their being a detached unit taken
together, prominently placed at the entrance to the estate. He was asked by the
judge why a valuer should not be cautious and deduct 10%. The answer was:
If you are satisfied that it is not necessary,
you do not do it.
His view was:
There was general demand from owner occupiers and
I believe it would have been reasonable for the valuer to be optimistic when
half were sold or under offer.
The judge was clearly more impressed with Mr
Honeywill than Mr Shores. There were a number of reasons for him to express
that preference. Mr Honeywill had supported his opinion, which, of course,
involved (when cross-examined for days and days, as these experts were) a
hindsight view of the collapse of the property market, residential and
business; the effects no doubt of that ‘Black Monday’ and the withdrawal from
the European Monetary Union; the rising interest rates; the depression that
followed, all of that directed to trying to establish what the poor valuer
going about his business in April 1990 would have been able to forecast.
Mr Honeywill had a great deal of support for his
arguments; Mr Shores had less. Mr Honeywill knew the area very well, having
grown up in Kingston and was familiar with its exact locality, whereas Mr
Shores had no closer familiarity with the market than a single sale in
Leatherhead. Mr Shores was brought into the case rather late, had adopted a
valuation given by an earlier valuation and then increased it after a meeting
with Mr Honeywill. So there was good reason for the judge to accept Mr
Honeywill’s opinion as more reliable. That is how the judge effectively decided
this case.
He held:
I accept Mr Honeywill’s views that, as at April
1990, the demand for small business units, particularly if they were as
attractive as these and in a good position in Kingston, could be expected to
hold up. I therefore accept his view that it was a perfectly reasonable
decision for Mr Ralphs to make no discount for the 90-day clause. There is no
doubt that he considered the clause; I derive that clearly from his notes. There
was nothing in it for him deliberately to fail to make a discount. It is not a
situation where any over-value would obtain a sale, or anything of that sort.
He had no possible motive for overstating the price.
In my judgment his decision was reasonable and
appropriate on the evidence which was and should have been available to him. He
was justified in reasoning that six units had been sold or were under offer in
some six or seven months since completion of the development. In view of the
demand for these attractive units in an attractive development, it was
appropriate to make no discount for a 90 day sale.
Mr Phillips (for whose case I have such obvious
sympathy) directed his attack on the judgment on three legs. He submitted that
the retainer in effect created some presumption from which the court should be
slow to find as a fact that the valuations were equal. But he was driven, of
course, to accept on the evidence common to the experts that it was all
dependent upon the market at the time. So his substantial attack was that the
judge’s acceptance of the evidence of Mr Honeywill was plainly wrong because
the external admitted factors drove one inexorably to the contrary conclusion.
He submitted that those factors, in addition to the presumption arising from
the retainer, were the circumstances actually applying on the ground in the
estate at the relevant time. Two properties had been sold before Christmas; two
were sold to the borrower in this case after Christmas; two were on offer and
only one was completed. So his attack was that the facts disprove the optimism
expressed by Mr Honeywill. If there was a lull before and after Christmas, then
one would have expected the lull to have ended by about the end of January and
have expected, if there were a 90-day restriction, that between the end of
January and the end of April, which was the date of the report, in that 90-day
period, all of the remaining 10 properties or most of the properties would have
been sold, when the evidence was only that two had been sold and two were under
offer. The evidence did not justify the optimism. At best, only six out of 12
had been sold. Consequently, the glass was either half empty or half full,
depending on one’s point of view. This view of the valuers, advising their clients
in November 1988, at the very first stage of the down turn in the residential
property market, after the October budget, was that:
Caution is the antithesis of optimism and so the
conclusion should have been, not as Mr Honeywill felt, that one could
reasonably expect this property to be sold in 90 days, when in fact half of the
properties remained still to be sold.
Mr Johnson submits that the case has to be looked
at much more conventionally. This is an appeal against a finding of fact. The
principles upon which this court is to interfere are well settled. He refers us
to Watt v Thomas [1947] AC 484 at p486, where Viscount Simon
said:
If there is no evidence to support a particular
conclusion (and this is really a question of law), the appellate court will not
hesitate so to decide. But if the evidence as a whole can reasonably be
regarded as justifying the conclusion arrived at at the trial, and especially
if that conclusion has been arrived at on conflicting testimony by a tribunal
which saw and heard the witnesses, the appellate court will bear in mind that
it has not enjoyed this opportunity and that the view of the trial judge as to
where credibility lies is entitled to great weight.
That applies, as to ordinary conflicts of fact,
also to the evidence of an expert, as this court held in Joyce v Yeomans
[1981] 1 WLR 549. Brandon LJ observed at p556H that the advantage the judge has
in seeing and hearing witnesses also applies when judging experts, and that
there are:
nevertheless significant advantages which an
appellate court ought not to ignore.
We were not referred to the Benmax case,
which entitles this court to draw inferences from primary facts.
The interesting question for me has been whether
the primary facts from which this court can draw inferences as efficiently as
the trial judge are limited to the actual state on this estate in April 1990.
Should I take it upon myself to decide whether it was reasonable to be
optimistic in the circumstances where the glass was either half full or half
empty depending on one’s view? I have been jolly tempted to do just that. But I
am eventually persuaded, albeit reluctantly, that the evidence that was before
the court included the opinion evidence of experts. Their opinions were there to
be accepted or rejected by the judge. It was clearly within his permitted remit
to accept Mr Honeywill’s views, and it is certainly not outside the generous
ambit within which one may reasonably disagree to say that he was wrong in
accepting his conclusions. The evidence that he accepted was the opinion
evidence of the view that, as at April 1990, the demand for small business
units, particularly if they were as attractive as these and in a good position
in Kingston, could be expected to hold up. I see the force of Mr Phillips’
submission that there was possible room for the judge to have confused the
general buoyancy of the market in Kingston as a town or as a locality when his
view ought to have been narrowly focused upon what was happening on this particular
industrial estate. But I am persuaded by Mr Johnson that that point was urged
fully before the judge and that he had it well in mind to consider whether two
sales before Christmas, two sales after Christmas and two under offer was good
enough to justify the conclusion.
Furthermore, the judge accepted Mr Honeywill’s
view that it was a perfectly reasonable decision for Mr Ralphs, the surveyor,
to make no discount. Experts are called to give expert evidence of their
opinion. That is why they are there. The judge has to accept it or reject it.
Here he accepted it. I very much doubt whether I would have done so, but that
matters not at all. The question is whether he had evidence before him that
justified his conclusion. I am afraid that he did.
Accordingly, this appeal should be dismissed.
Agreeing, GAGE J said: I agree. In my
judgment, the appellant’s case, when stripped to the bare essential, comes down
to the submission that common sense dictates that any valuer valuing a property
on the basis of a 90-day sale as a mortgagee in possession must value at a
discount to the open market value. As Mr Phillips QC puts it, it is almost an
irrebuttable presumption that the 90-day sale value will be less than that of
the open market value. That is an attractive argument. But the difficulty with
it is that, as Mr Phillips fairly accepts, there can be circumstances when the
market is so buoyant that one can conceive that the 90-day sale value will be
the same as the open market value. Once that concession is made, the question
of what is the correct valuation, is a matter of fact for the judge to decide
on a consideration of all the evidence, including the expert evidence called
before him. In this case, the judge, in his judgment, having recited all the
evidence of the respective experts, accepted the defendants’ expert’s evidence
and rejected the claimant’s expert evidence. That was a conclusion to which, in
my judgment, he was entitled to come. Having done so, he concluded that it was
reasonable for Mr Ralphs to make no discount for the 90-day clause.
I remind myself that it is only on rare occasions
that an appellate court will interfere with the trial judge’s findings of fact,
even when dealing with expert evidence. Powerful as Mr Phillips’ submissions
are, I find myself unable to say that the judge’s acceptance of the defendants’
expert evidence was wrong.
For these reasons and the reasons expressed by my
lord, I too would dismiss this appeal.
Also agreeing, Roch LJ said: The issue in this case was whether, in valuing
these properties in April 1990, the valuer, Mr Ralphs, having determined the
open market value of the properties, should have applied a discount to that
valuation because his instructions were that the valuation of the open market
value of the unencumbered freehold interest in units 11 and 12 at the Ashway
Centre, Kingston, should be ‘on a 90-day sale basis with UCB Bank Plc as
mortgagees in possession’. If a discount of the order suggested by the
appellant’s valuer, Mr Shores, namely 10%, should have been applied, Mr Ralphs’
valuation was too high, and too high by a margin that went outside the margin
of differences to be expected of reasonably competent valuers. If such a
discount was not called for in the circumstances that existed in April 1990, then
his valuation, although high, fell within the permissible margin of differences
between reasonable valuations by competent valuers.
The question for the judge was whether Mr Ralphs’
valuation was one that a competent valuer using proper skill and care could
properly have reached. More precisely, the question in this case was: was it
established on the balance of probabilities that a 10% deduction from the open
market value should have been made?
The judge accepted that Mr Ralphs had considered
whether he should apply such a discount, and had decided that the circumstances
did not call for such a deduction to be made from the open market value. The
judge heard conflicting expert evidence on this issue; Mr Shores for the
appellants and Mr Honeywill for the respondents. Mr Shores’ evidence was that a
discount of 10% should have been applied by Mr Ralphs, and Mr Honeywill’s
evidence was that no discount was called for in the circumstances that existed
in April 1990.
In this court, a point was raised by the court
that was not taken before the judge below, and does not find a place in the
appellants’ notice of appeal or in the appellants’ skeleton argument. It is
that there is a difference between the open market value where the sale is by a
willing vendor who will seek the best price available and the open market value
where the sale is by a mortgagee in possession, whose only obligation is to
sell for a reasonable price rather than for the best price obtainable, and that
this factor, quite apart from the 90-day period in which the sale has to be
achieved, must mean that the open market price where the sale is by a mortgagee
in possession will be lower than the open market price where the vendor is the
owner of the property.
In my judgment, this point could not have been
taken by the appellants at this stage. Had the point been taken below, the
valuation witnesses could have given evidence concerning valuation practice.
Both experts gave evidence that the second stage in the valuation process was
to consider, as the judge put it:
What is the discount (if any) from the open
market valuation that should be made to comply with the 90-day clause?
Neither expert gave evidence that a competent
valuer would have applied a second discount for a second factor, namely that the
vendor was the mortgagee in possession. The judge accepted that the methodology
agreed by the experts was the proper methodology for Mr Ralphs to follow in
making the valuation he had been instructed by the appellants to make. I can
see no basis on which this court could have come to the conclusion that there
was a further step that Mr Ralphs should have taken, but did not take. I
mention this point because, if the point were to be raised in future, it should
not be thought that the judgments in this case are decisive one way or the
other.
The appellants’ instructions to the respondents
were:
To provide your opinion as to the open market
value of the unencumbered freehold interests in the above mentioned properties
with the benefit of full vacant possession being available. Your valuation to
be on a 90 day sale basis with UCB Bank Plc as mortgagees in possession.
Again, the valuation experts were agreed that in
interpreting those instructions, Mr Ralphs was entitled to look at the RICS’
Guidance Notes on the valuation of assets, and, in particular, Guidance Note GN
22, which had been revised in January 1989. Open market value is defined in
that note in this way:
‘Open Market Value’ means the best price at which
an interest in the property might reasonably be expected to be sold at the date
of the valuation assuming:
(a) a willing seller;
(b) a reasonable period in which to negotiate the
sale taking into account the nature of the property and the state of the
market;
(c) that values will remain static during that
period;
(d) that the property will be freely exposed to
the open market; and
(e) that no account will be taken of any
additional bid by a purchaser with a special interest.
Those are the assumptions that a valuer is to make
when arriving at an open market value. It is arguable that the only assumption
that the instructions given to the respondents alter is the second. The
reasonable period becomes 90 days. Such an argument may well derive added force
from the definition of ‘forced sale value’ in the same guidance note.
Returning to the core of this appeal. The judge
accepted the evidence of Mr Honeywill. Mr Phillips submits, on behalf of the
appellants, that the primary facts found by the judge simply did not support
the evidence of Mr Honeywill that the circumstances were such that no deduction
for the 90-day sale by a mortgagee in possession qualification ought to have
been made.
In my judgment, the evidence of Mr Honeywill
related to a matter that was peculiarly within the knowledge and expertise of
an expert valuer and outside the knowledge and experience of judges, and
certainly outside the knowledge and experience of this member of this court.
Judge Green had the advantage of seeing and hearing the expert witnesses. He
rejected the evidence of the appellants’ expert where it conflicted with that
of the respondent’s expert. The judge was satisfied that he could safely accept
and act on the evidence of Mr Honeywill, that the demand for commercial
properties of this type in the Kingston area was strong, and that the estate on
which these units were was a particularly attractive location. Moreover, of the
units on this estate, these units were the most desirable.
The judge accepted Mr Honeywill’s assessment that
the movement of units on this estate, from the time the development had been
completed in the autumn of 1989 and the date of the valuation in late April
1990, entitled Mr Ralphs as a competent valuer to conclude that no discount was
called for in this case and make his valuation accordingly. Whether the
circumstances that existed at the end of April 1990 justified a competent
valuer reaching that conclusion when exercising the skill and care to be
expected of him, was very much a matter of valuation expertise and practice.
The judge on that issue required the assistance of expert evidence. The judge,
having heard and seen the witnesses, accepted the view advanced by Mr
Honeywill. The judge did not find that the appellants had established that all
competent valuers, or indeed any competent valuer, would, in the circumstances,
have made the discount Mr Shores thought should have been made.
In Watt v Thomas, at p487, Lord
Thankerton stated the role of an appellate court on reviewing questions of fact
tried before a court of first instance in three propositions, with which Lord
Simonds agreed:
I. Where a question of fact has been tried by a
judge without a jury, and there is no question of misdirection of himself by
the judge, an appellate court which is disposed to come to a different
conclusion on the printed evidence, should not do so unless it is satisfied
that any advantage enjoyed by the trial judge by reason of having seen and
heard the witnesses, could not be sufficient to explain or justify the trial
judge’s conclusions; II. The appellate court may take the view that without
having seen or heard the witnesses, it is not in a position to come to any
satisfactory conclusion on the printed evidence; III. The appellate court,
either because the reasons given by the trial judge are not satisfactory, or
because it unmistakably so appears from the evidence, may be satisfied that he
has not taken proper advantage of his having seen and heard the witnesses and
the matter will then become at large for the appellate court.
Despite the attractive submissions of Mr Phillips,
I can see no basis on which it could be said that the reasons given by the
trial judge were not satisfactory, or that it unmistakably appeared from the
evidence that the judge had not taken proper advantage of having seen and heard
the witnesses in this case.
In short, I can see no basis on which we in this
court could say that the judge was wrong in reaching the conclusion he did. I
agree that the appeal should be dismissed.
Appeal dismissed.
