Negligence — Valuation — Court of Appeal uphold decision in favour of chartered surveyor — Mortgagees, unsuccessful defendants in action by mortgagor for failure to obtain true market value on sale of mortgaged property, claimed against surveyor as third party that he had failed to exercise due care and skill in valuation — Judge dismissed claim against surveyor, and mortgagees appealed — The written instructions given to the surveyor by the mortgagees were to carry out a ‘crash sale valuation’ of the property in question — The surveyor valued the property, a bungalow in need of renovation, at £5,750 — It was sold by the mortgagees to a Miss K for £6,000, who immediately put it on the market for £15,000 and resold it a few months later for £10,000 — In the plaintiff mortgagor’s action against the mortgagees the judge held that with proper exposure to the market the property would have fetched not less than £8,500 and awarded the plaintiff damages of £2,500 with interest — There was no appeal against this decision — So far as the third party proceedings against the surveyor were concerned, however, certain findings by the judge were relevant — Before the ‘crash sale valuation’ instructions had been given to the surveyor, the mortgagees’ managing director had negotiated a subject to contract sale to Miss K for £5,500 (later altered to £6,000) — He wished to give her the opportunity of purchasing the property at a price which would allow her to make a profit on resale and he gave instructions to the surveyor in terms which would enable him to give the lowest valuation — The surveyor understood the words ‘crash sale valuation’ as indicating a more rapid sale than a ‘forced sale’ valuation basis — Having regard to the instructions received by the surveyor the judge dismissed the third party claim against him — Held on appeal that the judge was right in concluding that the surveyor had interpreted his instructions correctly — The court rejected a submission that the surveyor had an overriding duty to advise on the true market value despite the specific basis clearly set out in his instructions — Mortgagees’ appeal dismissed — RICS guidance notes on ‘open market value’ and ‘forced sale value’ in connection with property asset valuations considered
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The following cases are referred to in this report.
Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949; [1971] 2 WLR 1207; [1971] 2 All ER 633; (1971) 22 P&CR 624, CA
Singer & Friedlander Ltd v John D Wood & Co [1977] EGD 569; (1977) 243 EG 212 & 295, [1977] 2 EGLR 84
This was an appeal by the defendants, Castle Phillips Finance Co Ltd, from a decision of Judge Inskip, sitting as a High Court judge, dismissing their claim against the third party, Michael Kent FRICS, in an action by the plaintiff, Jeff Arnold Predeth. The plaintiff succeeded in his action against the defendants as mortgagees, for failure to obtain the true market value on sale of his bungalow near Alton in Hampshire, and the defendants did not appeal against this part of the decision.
Jeremy Carey (instructed by Turner Garrett & Co, of Addlestone, Surrey) appeared on behalf of the appellants; J Grace (instructed by Thompson & Co) represented the respondent third party.
Giving judgment, FOX LJ said: This is an appeal by the defendant, Castle Phillips Finance Co Ltd, from a decision of Judge Inskip, sitting as a judge of the High Court, whereby he dismissed the defendant’s claim against the third party, Mr Kent, a chartered surveyor, that Mr Kent had failed to exercise reasonable professional skill and judgment in giving a valuation of certain land. The plaintiff in the action succeeded in a claim against the defendant that the defendant had failed as mortgagee in possession in exercising their powers of sale to obtain the true market value of the property. There is no appeal from that. The present appeal is between the defendant and the third party only.
The land in question is near Alton, in Hampshire. The plaintiff purchased it in 1976 or thereabouts for £2,500 with the assistance of a loan of £2,000 from the defendant, which is a moneylending and financing firm. The loan was secured by a legal charge on the land. The property was a bungalow which was not then habitable. The plaintiff intended to renovate and extend it himself. Between 1976 and 1978, the plaintiff got into financial difficulties and fell into arrear with his payments to the defendant under the legal charge. The defendant obtained an order for possession of the property in September 1978. That order was not executed immediately because the plaintiff obtained a stay.
On February 1 1979, however, the order was executed and the defendant went into possession as mortgagee. Mr Phillips, the managing director of the defendant, attended with a bailiff when the warrant for possession was executed. He took with him, it seems, a Mr Hogg, a property speculator, who, later in February, made an offer of £4,000. That was rejected. Mr Phillips’ reaction to the property is described as follows in the judgment at p 25:
Mr Phillips said he was shocked by what he found. He said he decided in his own mind that the property was worthless, and he therefore decided not to follow what he would otherwise have done, namely, put the property in the hands of three local agents. However, he did not inform the plaintiff that that was no longer his intention. Mr Phillips agreed in evidence that in the light of his personal view as to the worthlessness of the property, it was important to get an early valuation from an independent valuer in case his assessment was wrong. He maintained in evidence that that is what he did.
On February 2 Mr Phillips telephoned Mr Kent, the third party, who was in practice as a chartered surveyor and who had carried out valuations for the defendant in the past. Mr Kent was not immediately available, but he returned the call within a day. Mr Phillips’ evidence was that he gave Mr Kent instructions on the telephone to carry out a valuation of the property. He said in evidence that prior to March 7 he had received an oral valuation of £5,000 from Mr Kent. The judge did not accept that. He found that on February 2 or 3 Mr Kent was told by Mr Phillips on the telephone that he might require a valuation of the property in the future and that he would give Mr Kent written instructions in due course.
On March 3, the judge found, Mr Kent was given oral instructions by Mr Phillips to value the property. He was given various particulars, including the site of the plot, and the 1976 purchase price. Mr Phillips did not accept that he had any telephone conversation with Mr Kent on March 3, but the judge accepted Mr Kent’s evidence on that. Mr Kent was not able to inspect the property immediately because the key had not arrived from Mr Phillips. It arrived with Mr Phillips’ letter of instructions of March 7 1979, a copy of which was sent to the defendant’s solicitors, Turner Garrett & Co.
That letter was addressed to Michael Kent Esq FRICS and is in the following terms:
Re: ‘The Bungalow’, Five Ash Lane, Medstead, Hants.
Further to our recent conversation on the telephone, we take pleasure in confirming our instructions for you to carry out on our behalf, a crash sale valuation of the above property. The situation is that we recently obtained possession of the property, as mortgagees. The mortgagor has advised us that, some time in 1978, he obtained planning consent to extend the bungalow. No doubt you will obtain full details when you make your usual enquiries of the local authority. As the property is derelict, would you please take some photographs of the inside, and the outside, with a general view, taking in the front fence. Also, would you please comment fully on the state of the property, and any other factors which you feel may influence the market price. We have in fact obtained an offer, subject to contract, but naturally will not proceed until we have received your valuation and any other advices. The photographs are required to form part of our records, together with your valuation, and other comments. Please find enclosed a key which fits the padlock on the front door.
They then asked for the key to be returned in due course.
Mr Kent inspected the site on March 8. Before giving a valuation, however, he had to investigate various planning matters. He visited the planning office for that purpose on March 16 and as he was about to leave his office for that purpose, Mr Phillips telephoned and asked ‘for a rough idea of the value as he was hoping to exchange contracts by the end of the month’. Mr Kent told him that he thought that the figure might be as low as £5,000, but he gave no firm valuation. The judge found that by March 7 Mr Phillips had already negotiated a subject to contract sale of the property with a Miss Keeping, who was a member of a firm of solicitors in Alton, for £5,500. The judge found that the arrangement was entered into before any oral or written valuation of the property had been received from Mr Kent. There is no finding as to how the figure of £5,500 was arrived at.
Mr Kent’s written valuation was dated March 20 and would, the judge found, have been received by the defendant on the following day, March 21. The valuation is addressed to the defendant and is in these terms:
Re: Byways, Stoney Lane, Medstead. In accordance with your instructions of March 7 1979, I confirm that I have carried out an inspection of the above property, in order to ascertain its current market value. The property, as you are aware, is a small derelict single storey construction originally erected about the 1920s of single skin 4 in brickwork, under an asbestos tiled roof. This building stands on a small site having a frontage to Stoney Lane of approximately 52 ft and a depth of about 70 ft. I have been given to understand that planning consent was granted on August 4 1976
and he then gives the reference number
for an extension to be erected to contain a kitchen, bathroom and two bedrooms, subject to the usual conditions of planning. From inspection it was ascertained that someone has attempted to commence building works by partially digging out some foundation trenches but nothing further has been done.
Taking into account the present condition of the property, the planning consent contained, the general situation and size of site and also the fact that the site is low lying and there is a possibility of it being affected by partial flooding; the narrowness of the access road and therefore providing some difficulty for construction and also as the road is unmade could mean eventual liability by way of new road works and there is also the question of limited services to the site in respect of water, electricity and sewerage, I am of the opinion that the freehold value is £5,750. Trusting this brief valuation is satisfactory for your requirements but should you wish me to elaborate on any points, please do not hesitate to let me know.
That was dated March 20 and, as the judge said, would have reached the defendant on March 21. On March 20, Mr Phillips instructed the defendant’s solicitors to send a contract for the sale of the property to Miss Keeping’s solicitors. That was in fact done by the defendant’s solicitors on March 21. The contract of sale by the defendant to Miss Keeping was signed on April 5. That was before the preliminary inquiries before contract by Miss Keeping’s solicitors to the defendant’s solicitors had been answered. The judge found that by the time the contract was signed, the figure of £5,500 had been altered by Miss Keeping’s solicitors to £6,000. That alteration is explained in her solicitors’ letter of April 5, which is, so far as material, as follows:
As discussed on the telephone this morning our client informs us that she has been in direct contact with the vendors who inform her that although there is another purchaser willing to offer £6,000 for the property, provided she can exchange contracts forthwith, they will accept a purchase price of £6,000.
Mr Phillips explained his position in this way. I quote from the judgment on p 30:
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Mr Phillips, in evidence, said he told her that another purchaser had offered £6,000 and that she accordingly increased her offer to the same, which in fact took it to £250 above Mr Kent’s valuation of £5,750. That other purchaser was Mr Fosbury. Mr Phillips did not go back to Mr Fosbury to see whether he would offer more for the property, because Mr Phillips said Mr Fosbury had stated he would not go higher. Mr Fosbury was not called to give evidence by any party in this case.
The conveyance in pursuance of the contract of sale to Miss Keeping was by Miss Keeping’s direction taken in the name of a Mr Hall. That was at the beginning of May. Some weeks later, the property was conveyed back by Mr Hall to Miss Keeping. Before the sale to Miss Keeping was completed, at the beginning of May, Miss Keeping had already put the property in the hands of estate agents for sale at the sum of £15,000. Miss Keeping sold the property at the end of August for £10,000. It seems that by 1984, the property, still in its existing state, was sold, so the judge found, for £21,500.
At p 33 of his judgment, the judge made the following findings:
I am driven to the conclusion that for some reason which I do not know, Mr Phillips wished Miss Keeping to have the opportunity of purchasing the property at a price from which she was able to make a profit. I am abundantly satisfied that Miss Keeping was eager to purchase, because she was satisfied that she could make a quick profit. She may have had domestic problems at the time, as she says, but I do not think she ever intended to live on this site in a mobile home if the problems became too much for her. As I have already indicated, she had already put the property on the market at more than double the price even before the completion of the purchase by herself. I am satisfied that early in March Mr Phillips realised that a valuation would be needed, and that if he did not have a valuation which justified the price at which he sold to Miss Keeping, there might be problems. It was with that in mind that he gave his written instructions to Mr Kent on March 7.
The judge rejected Mr Phillips’ evidence that he had thought the property was worthless. The judge’s conclusions on the value of the property are to be found at p 39 and are as follows:
I find that the property, if properly exposed to the market from February, would have been sold for not less than £8,500 with completion taking place at about the beginning of June. The sale at £6,000 was considerably too low . . .
On the plaintiff’s claim against the defendant, the judge found that the defendant did not discharge his duty as a mortgagee to take reasonable care to get a proper price. The judge’s conclusions on that are stated in the judgment at pp 38 and 39 as follows:
In the circumstances of this case, I consider that the exercise of reasonable care by the defendant to obtain the true market value required him, first of all, to obtain from a valuer a valuation on that basis. He has given in evidence no reason for asking for a valuation on the basis that he did; that was, a crash sale valuation. He failed to obtain a valuation on the basis that the exercise of reasonable care required.
Secondly, in my judgment, the exercise of reasonable care required him to expose the property to the market through local estate agents for a period of approximately three months. He failed to instruct any agents to expose the property at all. Such exposure as there was to the market through his own efforts was completely inadequate, for reasons that I have given, and was unduly short having regard to the sound financial strength of the defendant company, as described by Mr Phillips himself.
In those circumstances, the judge concluded that the defendant was in breach of its duty of care to the plaintiff and made an award of damages for the plaintiff against the defendant in the sum of £2,500 with interest.
As to the claim against the third party, Mr Kent, I must start with the duty of a mortgagee in exercise of his power of sale. A mortgagee is not a trustee of his power of sale for the mortgagor. It is given to him for his own benefit, and if he exercised it bona fide the court will not interfere, though the timing may be very harmful to the mortgagor. He must take reasonable care to obtain the true market value of the property at the time when he chooses to sell. Thus Salmon LJ, in the leading case, Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949, at p 968 said:
I accordingly conclude, both on principle and authority, that a mortgagee in exercising his power of sale does owe a duty to take reasonable precautions to obtain the true market value of the mortgaged property at the date on which he decides to sell it. No doubt in deciding whether he has fallen short of that duty the facts must be looked at broadly, and he will not be adjudged to be in default unless he is plainly on the wrong side of the line.
It was that duty of care which the judge held that the defendant had failed to discharge in this case and against which there is no appeal. The judge dealt with the claim against Mr Kent in this way at p 37 of the transcript. He said:
Mr Kent said that although he had heard in conversation the words ‘crash sale value’ before he had never had to interpret them. He read the letter of March 7 as indicating that a more rapid sale than what he would term a forced sale valuation basis was intended, and he found support for that in the reference to the fact that Mr Phillips told him that they had already found a purchaser subject to contract. He said that the conversation I have already described of March 16, referring to an exchange of contracts at the end of the month, reinforced his interpretation that a shorter exposure to the market was intended as the basis for the valuation, by the use of the words ‘crash sale value’, than he would have applied to a forced sale valuation. Mr Kent said he did not feel it necessary to go back to check his interpretation with Mr Phillips.
At one time in his evidence I described his interpretation I think, as the purest guesswork or speculation, but having considered the matter further, I am satisfied that Mr Kent indeed interpreted Mr Phillips’ instructions in the way in which Mr Phillips intended him to interpret them. I am satisfied that Mr Phillips wanted Mr Kent to give the lowest valuation he felt he properly could, and therefore gave instructions in terms which he knew would enable Mr Kent to give the lowest valuation. Mr Kent assumed a four-week exposure for the purpose of his valuation and arrived at a figure of £5,750. If he had interpreted it as a forced sale, as opposed to something more drastic, he would have valued it at about £6,750. If, of course, he had been told to give a true market value, as opposed to a forced sale valuation, the valuation would have been still higher.
Finally, the judge said at p 39:
I will hear counsel in due course as to the effect of this finding in financial terms
that was his finding against the defendant in favour of the plaintiff
but I turn now to the third party claim. I am satisfied, as I say, that Mr Kent interpreted his instructions in the letter of March 7 as he was intended to interpret them by Mr Phillips. In those circumstances, I certainly do not find that Mr Kent was in breach of the duty of care which he owed to the defendant in arriving at the valuation that he did upon the basis of the instructions that he received from the defendant.
He therefore dismissed the claim against the third party.
The defendant on this appeal makes two main submissions. First, on the evidence, the judge was not entitled to say that Mr Kent correctly interpreted his instructions in the letter of March 7. Second, that in any event, even if Mr Kent did correctly interpret his instructions, the judge should not have stopped there. He should have considered whether Mr Kent had acted with reasonable care in giving the opinion he did.
As to the first point, there was, in my view, ample evidence to justify the judge’s conclusion. By way of preliminary, I should say something about terminology. The judge referred to Guidance Notes on the Valuation of Assets issued by the Royal Institution of Chartered Surveyors* at p 34 of the judgment as follows:
2. The Institution considers that it will be helpful to issue to members for general use in property asset valuations definitions of ‘Open Market Value’ and ‘Forced Sale Value’:
(i) The Open Market Value is intended to mean the best price at which an interest in a property might reasonably be expected to be sold by Private Treaty at the date of valuation assuming:
(a) a willing seller; (b) a reasonable period within which to negotiate the sale, taking into account the nature of the property and the state of the market;
(c) values will remain static throughout the period; (d) the property will be freely exposed to the market; (e) no account is to be taken of an additional bid by a special purchaser.
*Editor’s note: Guidance Note No DI published March 1975.
The judge then said:
I am satisfied on the evidence I have heard that estate agents generally would work on the expectation of about three months’ exposure to the market before exchange of contracts in arriving at the open market valuation.
He then referred to the institution’s explanation of the special ‘forced sale value’, which was as follows:
(ii) The Forced Sale Value is the open market value (as defined in para (i)) with the proviso that the vendor has imposed a time limit for completion which cannot be regarded as a reasonable period as referred to in para (i)(b).
I have already read the judge’s comments on (i)(b). The guidelines emphasise that members are advised that the time-limit should be discussed in any forced sale valuation with the instructing client.
Against that background, I refer to the following matters. First, Mr Kent, by the letter of March 7, was instructed to carry out a crash sale valuation. That does not appear to be a term in general use in the profession, but, in my view, it carries a clear sense of urgency as a matter of the ordinary use of the English language. The urgency, I think, must relate to the exchange of contracts. Mr Kent made his valuation on the basis that four weeks’ exposure to the market, until exchange of contracts, was to be allowed. That is to be compared with the three months which the judge felt appropriate for a true, open|page:147| market valuation. It might obviously reduce substantially the chance of getting the best price.
Second, in the letter of instruction, Mr Kent was told that the defendants had obtained an offer subject to contract. Third, in the conversation on March 16, Mr Phillips told Mr Kent that he was hoping to exchange contracts by the end of the month. The above matters were known to Mr Kent. Next, the following facts existed when the instructions were given: (a) the defendant had already negotiated a price with Miss Keeping; (b) Mr Phillips, as the judge found, wanted to give Miss Keeping the opportunity of purchasing the property at a price at which she could make a profit.
Finally, the following facts also throw light upon the defendant’s attitude generally: (1) The defendant sent the draft contract to Miss Keeping on March 20, the day when Mr Kent had despatched the opinion on valuation, although before the date when the judge said that in the ordinary course, the defendant would have received it. (2) The defendant made no further attempt to test the market after the receipt of the valuation. (3) Mr Phillips himself was contemplating a quick sale. As to that, I refer to his evidence before the judge, which is at p 32B, where he was asked:
(Q) When you received this valuation with that statement ‘current market value’, what did you understand the valuer to be meaning by that phrase?
(A) I understood him to mean the value of the property if it was sold in the very near future, having regard to the fact that the property was empty and that any potential purchaser would know that it was a mortgagee sale. And having regard to all those three facts that is what I assumed the valuation that Mr Kent gave me.
Looking at all those matters, it seems to me that the language of the letter itself and the known facts before, at the time of, and after the letter of instruction of March 7, all point to the conclusion that Mr Phillips wanted a quick sale. That reduced the exposure of the property to the market and would inevitably affect the price. The facts, it seems to me, as we know them, are entirely consistent with Mr Kent’s interpretation of the letter. In general, it seems to me that the hard fact is that Mr Phillips wanted to sell to Miss Keeping, he wanted to sell quickly and he wanted to sell at a price which would enable Miss Keeping to make a quick profit. No doubt Mr Kent, in making his valuation, took into account various circumstances; for example, the unattractive and what is called ‘difficult’ nature of the property and his view that the defendant, as a finance company, charging a high rate of interest, would want to recover their money as quickly as they could. Those additional circumstances, which Mr Kent had in mind, do not seem to me to detract from the judge’s conclusion, reached after a hearing of several days and with a full opportunity of judging the witnesses, that Mr Kent interpreted his instructions just as Mr Phillips intended him to interpret them.
I think that this experienced judge’s conclusion on those matters was quite correct and was fully justified on the evidence which was before him.
I come now to the second point. It is said that in any event Mr Kent was in breach of duty. There was, it is said, only one basis of valuation in this case, that is to say, the true market value when the defendant chose to sell. Mr Kent, it is said, knew that the defendant was a mortgagee in possession and owed a duty to the defendant to advise it on the true market value quite irrespective of the use of the expression ‘crash sale valuation’ in the letter of instruction.
We were referred by Mr Carey, for the defendant, to some observations of Watkins J, as he then was, in Singer & Friedlander v John D Wood (1977) 243 EG 212 at p 213, [1977] 2 EGLR 84, where he said:
In every case, the valuer, having gathered all the vital information, is expected to be sufficiently skilful so as to enable himself to interpret the facts, to make indispensable assumptions and to employ a well-practised professional method of reaching a conclusion; and it may be to check that conclusion with another reached as the result of the use of a second well-practised method. In every case the valuer must not only be versed in the value of land throughout the country in a general way, but he must inform himself adequately of the market trends and be very sensitive to them with particular regard to the locality in which the land he values lies. Whatever conclusion is reached, it must be without consideration for the purpose for which it is required. By this I mean that a valuation must reflect the honest opinion of the valuer of the true market value of the land at the relevant time, no matter why or by whom it is required, be it by merchant bank, land developer or prospective builder.
It seems to me that this case turns throughout very much on its own facts. Mr Kent, in my view, was instructed to value upon a particular basis which was stated in the letter of March 7. It would, in my view, be wholly unreasonable to suppose that the defendant was asking for a true market value assessment. All the facts point the other way. Further, the defendant was not a layman. It was a finance company experienced in mortgage matters, which had its own solicitors who had actually been sent a copy of the letter of March 7 at the time when it was written. I do not, in the circumstances of this case, think that it was necessary for Mr Kent to embark upon general advice as to the duty of the mortgagor. He was given a particular task to do. It seems to me that he did it. It is quite true that he uses the expression ‘current market value’, but that has to be read in the light of the instructions which he received. The instructions did not ask for current market value. They asked for a crash sale valuation, which Mr Kent rightly interpreted as something quite different.
I accept that in the letter of March 7 Mr Kent was asked to comment on any factors which he might feel affected the market price. Mr Kent did set out various factors in his report which he had taken into consideration. A quick sale was not one of them. A quick sale was, in my view, inherent in and central to the instructions which he had received on March 7 and which would quite obviously affect the price. In the circumstances, I do not think that there was any breach of duty by Mr Kent.
There was, I should add, no real criticism of Mr Kent’s valuation upon the basis upon which he made it and in accordance with his interpretation of his instructions. The evidence of Mr H J Sweetnam [FRICS], for the defendant, was that on the basis of, say, three weeks’ exposure to the market, to find a buyer, the value was £6,000. In my view, the defendant’s difficulties in this case are not the result of Mr Kent’s advice. They are essentially of the defendant’s own making. In the circumstances, it seems to me that no case is made out against the third party and I would dismiss this appeal.
Agreeing, CROOM-JOHNSON LJ said: I am of the same opinion. Two grounds of liability by Mr Kent against the defendant are alleged. The first is that the judge was not entitled to find that Mr Kent correctly interpreted the letter of March 7 from the defendant containing his instructions. The second was that the judge should, in any event, have gone on to say that Mr Kent had been in breach of his general duty, including his duty to the plaintiff himself, to give a market valuation.
The second alternative ground was not expressed in the opinion and hardly seems to have been investigated during the course of the trial. I have some doubt whether the defendant was entitled to rely upon it in this court.
So far as the first ground is concerned, what Mr Kent was asked for was a crash sale valuation. What he gave was a current market valuation. Neither of those expressions appears to be a term of art in the profession of chartered surveyors, although they do seem to be expressions which have been heard of and are sometimes used. At all events, when Mr Kent gave his valuation on March 20, he knew very well that there was a sale in the offing, subject to contract, to Miss Keeping.
The expressions which have been used and to which I have referred were not generally understood by the other surveyors, of whom three gave evidence in the course of the proceedings, and there is no finding by the judge as to either of them as to what they actually mean. It is quite clear that by March 7, on the occasion on which the letter was written to Mr Kent, after a preliminary warning telephone call at the beginning of February, Mr Phillips had negotiated the sale of this land to Miss Keeping at a price of £5,500. There was at that time no valuation in existence by Mr Kent or by anybody.
The learned judge made a finding that he was satisfied that Mr Phillips wished Miss Keeping to have the opportunity of purchasing the property at a price from which she was able to make a profit. He was also satisfied that early in March, Mr Phillips realised that a valuation would be needed and that if he did not have a valuation to justify the price at which he sold to Miss Keeping, there might be problems. That resulted in the conversation that he had with his own solicitor, in which he had mentioned the prospective sale to Miss Keeping. The judge found that as a result of the warning that the solicitor gave to the defendant, the defendant gave the written instructions to Mr Kent of March 7.
It has not been suggested at all that there was in any way some sort of conspiracy between the defendant and Mr Kent to give a deliberately low valuation which would justify the sale to Miss Keeping at that price, but it was clear that Mr Phillips, quite properly, wished to safeguard his position when the time came for whatever sale which took place to take place, so that he could justify the price to the plaintiff, Mr Predeth.
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What the learned judge went on to find was that as a result of the need for a valuation, as he put it, it was with that in mind that he gave written instructions to Mr Kent on March 7. That is the letter containing the ‘crash sale valuation’ expression. It is quite true that we have had comments made on Mr Kent’s evidence by counsel on behalf of Mr Phillips, the effective defendant, that Mr Kent’s explanation as to his reasons behind his valuation were sometimes confused or contradictory. People’s explanations for their actions do not always make the best sense, but that does not mean that they have been negligent in doing what they did.
Throughout Mr Kent’s evidence, it is quite clear that he was regarding his instructions as instructions to treat the matter as one of some urgency as he knew all about the proposed sale to Miss Keeping. He had been ‘nagged’ at, if that is the right word, by Mr Phillips on the telephone on March 16 with a view to hurrying up his valuation.
The learned judge, when he came to make his findings as to the negligence or otherwise of Mr Kent, said this:
Mr Kent said that although he had heard in conversation the words ‘crash sale value’ before he had never had to interpret them. He read the letter of March 7 as indicating that a more rapid sale than what he would term a forced sale valuation basis was intended, and he found support for that in the reference to the fact that Mr Phillips had told him that they had already found a purchaser subject to contract.
The learned judge then went on to refer to the terms of that conversation of March 16.
In the end, the learned judge came to his conclusion after finding that Mr Phillips had himself been negligent in relation to the plaintiff. He went on to say:
I am satisfied that Mr Kent interpreted his instructions in the letter of March 7 as he was intended to interpret them by Mr Phillips. In those circumstances, I certainly do not find that Mr Kent was in breach of the duty of care which he owed to the defendant in arriving at the valuation that he did upon the basis of the instructions that he received from the defendant.
That was a clear finding of fact by the judge, who had heard the evidence and seen all the witnesses. The evidence was there in substance to support that finding. If the second ground upon which this appeal is advanced is open to the appellant, I agree with the reasons which have been given by FOX LJ and I, too, would dismiss the appeal.
Also agreeing, RALPH GIBSON LJ said: I want to add very little. The finding of the judge, including the finding to which my lord has already referred, was that for some reason unknown to the judge, Mr Phillips wished Miss Keeping to have the opportunity of purchasing the property at a price at which she was able to make a profit. This appeal has been brought by the defendant, I am sure, partly because of a feeling on the part of Mr Phillips that his good faith appears to have been questioned although no allegation is made in the proceedings based upon any bad faith on his part. In this, I have considerable sympathy for him and his position. He was right in thinking that the law allowed his company to sell at the time which suited its convenience, provided, of course, the property was fairly and properly exposed to the market or sold at a price which was based upon such exposure. If there was a profit to be had by waiting, on purchase from the mortgagee, on sale to a keenly interested customer, for this difficult and, in some respects, unattractive site, there was no reason why Miss Keeping or anyone else should not have that profit, and no wrong in Mr Phillips being willing to let her have it. She waited some five months for the sale and the defendant was not obliged to wait for any such period. No one suggests that it was so obliged. Such a profit would be available to anyone who bought from a mortgagee in possession and was willing to wait.
The mistake of the defendant was in instructing this surveyor in terms which referred to its legitimate desire to sell quickly, but referred to it in a way which was open to the construction which Mr Kent put on his instructions as to the basis of the valuation which he was required to provide and which the judge held was a reasonable view for Mr Kent to take of his instructions and one open to him.
It was, in my judgment, unfortunate in the interests of everyone known at that time to be concerned in this property that Mr Kent reported as he did and failed to mention the extent of the difference between the valuation he put on the property, according to his understanding of his instructions, and the market value to which he was invited to refer and to which he did refer. I agree that in the circumstances of this case, on the findings of the judge, he was not in breach of any legal duty he owed to these particular clients in so failing to deal further with the matter. The defendant has thus fallen between the duty owed to its mortgagor and the unhappy language of their letter of instructions to the surveyor. The judgment of the learned judge cannot, in my view, be disturbed.
Judgment was given for the third party, Mr Michael Kent, with costs.
