Royal Bank of Scotland (BOS) has fought off allegations that it sold a Devon property at a quarter of its actual worth.
Deputy Judge Bernard Livesey QC has rejected claims by Margo Freeguard, who was entitled to proceeds from the sale only after a £205,000 mortgage had been discharged, that the bank should have sold the site for £260,000.
The judge said that he was “not persuaded” that the £60,000 sale price received by BOS in June 2000 was “less than the proper price achievable”.
According to Freeguard, the 0.06 acre site in the village of Brixton had a ransom value because it provided the only means of access to an adjacent field known as Cloudesleigh, which had the benefit of planning permission for five large houses.
She claimed that, in January 2001, the owners of the neighbouring field had sold the ransom site, together with Cloudesleigh, for £527,000 and that the ransom land comprised around one-half of the site’s development value.
However, Mr Livesey QC said that in order for the mortgage to be discharged and for Freeguard to benefit from the sale, BOS would have to have sold the property for at least £205,785.
“In my judgment, the bank had no prospects whatsoever of achieving a figure in excess of this on a sale at that time,” he said.
He added: “Where the mortgaged land is a ransom strip, the best price reasonably obtainable on a sale by a mortgagee is not the open market value but the price that can be obtained only from the person with the special interest in purchasing it.
“Whether the best price has or has not been achieved is very substantially, if not entirely, dependent upon what that person is prepared to pay at that specific time.”
The dispute is the second in which Freeguard and her husband, Roger, have been involved concerning the ransom site. In 1998, the Court of Appeal ruled that the bank’s charge took priority over Freeguard’s rights under an option agreement with the site’s owner, JL Edgar & Sons, in the mid-1980s.
The Freeguards had sold the land, along with their own substantial property, Brixton Lodge, to JL Edgar in order for the company to carry out a nine-house development project, but had retained an option to repurchase the ransom strip at the same price.
Freeguard v Royal Bank of Scotland plc Chancery Division (Bernard Livesey QC, sitting as a deputy judge of the division) 19 May 2005.
Roger Freeguard appeared for the claimant; Teresa Peacocke (instructed by Cobbetts, of Manchester) appeared for the defendant.
References: EGi Legal News 19/05/05
