Action against valuer for alleged negligence fails — Valuer appointed by president of the RICS to determine rent under review clause in a lease of industrial premises — Rent to be the ‘fair rack rental market value’ — Valuer determined a rent of £15,000 per annum, the landlords’ figure being £20,765 and the tenants’ £12,000 — Landlords claimed that in determining a rent as low as £15,000 the valuer had been guilty of professional negligence — Evidence reviewed by judge at length — Conflicting opinions by expert witnesses as to the effect on value of such matters as limited access to the premises, the layout, the noise level and the rents of premises cited as comparable — Criticisms of valuer rejected by judge — Neither the broad allegation of negligence nor the particularised complaints had been established — ‘Indeed, it would all seem to indicate that he came fairly near to the true mark’ — Plaintiffs’ action dismissed
This was an
action by Belvedere Motors Ltd, plaintiffs, alleging professional negligence against
Douglas James Edward King FRICS, of King & Co, London EC1, in carrying out
an assessment of rent as a valuer appointed by the president of the RICS in
pursuance of provisions in a lease of premises known as Unit 1, Monaco Works,
King’s Langley, Herts. The defendant was appointed, in accordance with the
lease, to act as an expert, not as an arbitrator.
J M Henty
(instructed by Levene, Phillips & Swycher) appeared on behalf of the
plaintiffs; J P M Phillips QC and D Pearce-Higgins (instructed by Barlow, Lyde
& Gilbert) represented the defendant.
Giving
judgment, KENNETH JONES J said: This is an action for professional negligence.
In it the plaintiff (Belvedere Motors Ltd) alleges that the defendant (Douglas
King) has been guilty of negligence in assessing rent as an independent
surveyor; as a result of that negligence it has suffered loss and claims
damages accordingly.
Let me start
with the premises involved. They are referred to as Unit 1, Monaco Works,
King’s Langley, Hertfordshire. An aerial photograph shows the premises bounded
in red. Originally, Unit 1 was divided into two parts, the part which is
bounded with a green line within the red (which has been referred to as Unit
1a) and the remainder of what is now Unit 1. By a lease dated August 24 1972
the original lessors demised Unit 1, less Unit 1a, to the original lessees for
a period of 30 years from August 12 1972 at a rent of £7,000 per annum. On
January 17 1973 those parties entered into a deed of variation, which had the
effect of grafting on to the lease the part 1a that was to be demised for the
residue of the term of 30 years in the original lease, and the rent reserved
was £3,250 per annum. The combined effect of the lease and deed of variation
was this. By the beginning of 1973 the original lessors had demised to the
original lessees the whole of Unit 1 for a term expiring on August 12 2002 at a
rent of £10,250 per annum. The lease provided for rent reviews at five-yearly
intervals; thus, the first rent review was due on August 12 1977. The method of
ascertainment of the new rent was clearly set out in the proviso to clause 1 of
the lease and what had to be determined was the fair rack rental market value
of the demised premises, which was defined in clause 1(ii) as being:
the best rent
at which the premises might reasonably be expected to be let for a term equal
in length to the then unexpired portion of the term . . . in the open market by
a willing Landlord to a willing Tenant and subject to similar covenants and
conditions . . . to those contained in this Lease.
In 1974 the
reversion became vested in the plaintiff and in 1976 the leasehold interest was
assigned to a company (A B G Rubber & Plastic Ltd) to whom I shall refer
hereafter as ‘the tenants’.
As the time
for review drew near, the plaintiff consulted valuers (Derek Gwynne & Co of
Luton) and they advised that the proper new rent should be £20,765 per annum.
The tenants consulted other valuers (R J Aitchison of Hemel Hempstead) and they
advised that the proper new rent should be £12,000 per annum. There was such a
wide divergence between those figures that the parties to the lease were unable
to agree a new rent; they were unable to agree even on an independent surveyor
to determine that rent for them. Clause 1(iii) of the original lease provided
that in those circumstances an independent surveyor or valuer should be
appointed on the application of the parties ‘by the President for the time
being of the Royal Institution of Chartered Surveyors’. The clause went on to
provide that:
such independent
surveyor or valuer acting as an expert and not as an arbitrator
Accordingly,
the parties made such application and on September 5 1977 the president of the
Royal Institution of Chartered Surveyors appointed the defendant as such
independent surveyor or valuer.
his determination. His determination was in these terms:
I hereby
assess the fair rack rental market value of the said premises as at the
relevant date of review namely the eleventh day of August 1977 to be £15,000
per annum and I hereby determine and fix that the yearly rent to be paid by the
Tenant during the second period of the five years of the term as from the rent
review date shall be £15,000 per annum.
The plaintiff
alleges that the defendant was negligent in making that assessment.
Fortunately, the law is wholly straightforward. The defendant did owe to the
plaintiff a duty of care and that duty is adequately set out in Charlesworth
on Negligence, 6th ed, para 945, where it says:
Nature of
Duty.
The duty of
architects, surveyors, building contractors and engineers is to use the
reasonable care and skill of such persons of ordinary competence measured by
the professional standard of the time.
That was the
duty of care which the defendant owed to the plaintiff. That is the duty of
care which it says he has breached.
It is obvious
that in an assessment such as this a considerable element of expert judgment
must be employed. Experts using care are likely to arrive at different
decisions, but those decisions one would expect to fall within a bracket. There
has been no evidence at all before me as to what that bracket should be, but Mr
Henty on behalf of the plaintiff has contended that that bracket should be one
of 10 per cent either side of what may be held to be the correct answer. In
putting that figure forward he takes the analogy of the figures used by Watkins
J (as he then was) in Singer & Friedlander Ltd v John D Wood
& Co (1977) 243 EG 212, [1977] 2 EGLR 84. The learned judge in that
case adverted to that bracket of 10 per cent and decided that the evidence
which had been called before him justified the employment of such a bracket, in
the sense that if the valuation fell outside that bracket that fact, of itself,
would be prima facie evidence of negligence. In this case, as I have
said, I have had no such evidence as was available to Watkins J. Of course, a
decision which falls well outside such a bracket, whatever its value as
evidence of negligence, would certainly give cause for those adversely affected
to inquire as to whether or not negligence was the cause of such a discrepancy.
In this case the defendant can only be found guilty of negligence if it can be
shown that he has omitted to consider some matter which he ought to have
considered, or that he has taken into account some matter which he ought not to
have taken into account, or in some way has failed to adopt the procedure and
practices accepted as standard in his profession and has so failed to exercise
the care and skill which he, on accepting the appointment, held himself out as
possessing.
I wish to
stress, as I have done repeatedly in the course of this case, that it is not my
task here to assess the rent. It is not my task in any way to seek to replace
the defendant’s figure with some other figure which I have determined. It is in
a very real sense no part of my duty to decide whether the defendant’s figure
was right or wrong. The only relevance of the correctness or otherwise of his
assessment is as possible evidence of negligence; that is, the correctness of
his assessment becomes relevant only if it is shown that it is so significantly
below what would have been a correct assessment that it leads to the conclusion
that he must have been guilty of one of the acts of omission of commission
which would constitute negligence on his part.
I come now to
the evidence which has been made available to me. There is a wide area of
undisputed evidence, as might well have been expected. That came, principally,
from documents, and in some part that undisputed evidence has come from
witnesses who were called to give evidence before me.
I turn, first,
to the premises on this Monaco site. I have already referred to the aerial
photograph (D6). There is a site plan (P1) which suffers from the inadequacy
for the purposes of this judgment that it concentrates exclusively upon Unit 1
and does not show clearly the remaining units on this site. Nor does it show
one matter about which I have heard a considerable amount of evidence, namely,
the access road. That is clearly shown on the plan annexed to the deed of variation
and is coloured brown thereon. It starts at Station Road at the northern edge
of the plan, it then travels in an easterly direction to where one can see the
words ‘private access road’, it then turns in a southerly direction and runs
alongside the buildings of Unit 1 (not quite to the end of those buildings,
that is, to the southern end of them) and stops short at a point which can be
identified as the prolongation of the northern boundary of what is called the
‘main access and parking area’. That is shown, perhaps not 100 per cent
accurately, on the aerial photograph or on the overlay to it; it is there
marked brown and is shown as going to the end of the Unit 1 buildings. However,
that is a discrepancy which is of no material importance.
I have also
had made available to me some 10 photographs which appear at the back of a
report made by Mr J Phillips of Henry Butcher & Co (D2). These are good and
clear photographs. It can be seen immediately from a consideration of the
aerial photograph and these photographs that this whole Monaco site was
originally constructed as one factory. I believe it was so constructed either
immediately pre-war or immediately post-war. The opinion has been expressed by
witnesses (and I accept it) that it was obviously a factory of good standing.
It consisted of a block at the northern end, to which it may be convenient if
not wholly accurate to refer as ‘the office block’, and some 10 days. There was
a car park in front of the offices. There was good access from Station Road to
the factory bays; that provided not only access but parking area. It was a
factory built to an extent behind residential property, but reasonably easily
visible from Station Road. There was also provided an access lane running from
Station Road to the car park in front of the offices, and a continuation of
that lane which ran down the side of the offices and the first few factory bays
and joined in to the main access area. That lane, to which I have referred in
two parts, obviously now constitutes the road coloured brown to which I have
already made reference.
That was the
original good standard factory. It has now been divided into four units. They
can be seen from the overlay of D6 to be Unit 1 (with which I am immediately
concerned), Unit 2, Unit 3a and Unit 3. That division into four units is the
principal cause of all the difficulties which have arisen in this case. It is
something which has made the assessment of rents a matter of some complexity.
As Mr King very graphically put it: it was like taking the carcase of a lamb
and cutting off the head and shoulders, then dividing it even lower than that;
thus producing at the head end (which is Unit 1) an odd sub-unit which consists
of a very high proportion of office premises in relation to factory premises.
The next
matter, about which there is no dispute, is the interior layout of each of
these units. That is to be seen in a sketch at D7. The first page shows the
ground floor of the office block, the four factory bays, and the link building
which joins those two constituent elements. The ground floor of the office
block is used by the present tenants (or was used by the tenants at the
material time) as to three-quarters workshop and stores, as to about
one-quarter a works’ office. It is right, of course, as Mr Henty has reminded
me, that in making an assessment of rent the valuer is not bound by the
particular use which the tenant is making of the property at the time: he must
look at it, as it were, through the eyes of some notional willing tenant who may
come in from the open market. Of course it is right that such a notional tenant
would observe one very odd feature about the ground floor of this block,
namely, that the ceiling height is 30 ft. That is very substantially higher
than is to be found in present-day offices, which are usually 8 ft to 8 ft 6
in. Photograph 3 in D2 shows this feature very clearly. It can be seen that the
windows on the ground floor are very much higher than one would expect for
offices: higher than the level of the porch over the door. That leads me to
suspect that that ground floor was designed originally not simply as offices,
but probably more for some form of special store or showroom.
The link
building is in itself an oddity. It provides only a restricted passageway from
the office block to the factory, and there is within it restricted headroom.
That can be seen from a drawing at D5, where it is obvious that rolled steel
joists have been put in, supporting the rear wall of the office block and the
front wall of the factory bays: thus reducing the headroom to 6 ft 3 in. The
other feature,
with the result, to which I have already adverted, that the office space here
is really out of all proportion to the factory area. Referring to the office
space, of course I include not merely the ground floor shown on p 1 of D7 but
the first floor which is shown at D2, which clearly consists of a number of
small offices and purely ancillary stores and toilets.
Unit 2 is
shown at p 3; that consists of a further three bays of the original factory to
which has been added in the course of time a small extension providing offices,
kitchen and an entrance lobby. But Unit 2 has worked out very well for
practical purposes. It provides a good, clear area of workshop with a good
loading door, such that a lorry can be driven into it, for example, to deliver
heavy machinery which may be required. The offices and ancillary accommodation
bear a very reasonable relationship to the area workshop, and, of course, the
whole unit has excellent access and car-parking facilities, which were those
designed for the original factory.
Units 3 and 3a
are also shown on D7. I do not propose to refer to those in detail because they
are substantially different, either from Unit 2 or Unit 1. They proved to be of
little assistance in the problem which has faced the valuers in this case.
The next
matter of undisputed evidence is the immediate location of this site. Again,
this can be seen from the aerial photograph. It is away from the road. It is
set behind residential properties and that has this feature: the residential
properties share the road coloured brown as an access to their garages. Another
outstanding feature of the immediate location is that the unit lies alongside
the railway; that is, the main electrified railway line which carries all the
traffic from Euston Station to the Midlands and North West of this country.
Trains pass along it with very considerable frequency, being separated only by
a matter of minutes, and the distance from the eastern wall of the office block
and the factory bays to the side of the train as it is passing on the nearest
track would be only of the order of 30 ft.
The general
location of this site can be seen from the plan which is P2. I do not propose
to refer to this in great detail. The site is in King’s Langley. King’s Langley
is an ancient village which lies on the main A41 road. A short distance to the
south is Watford, and almost exactly the same distance to the north is Hemel
Hempstead. Both of those are major industrial centres; as Mr Phillips described
them, they are two substantial, self-contained and self-generating areas.
Watford is close to London. It is recognised nationally as an industrial area.
Hemel Hempstead is much the same size now. It is a newer town. It has very
large, modern, industrial estates, and they are ideally situated with very easy
access to the M1.
By contrast,
the site of these Monaco Works lies in the valley between Watford and Hemel
Hempstead, a valley through which passes the A41, the railway to which I have
already referred, the canal and the river. Mr Phillips described the whole
situation as being rather like a dumb-bell, with Hemel Hempstead forming one
ball and Watford forming the other, with the valley, like the shaft, between
the two. It is that valley in which these premises are situated.
That provides
the whole physical background to the matters which I have been called upon to
consider.
I have had the
advantage of hearing five witnesses. Mr Ercott, the managing director of the
plaintiff, was called on its behalf to give evidence; Mr N R Aitchison, the
valuer who originally advised the tenants, was also called to give evidence.
Both of those witnesses really were called to give purely factual evidence on
comparatively minor matters. Although Mr Aitchison did repeat the opinion which
he had originally expressed, I do not think that the defendant placed a
considerable reliance on that. More importantly, of course, I heard the defendant
himself. I heard two expert valuers: one, a Mr M A Roe, was called on behalf of
the plaintiff, and the other, a Mr J M Phillips, was called on behalf of the
defendant.
I turn now to
the witnesses and the evidence which they gave. First, the defendant (Mr King).
Let me say immediately that in so far as he gave evidence of fact, I accept his
evidence without reservation. His qualifications are clearly of the highest. He
is a senior partner in the firm of King & Co, who are chartered surveyors
in the City. It is a large firm with some 25 partners. He has been the senior
partner since 1963. It is a partnership which is concerned mainly with
industrial properties in the United Kingdom and abroad, and Mr King’s
speciality is that he runs the valuation section. He has very frequently acted
for landlords and tenants in about equal proportion on rent reviews, and he had
up to the time of this review in 1977 been called on about 20 occasions to act
as an independent surveyor. It would be both unreal and unfair if I in any way
overlooked the fact that he was appointed by the president of his professional
body to act in this case. I have no doubt, whatsoever, that he would not have
been so appointed unless he was well and highly regarded within his own
profession.
He told me
that the method which he adopted in making the assessment was this. First, he
received and read the lease and the deed of variation. He saw from the lease
the precise problem which he was called upon to resolve. I refer, of course, to
the definition of the ‘fair rack rental market value’ which appears in clause
1(ii). He saw from the lease, and as he knew from his appointment, that he was
called upon to act as an independent valuer. I was impressed by the way in
which he gave content to that word ‘independent’ in the course of his evidence
by saying that he was called upon to be fair to both sides. There was one
further matter which emerged from a perusal of the lease and deed of variation,
that was that the only access provided was over the road coloured brown on the
plan. I accept from the evidence which I have heard that, in fact, lorries
going to this unit used both the road coloured brown and the main access road.
I would have been surprised had things been otherwise. But what struck Mr King was
that there was no right of way whatsoever granted to the tenants over any
access road, apart from the road coloured brown on the plan. He took the view
(in my judgment, the only tenable view) that he could place no value simply
upon the fact that lorries used the main access road, because that use was
founded upon no legal right beyond some possibly gratuitous licence which could
be as easily and quickly withdrawn as it had been impliedly granted.
The next thing
that happened was that he received, read and considered two reports which were
sent to him by the valuers who had acted for or had advised the respective
parties. Those two documents appear in the bundle entitled Derek Gwynne &
Co’s ‘Statement of Claim’ and R J Aitchison’s valuation report. They argued the
cases on each side and referred to comparable properties. Mr King noted that
the superficial areas for this unit were agreed.
The next
matter was that he had a knowledge of the general area, which came, first of
all, to him privately because he had lived all his life not very far away in
Hadley Wood, and it also came to him professionally through work which had been
done in the area by his firm.
On October 12
he visited the site. He spent 1 1/2 hours looking in detail at Unit 1 and, so
far as was possible, at other units on the site. Next, he addressed his mind to
the question of comparable properties. He rejected both Watford and Hemel
Hempstead as a source of such comparables. He said that he did not regard
Watford as a comparison; among valuers Watford was regarded as a more desirable
area than King’s Langley, with higher rents. He took the same view, as I
understand it, of Hemel Hempstead: there dealing with large, new, estates,
quite different from the site which he was here considering. In that connection
it did not escape his attention that Mr Gwynne in his report had referred to
the Finway Development. Mr Gwynne seems to have placed some reliance upon that
as a comparable. It so happened that Mr King had been involved in that
development, and he explained that that was a new property erected in 1975 and
the position was that at the time it had not been let but was available; that
is, it had been offered to the market, at about £2 per sq ft. There was no
evidence that the landlords had achieved that figure. But he did regard that
(he told me) as a sort of ‘high tide mark’: that whatever figure was correct
for Monaco Works, it could not go as high as £2 per sq ft, which was the
offered figure for a newer and better-situated site in Hemel Hempstead.
He looked,
also, at neighbouring premises. He noticed two in King’s Langley during his
visit and he caused his assistant to obtain particulars of those. (They
referred to units which were being
He knew of an area to the north at Apsley, in which one of the roads was
called Frogmore Road. He had there been concerned with a unit just under 4,000
sq ft, and he said that he had there been involved in a rent review. He had
formed the view in that instance that the rental value of the property was
about £1.75 per sq ft. Of course, he had known from Mr Aitchison’s report that
there were a number of properties in that area (that is, the Frogmore Road and
Ebberns Road area) all of which appeared to command low rental values per sq
ft. He also noticed two properties at the southern end of the valley, at Hunton
Bridge. He had some details of those.
The upshot was
that having addressed his mind to these comparables he considered that they
offered him little, if any, assistance. He came to the conclusion that the only
real and useful comparable was Unit 2 on the Monaco site. He said that he
concentrated, so far as comparability was concerned, on that unit. He
considered the rental history of the units on the Monaco site. He took a
further step of obtaining rateable values of the units on that site. Having
amassed that information he applied to it all his judgment as an experienced
expert. With the possible exception of the obtaining of the rateable values
there is no criticism of the steps which he took. Even including the obtaining
of the rateable values it is accepted by the plaintiff and its advisers that
the steps that he took in arriving at his determination were wholly in
accordance with the standard professional practice.
The way in
which he applied his judgment was that he decided to start by arriving at a
figure of the rental value per sq ft, and then applied that figure overall to
the whole of the superficial usable area of the unit. It has to be remembered
that he had been told that the areas had been agreed; he had been supplied with
the figures; and there was agreement between the total figures, though there
was a slightly different breakdown in Mr Gwynne’s report and Mr Aitchison’s
report. But in this computation Mr King decided to omit the non-productive
areas, such as toilets, kitchens, passage-ways and so on. It appears in the
event that he was, perhaps, a little generous to the plaintiff in that regard.
I believe the figure put forward by Mr Gwynne for those areas was 625 sq ft,
whereas, in fact, Mr King deducted a lesser figure by about 140 sq ft. That is
a very small matter indeed. However, he had to arrive at a figure for a rental
value per sq ft.
He had very
much in his mind certain disadvantages attaching to Unit 1. One was the, as he
saw it, considerable disadvantage arising from the limited access. He regarded
that as a serious matter. It is, of course, plainly to be seen in the plans and
photographs. It is, perhaps, not altogether surprising that Mr Roe succeeded in
driving a 10-ton lorry down there, turning it and bringing it out, reversing it
and so on. But it is manifestly a sub-standard access. Common sense and an
examination of the sort of access which was provided for the factory,
originally, must drive one to that conclusion. Of course, that still leaves for
the valuer’s determination how far, or to what extent, it is to be regarded as
sub-standard, to what extent should its inadequacies be reflected in the rental
valuation. There were also, as an ancillary matter, difficulties associated
with loading. Every lorry has to unload at right angles to the factory; the
lorry cannot be driven into the factory. But there is no need for me to enlarge
upon these aspects of the matter.
He regarded
the layout of the factory (with which I have already dealt) as being a
disadvantage; the disproportion between the office building and the factory
bays; the restricted access from one to the other through the link building. He
was impressed by the noise from the railway: the vibration caused by passing
trains. That affected, in particular, the first-floor office building where the
offices in the fullest sense were located by the existing tenant. This tenant,
or an earlier tenant, had had to resort to the installation of double-glazing
to try to reduce the noise. That was one disadvantage of the site to which Mr
King felt justified in having regard.
He then looked
at the comparison between Unit 1 and Unit 2. Unit 2 provided him with a basis.
He had been given certain figures by Mr Gwynne which resulted in his having
this information: that a rent review had taken place with effect from March 25
1978. The figure had been determined in 1977 and was due to become effective as
from March 25 1978. That figure was £2 per sq ft. He regarded Unit 2 as being
comparatively free from the disadvantages attaching to Unit 1. Unit 2 had good
access, good loading facilities, and a good practical layout. Even as far as
the noise of the railway was concerned it was better off, because it had no
glazing in its eastern walls (unlike three of the four bays in Unit 1). And, of
course, its offices (such as they were) were on the western side of the
building and, thus, insulated by the factory itself from the noise of the
railway. He also took account of the fact that Unit 2 was substantially smaller
in size than Unit 1. Unit 2 had a superficial area of about 4,000 sq ft. Unit 1
had a superficial area of about 9,100 sq ft. He knew from his experience that
smaller properties today command higher rents. There are various explanations
for that which have been put forward, but they do not really matter. The fact
is, it is agreed by all valuers that a small unit commands, proportionately, a
higher rent than a large one.
Having Unit 2
in the back of his mind and taking account of the disadvantages which he saw
attaching to Unit 1, Mr King decided as a matter of first impression that the
appropriate figure was that of £1.50 per sq ft. Then he reflected and decided
that that was too low, and increased it to £1.60 per sq ft. He then multiplied
that figure by the superficial usable area (as he judged it to be), namely,
9,104 sq ft. He arrived at a figure of £14,566, which he rounded up to £15,000.
That is how he tackled the problem. That is how he reached his determination.
I have said
that I accept, unreservedly, what Mr King says when he is speaking to matters
of fact. It is, of course, to be borne in mind that he is entitled to stand in
his own right as an expert witness whose opinions are entitled to be regarded
and taken into account by this court. But, of course, as an expert witness he
is not independent of this case. He is a defendant.
The next
witness of importance was Mr Roe, the valuer called on behalf of the plaintiff.
He is a partner in the firm of Gordon Hudson & Co, who have offices in
Watford and King’s Langley. Their offices are concentrated in the area which is
being discussed in this case. Mr Roe qualified as a [chartered] surveyor in
1964. Prior to that he passed through a district valuer’s office, which left
him with a rather dismal view of the usefulness of valuations made in such an
office in determining valuations on the open market. He joined his present firm
in 1968, first as an industrial negotiator, then as a senior surveyor, and
(more recently) he has become a partner. He obtained his fellowship of the
[Royal] Institution [of Chartered Surveyors] in 1977. His firm is widely known
as a firm of estate agents in residential properties. But they do, in addition,
deal with industrial properties and have substantial experience in that side of
the business in the area with which this case is concerned. On one occasion Mr
Roe had been called as an expert in a rent valuation that related to shop
premises in Rickmansworth.
It can be seen
from that recital of Mr Roe’s qualifications and experience that he is a
younger, substantially less experienced, man in his profession than is Mr King;
or, indeed, Mr Phillips, to whom I shall refer in due course. That is not a
matter of criticism. It is a matter which requires only the passage of time to
rectify. But I would be looking at matters unrealistically if I did not take
some account of that disparity in experience as between Mr Roe on the one hand
and Mr King and Mr Phillips on the other. The strength to which Mr Roe lays
claim is that he is a local man. He says the local man knows his local area.
His valuation
here produced a rent of £19,000 as contrasted with the £15,000 determined by Mr
King. Mr Roe (as he is fully entitled to) criticised Mr King. He expressed the
view that the disadvantages to which Mr King referred had been overstated by Mr
King. As far as access was concerned, he initially regarded that as being no
disadvantage whatsoever; or, more accurately, not in any way such a
disadvantage as should fairly be reflected in the rental value. Indeed, he made
no allowance whatsoever for any disadvantage attaching to the access in his
valuation. When pressed on the matter he expressed the opinion that even if one
did make an allowance for such a disadvantage, the allowance should be no more
than £500 out of the total annual sum. He took a rosier view (if that is the
right expression) of the noise problem. But he agreed that both the
disadvantage of the access and the disadvantage arising from the noise were
matters of opinion. With regard to the layout and
was a matter of opinion. Certainly, as will be seen in due course, in financial
terms he must have regarded it not so much as being of disadvantage but of
being of very considerable advantage.
I turn now to
Mr Roe’s opinion as to comparables. He criticised Mr King for not having placed
any reliance whatsoever upon properties which could be found in Watford and
Hemel Hempstead. He thought that even in valuing a property in the village of
King’s Langley, one should have regard to comparable sites in the two large
industrial centres to the south and to the north. There was clearly a
disagreement between his view and Mr King’s view in a matter of which, perhaps,
experience would be of value.
It is
interesting that when Mr Roe lighted upon a site which did not suit his
valuation, he ignored it. I hope that I am not putting that unkindly. When it
came to the Apsley area of Hemel Hempstead, where rents were low, his view was
simply: ‘Here is an area where rents are low. I don’t know why, but there must
be some special reason’ — what Mr Henty has referred to as a ‘contagion’
applying to that little area — and therefore they should be ignored. But he
does lay himself open to at least a passing suspicion that they were to be
ignored because they did not suit his book. He agreed that it was Unit 2 on the
Monaco site which provided the best information and in that sense was
outstandingly comparable when determining the rent of Unit 1. He agreed that in
determining the rent of Unit 1 some allowance must be made for the question of
size; that is, some recognition must be given to the fact that smaller units
command higher rents than larger units. (In referring to smaller units and
larger units in this judgment I am, of course, referring to units of 5,000 sq
ft and less as being smaller units, and units of about 10,000 sq ft as being
larger units.) There was, at least, agreement
on that point between Mr Roe and the other experts.
He criticised
Mr King for not making inquiries of local estate agents. He seemed to think
that Mr King ought to have been on the phone and writing to local agents
seeking information from them. I do not think he went quite so far as to say
that he should have picked their brains. Mr King gave his explanation as to why
he did not adopt that course. He said he certainly would not allow himself to
be influenced by the opinion of any other estate agent; that would detract from
his own independence. And, of course, there always arises the question of the
reliability of information which is obtained in this way. This is no reflection
in any way upon estate agents, but information comes in different ways and can
only be reduced to any measure of certainty by going to the site, looking at it
and obtaining a good deal of information about it. Mr King took the view that
anything beyond what he did would have been an expensive waste of energy on
behalf of those parties for whom he acted.
Mr Roe
criticised Mr King for taking notice of rateable values. This arose from Mr
Roe’s unhappy experience in the district valuer’s office. He may or may not be
right. Even if he were right the use which Mr King made of those rateable
values was minimal. He used them only as a very rough check upon his own
determination. In my judgment, no complaint can reasonably be made about that.
Generally, I would not regard the criticisms made by Mr Roe as carrying
sufficient weight as to lead me to, or anywhere near to, the conclusion that Mr
King had been negligent in any of those respects.
Mr Roe’s
assessment can be seen in the green summary sheet in the file P2. It is the
first entry in that summary. What he did was to separate the offices from the
factory workshop in the application of a rental value per sq ft. There is no
suggestion by any of the other valuers that this was an impermissible method,
but it has produced the surprising result that when the rents for Unit 1 and
Unit 2 are reduced to one overall figure of a rental value per sq ft the rental
value for Unit 1 is higher than that for Unit 2. This must be a result which is
inconsistent with the agreed view of all the valuers that the smaller unit must
be expected to command a higher rent than the larger unit. That leads me to
suspect that Mr Roe has taken an unwarrantedly high figure for the offices. It
is to be noted that he has taken as offices worthy of quite separate
consideration something between one-quarter and one-third of the whole of the
superficial area of the premises. This also leads me to suspect that what he
has done in taking the figures per sq ft for the two components is: that he has
made insufficient allowance for the disadvantages applying to Unit 1. Briefly,
therefore, I cannot accept £19,000 as an assessment as being so unquestionably
correct that £15,000 has been shown to be wrong in the sense of being so
significantly inadequate as to point to negligence on the part of Mr King.
Finally, I
heard the evidence of Mr Phillips. He is the senior partner in the firm of
Henry Butcher & Co. That is a firm with offices spread throughout this
country and on the Continent. It is an old-established firm of valuers,
surveyors, agents and auctioneers specialising in the fields of industrial
property, plant and machinery. Mr Phillips joined the firm in 1955. He is a
fellow of the Royal Institution of Chartered Surveyors, and since joining the
firm he has been engaged regularly in dealings with, and valuations of,
industrial property throughout the United Kingdom and Europe. He has also acted
as an independent surveyor or arbitrator appointed by the president of the
institution. He told me that he had general experience of the area under review
here. That gave me the impression that he did not have an immediate knowledge
and could not be described in Mr Roe’s words as ‘a local man’, but he certainly
had experience of the area as being one of the satellite areas of London. He is
obviously a surveyor of considerable standing and experience. His opinion,
where it clashes with that of Mr Roe, I find preferable.
He agreed that
there were serious disadvantages attaching to Unit 1. I need not go into the
details of his evidence, but I am referring, of course, to the access, the
noise and the layout of the premises. For example, he took the view of the
access that it was ‘appalling’. Be that as it may, that was a matter of
opinion; an opinion which he was entitled to hold. He agreed that Unit 2 was
such in its layout and size that it would command a higher rent than Unit 1.
But he did not rely upon it directly as a comparable. He adopted in that
respect a rather different approach from Mr King. His valuation produced a rent
of £14,000. How he arrived at that figure can be seen from p 36 of his report
(D2). The method he employed was, in a sense, midway between the method
employed by Mr King and that employed by Mr Roe.
Mr Phillips
started from the proposition that an overall figure for rental value per sq ft
can be applied to the superficial area of a factory and offices together,
provided that the offices represent no more than 10 per cent of the total
space. In his opinion any area of offices over that 10 per cent should be
assessed at a higher rate. He took a basic figure for the factory and assumed
10 per cent offices at £1.40 per sq ft. He said that that was a figure which
was the product of no particular mathematical exercise, nor was it directly
derived from any comparable. It was one which he produced in the exercise of
his expert and informed judgment. For the extra office space over the 10 per
cent he thought that the appropriate figure was £2 per sq ft, and he applied
that not merely to the offices but to, what I call, the non-productive area
such as toilets and so on. Adopting that method he produced a figure of
£14,317, which he rounded down to £14,000. I hope from that exposition that it
can be understood why I say that his method was midway between the methods
adopted by Mr King and Mr Roe. Of these various methods Mr Phillips said that
none is right and none is wrong. Any one of them is permissible to a valuer,
but whatever one is applied it should produce, broadly, the same answer as any
other.
It is of
interest in this connection that if one takes the superficial area used by Mr
Phillips and deducts from it the non-productive areas, as the other two valuers
have done, producing a figure of 8,964 sq ft, and divide that into his ultimate
figure of £14,317, a figure of £1.60 per sq ft is produced. It is immediately
noticeable that that is precisely the figure that was taken by Mr King. So it
follows that if Mr Phillips had used the precise figures which Mr King had used
for superficial areas, he would have produced exactly the same answer as Mr
King. In the event, in the final figure there was only a difference of some
£200 to £300. The difference of £1,000 in the valuation arises because Mr
Phillips’ figure was such that he felt justified in rounding it down, and Mr
King’s figure was such that he felt justified in rounding it up. Accordingly, I
accept Mr Phillips’ valuation. Again, bearing in mind that I am not here
determining the rent, I can and do accept Mr Phillips’ opinion and calculations
as most certainly rebutting any suggestion of negligence on the part of Mr
King.
This long and,
I hope, not too wearisome route which my judgment has taken leads, ultimately,
to Schedule D4. That schedule is self-explanatory, save in one respect; namely,
that the column headed ‘Net Internal Floor Area’ represents the measured areas:
areas measured by Mr Roe on behalf of the plaintiff, and by Mr Phillips (or a
member of his firm) on behalf of the defendant. It is agreed that no argument
based upon this schedule is in any way imperilled by taking the defendant’s
measurements. That in itself, when one comes to Unit 2, may be less than fair
to Mr King because he worked upon figures supplied to him by the plaintiff’s
own expert valuer of 4,000 sq ft, which, as can be seen, is quite markedly
larger than the defendant’s measured areas. Be that as it may, any argument
based upon this schedule can be fairly examined for its validity and strength
taking the defendant’s measured figures.
Let me take as
a starting point the third entry which relates to Unit 1 and to the defendant’s
determination. This relates to August 1977 and when reduced to a rental value
per sq ft it comes out at £1.65. There can be put alongside that the figure
produced from Mr Roe’s valuation of £19,000, which would be £2.09 per sq ft. In
those two figures the dispute is encapsulated.
Mr Henty, on
behalf of the plaintiff, has relied forcibly upon this schedule in two ways.
First, he says, one must take as a starting point the rent for Unit 2 (that is
shown as the sixth entry), namely, a rent of £8,000 fixed for a period
beginning March 25 1978. On the defendant’s measured area that total rent
produces a figure per sq ft of £2.09. He concedes that Mr King was dealing with
a rent for August of the preceding year; therefore, to produce a figure for
that date one has to discount the 1978 figure. He suggests that the application
of an appropriate percentage discount would produce a 1977 figure of £1.96 per
sq ft.
Secondly, he
concedes, in the area where judgment must apply, that some sum should be
deducted in respect of the size factor. He relies upon Mr Roe’s evidence that
the appropriate figure would be about 10p per sq ft. He goes further and
concedes within the area of judgment that some deduction should be made for the
inferior access to Unit 1. Again, he takes the figure of £500 suggested by Mr
Roe as the maximum. That, as I understand it, would work out at about 6p per sq
ft. So, from the figure of £1.97 he deducts as being within the permissible
area of judgment 10p per sq ft, then 6p per sq ft, reducing the final figure to
£1.81 per sq ft and he compares that with Mr King’s figure of £1.65 per sq ft.
He relies upon that as showing that Mr King’s figure was significantly
inadequate.
The first
direct and simple answer to that submission would be that the difference which
is then produced is a difference of 16p. Assuming £1.81 to be a ‘correct’
figure, a figure of 16p less is less than 10 per cent out. In that sense,
taking Mr Henty’s own approach (arbitrary though it may be), the difference is
within the permissible limit in the sense that he is saying one cannot regard
any difference within 10 per cent as being prima facie evidence of
negligence. But that, as it were, is taking up Mr Henty’s argument on its own
figures. I see no reason why his final figure of £1.81 should be accepted as
correct or as an appropriate base line. This relates to the deductions which he
has made: 10p for the size element depends on Mr Roe’s evidence. Mr Phillips,
whose opinion I prefer, has suggested that it should go higher: even as high as
20p or 30p. Mr King would have put it even higher than that.
As far as the
access is concerned, there again a figure of £500 or 6p per sq ft is Mr Roe’s
figure. The view of Mr Phillips, and certainly that of Mr King, is that it
should have been higher. If those deductions are increased beyond Mr Roe’s
figure, then the figure of £1.81 per sq ft as a notional 1977 rent for Unit 2
must, itself, be substantially reduced, and the difference between that and the
defendant’s figure of £1.75 either becomes so small as to have no significance
or it disappears altogether.
The next
argument which Mr Henty addressed to me on the basis of Schedule D4 related to
the historical pattern of rents. He points out the figures for 1972. He takes
the rental value per sq ft for Unit 1 as £1.13. The corresponding figure for
Unit 2, again, must be the product of a discounting process because we only
have a figure for February 1 1973, that is, £1.30. That has to be adjusted back
to either December 1972 (the date of the deed of variation) or August 1972 (the
date of the original lease). Without putting too fine a point on it, Mr Henty
suggests that the result of the discounting process should be £1.25. So in 1972
the two rents were, respectively, £1.13 and £1.25. Carrying that forward into
1977 this process must be gone through, and this result produced in 1977 the
adjusted rent for Unit 2 of £1.97 per sq ft. If Unit 1 is to bear the same
relationship to Unit 2 in 1977 as it did in 1972, the figure produced would be
£1.78 per sq ft. Again, argues Mr Henty, that when compared with the
defendant’s figure of £1.65 throws up a difference which is so significant as
to entitle him to base his case upon it. Everything that I have said in
relation to a difference of 16p would apply to this difference, which is one of
13p. It falls within Mr Henty’s permissible 10 per cent margin of error. So
that argument does not avail him.
I bear in
mind, in the context of all these figures and calculations to which I have
referred, the old saying: ‘mathematics make a good servant but a poor master’.
The whole of this matter does not fall to be resolved by the application of
careful and seemingly accurate mathematical calculations. What I have sought to
do in relation to those figures is to show that even Mr Henty’s arguments do
not lead me to the conclusion for which he strives.
Mr Phillips,
on behalf of the defendant, suggests that the broad approach to Schedule D4 is
of some little help here. That shows (he says) that in 1972-73, without going
through any discounting process, the rent of Unit 1 was £10,250 and the rent of
Unit 2 was £5,000. So the rent of Unit 1 was just over double the rent of Unit
2. He says that if one goes forward into 1977-78, without going through any
discounting process, the rent of Unit 2 was £8,000. Mr King’s figure of £15,000
is under (but not substantially under) double that figure. Indeed, if one does
discount the 1978 rent back to 1977, Mr King’s figure is almost precisely
double the rent of Unit 2. There, suggests Mr Phillips, very broadly the same
picture emerges. Over this period the rent of Unit 1 has been (and should be)
about twice that of Unit 2. He suggests that the rateable values produced the
same answer. The rateable value of Unit 1 is £7,400 and the rateable value of
Unit 2 is £3,750. So Unit 1 has a rateable value which is just under twice that
of Unit 2. Again, on that basis suggests Mr Phillips, no complaint can be made
where one finds that the relationship between the rent is about the same. He
does not pretend that these are anything other than the roughest of checks upon
Mr King’s valuation. But, despite all their roughness, they do point to the
correctness of Mr King’s valuation. I accept his submission in that regard. For
what they are worth, they point in Mr King’s favour.
So the whole
of the examination of these valuations, thus far, leads me to the view that it
has not been shown that Mr King was in any way negligent in reaching the
determination which he did. Indeed, it would all seem to indicate that he came
fairly near to the true mark.
Thus far, I
have dealt with the question of negligence, broadly. I have dealt with it in
the way in which it is set out in paragraph 6 of the statement of claim:
The
above-mentioned assessment was made negligently in that the . . . Defendant
fixed the market rent for the premises at a level significantly below the
amount which the Plaintiffs could expect to receive on the open market as rent
for the said premises.
But it would
not be just to Mr King if I were to deal with it wholly upon that basis. That allegation
has been particularised by the plaintiff. Indeed, in answer to a request made
it has given further and better particulars of the statement of claim, and it
is right in a case of professional negligence that it should be held to the
case which it has pleaded. I therefore examine, briefly, the allegations which
have been made in a particularised form. First, it is alleged that Mr King:
(a) Failed to consider the fact that the current
market rents for directly comparable premises varied from £1.70 . . . to £2.00
per square foot.
The plaintiff
was asked to identify by schedule each of the comparable premises that it was
alleged the defendant failed to consider. The answer to that came (perhaps a
little obliquely, but its meaning is abundantly clear) in this form:
it is not
alleged that the Defendant failed to consider the premises set out in the
attached Schedule, but that he failed to consider the current market rents for
the said premises,
On looking at
the schedule which was supplied I see that it refers to the three other units
of the Monaco Works. In other words, the complaint made here is that Mr King
failed to consider the fact that the current market rents of the other units of
the Monaco Works varied as set out in the schedule, which was between £2 and
£2.25 per sq ft.
Mr Henty has
not pursued any arguments in relation to Units 3 and 3a. It is accepted that it
would be difficult to use those as comparables. He has concentrated on Unit 2.
The short answer to his allegations in paragraph 6(a) is that Mr King did
consider the rental value per sq ft for Unit 2. In fact, he took that as the
starting point of his valuation. Earlier in his case Mr Henty applied for (and
I granted him) leave to amend by adding a further particular a(a). This was
something which he felt he needed to rely upon at that stage, but as the case
has progressed that amendment became of no importance. He said in his final
speech that he did not rely upon the allegation contained therein, which I can
perhaps refer to as a refinement of the allegation in paragraph 6(a).
Paragraph 6(b)
alleges that Mr King:
Failed to
give any or any adequate consideration to the amenities provided by the said
premises, in particular excellent rail and road links.
Again, those
amenities were added to in the particulars where it is said:
The premises
are situated in a prominent site in a main industrial area. The premises have
car parking facilities and a private yard directly adjoining them.
That is right
—
The premises
have an additional shared access from the main road.
That is wrong.
It is manifest that Mr King did not fail to give adequate consideration to
those amenities. As to the rail and road links, he knew about them. But, of
course, by adopting Unit 2 as his starting point he was bringing into account
premises with exactly the same rail and road links, whatever epithet is
attached to them.
In paragraph
6(c) the plaintiff alleges that Mr King:
Gave too much
weight to the contention of the . . .
tenants —
that the said
premises suffered from poor access and loading facilities and a shortage of
parking space, whereas there was not evidence to support the said contention.
The answer to
that is that there was ample evidence that these premises suffered in this way;
certainly so far as access and loading facilities were concerned. I cannot
accept that Mr King was negligent in giving too much weight to that contention.
He considered it. As Mr Roe himself said, it was a matter of opinion. The
weight which Mr King gave to those considerations was a matter for the exercise
of his expert professional judgment.
The final
paragraph 6(d) alleges that Mr King:
Failed to
take into account the effect of inflation on industrial property rents.
That allegation
has not been pursued and I heard nothing of it during the course of this case.
Therefore, I need not refer to it further.
In conclusion,
in my judgment the plaintiff has failed to establish a case of negligence
against Mr King in the broad sense, based upon the difference between his
valuation and some ‘correct’ valuation. Equally, it has failed to establish the
precise allegations which it has made, and to which it is tied, in the
particulars which it has given. Accordingly, the plaintiff’s claim against the
defendant is dismissed.
