Valuer instructed by landlord and tenant jointly to assess surrender value of lease–Law transformed by Arenson appeal in House of Lords–Parties bound by valuer’s figure even though valuer be negligent–Aggrieved party’s remedy is action against valuer–Landlord’s proceedings against tenant to upset valuation held to disclose no cause of action
This was an
appeal by Mr John Colin Campbell, of Hertford Street, London W1, from an order
of May J dated March 26 1975 confirming the decision of Master Warren of November
14 1974 and directing that the appellant’s statement of claim in an action
brought by him against the respondent, Miss Irene Donalda Edwards, be struck
out as disclosing no cause of action.
Mr A J Bateson
QC and Mr S R Silber (instructed by Roney Vincent & Co) appeared for the
appellant, and Mr J M Chadwick (instructed by Jaques & Co.) represented the
respondent.
Giving
judgment, LORD DENNING said: We are concerned here with a house in Trebeck
Street in the very centre of Mayfair. It was built about 200 years ago as a
private house, but is now converted to other uses. On the ground floor there is
a restaurant. On the first floor there are offices. On the second floor there
is a residential flat. It has its own entrance from the street, and has three rooms,
kitchen and bathroom. On June 28 1973 the landlords let this second-floor flat
to Miss Edwards for seven years and two months free of rent. The tenant was
liable to do repairs and there was a prohibition against underletting. The
lease contained a special provision that if the tenant desired to assign the
premises she had first to offer to surrender them to the landlord, and the
price was to be fixed by a surveyor to be agreed upon by the parties. It is
clause 11 (b), which says in the material part:
If the tenant
desires to assign the whole of the premises as aforesaid she shall first by
notice in writing to the landlord offer to surrender this lease . . . at a
price fixed by a chartered surveyor to be agreed by the landlord and the tenant
or failing agreement to be nominated by the President for the time being of the
Royal Institution of Chartered Surveyors and the landlord may within 21 days of
the service of such notice upon him accept such offer the acceptance to be in
writing.
Six months
after the lease was made Miss Edwards desired to assign the lease. Under that
clause she had to offer to surrender it to the landlord. By a letter dated
January 17 1974 her solicitors offered to surrender it ‘at a price to be fixed
in the manner provided by the lease.’ By
a letter of January 24 1974 the landlord accepted the offer. Some names of
surveyors were suggested but these were not agreed. Eventually, however, both
sides did agree on a very eminent firm of surveyors, Chestertons, a firm who
were recognised by both to be quite unimpeachable. On March 6 1974 the
solicitors for each side signed jointly and sent a letter to Chestertons. It
referred to the lease and said: ‘It has been agreed between the parties to
instruct yourselves to assess the proper price for the surrender in accordance
with the provisions of the lease.’
Chestertons duly inspected the premises. On March 21 they wrote this
important letter, assessing the price at £10,000:
We confirm
with thanks receipt of your letter of March 6 1974, giving your two firms’
instructions to us to inspect the above premises in order to assess the proper
price to be paid by the landlord to the tenant for the surrender of the residue
of the term of the lease dated June 27 1973. . . . We have read the lease
carefully and have taken into account, in assessing the price to be paid, those
matters set out in clause 3 (ii) (c). . . . After carefully considering the
matter, we are of the opinion that the proper price for the landlord to pay to
the tenant for the surrender of the lease as at March 25 1974 is the sum of
£10,000 (ten thousand pounds).
Following that
assessment, the tenant went out of possession and the landlord went into
possession of the flat. There was some dispute about fixtures and fittings but
undoubtedly there was a surrender by operation of law. The landlord then turned
round and disputed the assessment of the price. He got new valuations for the
value of the remainder of the lease from two other surveyors. Mann Winkworth
made a valuation dated April 18 1974, putting the value as £3,500. Hinton &
Co, on June 18 1974, put it at £1,250. I must say that, even to a layman, that
seems a remarkably low assessment, especially when you remember that there were
over six years to run of this lease and that no rent was payable under it.
Having got those two new valuations the landlord challenged Chestertons’
valuation of £10,000. On June 17 1974 he issued a writ claiming that he was not
bound by it. In the statement of claim he said: ‘The valuation was incorrect in
that the true surrender value of the lease at the specified date was under
£4,000. In the circumstances, Chestertons must be presumed to have assessed the
price in an incorrect manner and their valuation is therefore vitiated.’ He claimed ‘(a) a declaration that he is not
bound by the valuation,’ and (b) ‘an order that the defendant (Miss Edwards)
concur with the plaintiff in obtaining a new valuation.’ Miss Edwards, by her solicitors, put in a
defence and counterclaim, relying on Chestertons’ price and counterclaiming
£10,000. She sought judgment for the £10,000, and she applied to strike out
that statement of claim of the landlord, as disclosing no cause of action. The
summons came before the master and before the judge. Both held that the claim
by the landlord disclosed no reasonable cause of action. They struck it out and
gave Miss Edwards judgment for £10,000. The landlord appeals to this court.
The appeal was
stood over pending the decision of the House of Lords in Arenson v
Casson Beckman Rutley & Co [1975] 3 WLR 815, which was decided only two
weeks ago. The law on this subject has been transformed by two cases in the
House of Lords, Sutcliffe v Thackrah [1974] AC 727 about
architects, and Arenson v Casson Beckman Rutley & Co about
valuers. Previously, for over 100 years, it was thought that when vendor and
purchaser agreed that the price was to be fixed by a valuer, then the valuer
was in the position of a quasi-arbitrator and could not be sued for negligence.
It is now clear that he owes a duty to both parties to act with reasonable care
and skill in making his valuation. If he makes a mistake owing to want of care
and skill he may be liable in damages. If he negligently gives a figure which
is too high, he may be sued by the purchaser; if it is too low, he may be sued
by the vendor. If he wants to avoid
accepts the appointment. Unless he stipulates for exemption, he is liable for
negligence. In former times (when it was thought that the valuer was not liable
for negligence) the courts used to look for some way of upsetting a valuation
which was shown to be wholly erroneous. They used to say that it could be
upset, not only for fraud or collusion, but also on the ground of mistake: see
for instance what I said in Dean v Prince [1954] Ch 409 at p 427.
But those cases have to be reconsidered now. I did reconsider them in the Arenson
case in [1973] Ch 346 at p 363. I stand by what I there said. It is simply the
law of contract. If two persons agree that the price of property should be
fixed by a valuer on whom they agree, and he gives that valuation honestly and
in good faith, they are bound by it. Even if he has made a mistake they are
still bound by it. The reason is because they have agreed to be bound by it. If
there were fraud or collusion, of course, it would be very different. Fraud or
collusion unravels everything. It may be that if a valuer gives a speaking
valuation–if he gives his reasons or his calculations–and you can show on the
face of them that they are wrong, it might be upset. But this is not such a
case. Chestertons simply gave the figure. Having given it honestly, it is
binding on the parties. It is no good for either party to say that it is
incorrect. But even if the valuation could be upset for mistake, there is no
room for it in this case. The premises have been surrendered to the landlord.
He has entered into occupation of them. Months have passed. There cannot be restitutio
in integrum.
I may add that
Mr Chadwick put forward an additional argument. He said, ‘If this valuation is
set aside, what is to take its place?’
The answer is, nothing. The only surveyors on whom the parties have
agreed are Chestertons. The parties are unlikely to agree on any other
surveyors, and Chestertons cannot reasonably be asked to make another
valuation. So there would be nothing to take the place of this valuation. In my
opinion, therefore, the landlord is bound by this valuation of £10,000. I would
just like to add this. The position of a valuer is very different from an
arbitrator. If a valuer is negligent in making a valuation, he may be sued by
the party–vendor or purchaser–who is injured by his wrong valuation. But an
arbitrator is different. In my opinion he cannot be sued by either party to the
dispute, even if he is negligent. The only remedy of the party is to set aside
the award, and then only if it comes within the accepted grounds for setting it
aside. If an arbitrator is guilty of misconduct, his award can be set aside. If
he has gone wrong on a point of law, which appears on the face of it, it can be
corrected by the court. But the arbitrator himself is not liable to be sued. I
say this because I should be sorry if any doubt should be felt about it. This
case is just a postscript to Arenson. The valuation is binding on the
parties. The master and the judge were right, and we dismiss the appeal.
GEOFFREY LANE
LJ: I agree. The parties here had agreed upon a valuer. They had agreed as to
the terms on which the valuer was to value the property and on which he was to
be instructed. The valuation took place, it was acted on, and the tenant
surrendered the lease. It is a common law situation in which there is no room
for an equitable remedy. The most up-to-date and accurate statement of the law
in the circumstances is in a passage of my Lord, the Master of the Rolls’s
judgment in Arenson v Arenson in this court [1973] Ch 346 at 363,
which states as follows:
‘At common
law–as distinct from equity–the parties are undoubtedly bound by the figure
fixed by the valuer. Just as the parties to a building contract are bound by
the architect’s certificate, so the parties are bound by the valuer’s
valuation. Even if he makes a mistake in his calculations, or makes the
valuation on what one or other considers to be a wrong basis, still they are
bound by their agreement to accept it.’
In this case
Mr Bateson has argued that there is sufficient discrepancy between the valuer’s
report and the subsequent valuations obtained by his clients to indicate that
the valuers, Chestertons, must have acted on a wrong principle. He says,
despite the fact that this is not a speaking report, that that wide discrepancy
is sufficient to cast that doubt upon the valuation. I disagree. There is
nothing to suggest that the valuer here did not take into consideration all the
matters which he should have taken into consideration, and where the only basis
of criticism is that another valuer has subsequently produced a valuation a
third of the original one it does not afford, in my view, any ground for saying
that Chestertons’ valuation must have been or may have been wrong.
The other
matter which perhaps I should mention is this. Mr Bateson asked for leave to
amend the statement of claim in order to join the valuer as a defendant as well
as the tenant, alleging that the valuer had acted negligently in his work. This
would have had the effect, desirable from Mr Bateson’s point of view, of
permitting him to obtain discovery, no doubt, of the valuers’ (Chestertons’)
papers relating to their inspection of the premises, and so on, and then to use
that information by way of attack against the tenant so that the valuation
could be set aside vis-a-vis the tenant. It seems to me that it is
undesirable that valuers undertaking this type of duty should be subject to
this additional peril. It is not only technically undesirable; it produces, as
I see it, an anomalous situation, for this reason. If the discovery shows that
there was no negligence on the part of the valuer, then the action against the
valuer will of course fail. If on the other hand the discovery shows that there
was negligence on the part of the valuer, then that means it would be possible,
on Mr Bateson’s argument, to set aside the valuation vis-a-vis the
tenant, in which case no damage would have been suffered by the landlord, and
likewise the valuers would not be liable in negligence. When that sort of
anomalous situation is produced, it cannot be right that this sort of amendment
should be allowed. For the reasons I have already indicated and those
adumbrated by my Lord, I agree that there is no fault in the reasoning or
conclusion of the learned judge and that this appeal accordingly should be
dismissed.
The appeal
was dismissed with costs, and a stay of execution was refused.
