Negligence–Action by purchasers of property for development against estate agents–Complaint that agents’ advice as to expected yield from completed development was wrong and in breach of contract and duty of care–Whether defendant agents had agreed to advise plaintiffs on yield and, if so, whether plaintiffs relied on such advice–Action against agents fails
plaintiffs, property developers, were interested in a property called
Kennelwood, in the Market Place at Hatfield, and purchased it for £278,000 from
the Commission for the
purchase, for which they received payment–Subsequently, however, the plaintiffs
complained that the defendants had, negligently and in breach of contract,
given the plaintiffs bad advice, leading to loss–In particular the plaintiffs
alleged that the defendants had undertaken to advise them on the viability of
the development project and had put forward a yield of 5.5% as what might be
expected on the completed development–Taking this yield figure and the actual
rental income of £46,000 from Kennelwood, the gross value would be £836,363–The
yield figure of 5.5% appeared in a letter dated June 24 1982 from the
defendants to the plaintiffs as having been mentioned by a contact of the
defendants considered to be knowledgeable in the property and agency world–The
response from potential bidders, however, was disappointing, no buyers being
attracted by a price based on a yield of that figure–In fact a London firm
which had been brought into the selling process startled the plaintiffs by
suggesting that a price reflecting a yield of 10% might be more
realistic–Eventually the plaintiffs’ disappointment resulted in litigation in
which they claimed damages to compensate them for the consequences of the
defendants’ alleged negligent advice, based on their inability to sell the
site–The amount of the damages was agreed at £390,000 subject to the
determination of liability
of Leonard J’s judgment was devoted to the review and assessment of evidence
and the submissions on behalf of the parties–The conclusion to which he came
was that the defendants had not entered into an agreement to advise the
plaintiffs and had not in fact advised them on the appropriate yield figure for
the sale of the development site–As regards the crucial letter of June 24 1982,
the judge held that it would be wrong to describe it as giving advice on
yield–It was the result of a purely informal and gratuitous approach to a
personal contact and it merely passed on to the plaintiffs the views of the
contact, the passing on being done casually and without obligation–The
plaintiffs had relied not on the defendants’ advice in making their decision
but on their own assessment and appreciation of the viability of the
development project–A suggestion, based on the judgment of Devlin J in Heskell v Continental
Express Ltd, that the defendants’ advice might have been one of the causes, if
it was not the only cause, of the plaintiffs’ loss, was rejected by the judge;
it had not been established that the plaintiffs had relied at all on the
defendants’ advice–Judgment for defendants
The following case is referred to in this
report.
Heskell v Continental Express Ltd [1950]
1 All ER 1033; 94 Sol Jo 339
This was an action by the plaintiffs,
Civic Structures Ltd, property developers, against Clark Quinney & Co, a
firm of estate agents, surveyors and auctioneers in Hertford. The plaintiffs
complained of alleged negligence or breach of duty by the defendants in
advising the plaintiffs in regard to the viability of a development project
concerning property in the Market Place, Hatfield.
Barry Green QC (instructed by Denison
Till, of Leeds) appeared on behalf of the plaintiffs; Stephen Desch QC and Miss
Deborah Taylor (instructed by Cameron Markby Hewitt) represented the
defendants.
Giving judgment, LEONARD J said:
The plaintiff company carries on business as a property developer from premises
in London. Mr William Shepherd is its principal shareholder, its chairman and
managing director. He has no training or qualification in surveying and
valuation. He has, however, considerable experience of property development,
originally in the residential field, but since 1958 his scope has extended to
commercial developments. Exhibit P1 is a list of his undertakings, showing the
agents appointed by him for that purpose.
Clark Quinney & Co was a firm of
estate agents, surveyors and auctioneers with premises in Hertford. Mr D W
Clark [BSc ARICS] and a Mr D J Quinney [FPCS] were partners. The statement of
claim alleges that Mr R A Withers [BSc ARICS], a witness in the case, was also
a partner. His name appears on the firm’s writing paper, together with the
other two I have mentioned, though there is no specific indication that any of
them is a partner. Mr Withers in evidence stated that he was not. In the event,
nothing turns on the discrepancy.
Mr Shepherd became interested in the
commercial development of a property called Kennelwood in the Market Place at
Hatfield. In December 1982 his company agreed to buy the property for £278,000
from the Commission for the New Towns. Clark Quinney acted for the plaintiffs
on the purchase and were paid commission for so acting.
In its amended form the statement of
claim alleges that in December 1981 and/or January 1982 the defendants were
instructed and/or agreed to advise on the viability of the development project
and thereafter advised the plaintiffs that a yield of 5.5% might be expected on
the completed development. The plaintiffs rely in particular on the defendants’
letter of June 24 1982, to which I shall return more than once later. It is the
plaintiffs’ case that the defendants’ advice was negligently given, in breach
of the duty of care owed to the plaintiffs or, alternatively, in breach of
their contractual duty. In their defence the defendants say that they were
initially asked to advise on the likely shop and office rents which would be
obtained from the developed site. In June 1982 they were instructed to act
jointly with a company, Peter Myles & Co Ltd, in connection with the
purchase. They, in common with that company, were asked to make inquiries
about, inter alia, the yield which could be expected. The letter of June
24 1982 was written by Mr Alan Thomas of the defendants in order gratuitously
to pass on to the plaintiffs the information as to the yield which he had
received from a contact at St Quintin, a distinguished London firm of chartered
surveyors. The defendants deny that the plaintiffs relied on any advice given
by them and say that before May 1982 the plaintiffs had already made up their
minds to purchase the property.
The plaintiffs claim damages to
compensate them for the consequences of the alleged negligent advice, based on
their inability to sell the site. It is unnecessary to say more about the
question of damages because they are agreed at £390,000, subject to liability.
It is crucial to the plaintiffs’ case
that they were wrongly advised by the defendants as to the yield to be expected
from the developed property. Yield is a figure which is expressed as a
percentage. It is based on the assumption that the developed property is
completely let on full repairing leases for terms of 25 years with five-yearly
reviews. The yield is the rental income received, related to the total capital
invested in the development. An investor buying the fully let property as an
investment will require a yield which will vary according to the expected
growth in the rental income he will receive. If the prospect of growth is small
he will require a higher yield. If there is a good prospect of growth, then he
will be content with a smaller yield.
The yield having been determined, the
value of the development can be calculated by dividing the actual rental income
by the yield figure. Hence, to take the yield figure of 5.5% referred to in the
letter of June 24 1982 and the actual rental income of £46,000 which was
achieved in respect of the Kennelwood development produces a gross value of
£836,363: that is £46,000 divided by 5.5 multiplied by 100. However, if the
correct yield is as pleaded by the plaintiffs in their statement of claim —
that is 9% — the value is a good deal less, namely £511,111. If the defendants’
expert’s figure of 8% is right, it would be £575,000.
As to determination of the appropriate yield
figure, I conclude that, for example, an estate agent will form a judgment
based on his experience of and his research into local conditions. I have seen
an example of a Goad plan which sets out certain information about the location
and the general nature of properties in the shopping area of Hatfield which
includes the Kennelwood property. I accept that, unless an adviser already
knows the area, he would be unable properly to advise without making an actual
visit to see it and the property referred to.
In June 1981
Welwyn Hatfield District Council approved, in principle, the proposals of the
Commission for the New Towns to develop Kennelwood, which was a mock Georgian
building in a shopping area. The plan was to build shops at the front of the
existing building. They would be available for letting as well as the office
accommodation which the structure already contained and which was to be
extended. During the course of time the number of shops was increased in order
to improve the rental income. Unfortunately, from the developer’s point of
view, a ramp was to be constructed so
only from a raised walkway. This and other factors affected the value of the
development.
Mr Shepherd’s evidence was that he had no
previous experience of development in Hatfield. He saw an advertisement for
Clark Quinney as ‘leading commercial agents’. He telephoned to ask if they
would work with the plaintiffs to secure the investment. They agreed. Thereafter,
Mr Shepherd’s dealings were mainly with Mr Alan Thomas, who was not qualified
and was not a partner, though he had been involved in estate agency work since
1975 or 1976. On January 14 1982 the Commission announced that they had had
offers at the quoted premium of £250,000 and that the purchaser was to be
selected on the basis of informal tender in excess of that sum. The defendant
submitted an offer of £278,000, on behalf of the plaintiffs, which was
accepted. It is Mr Shepherd’s evidence that the yield figure of 5.5% was given
to him by Mr Thomas or Mr Withers at a very early stage, he thought in January
1982. Mr Shepherd had had earlier dealings with Mr N P Myles of Peter Myles
& Co Ltd in connection with selling property as an investment to an institution
and had been impressed with his usefulness in this respect. Therefore, in June
1982, Mr Myles’ company became, for a time, joint agents with Clark Quinney in
the sale of the investment in Kennelwood.
Mr Shepherd denies that he relied on any
advice from Mr Myles with regard to the value of the property. Mr Myles raised
doubts as to the figure of 5.5% for yield, but Mr Shepherd took no notice
because he thought that Mr Myles was trying to get a better deal in respect of
his part in the transaction. On June 22 1982 Mr Thomas wrote to Mr Shepherd the
letter which is exhibit 140 saying that he had made further inquiries with his
‘contact’ at St Quintin about yield, type of purchaser, specification, etc and
that he expected to be able to report back to Mr Shepherd shortly.
There is a note of a telephone call which
Mr Thomas had with Mr C J Forbes [ARICS], who was his ‘contact’. On June 24 Mr
Thomas wrote a letter of that date to Mr Shepherd. I shall quote it in large
part. It contains these words:
As you will have noted, I am now in
direct contact with Mr Myles [sic] with regard to the sale of the
investment, and I have received further information from my contact at St
Quintin’s. A yield of 5.5 per cent may be expected on the completed development
and it is likely to interest insurance companies. The offices should be
completed to a good standard with gas fired central heating to radiators. It
will need to be fully let to achieve 5.5 per cent; for pre-funding 6.5 per cent
should be expected. I trust this provides the information you require at this
stage and, as I shall be away from the office until Monday, 12th July, Roger
Withers will be looking after this project in my absence.
The significance of the difference in
yield between 5.5% and 6.5%, which is referred to in the letter, is that if the
developer decides on a presale to an institution, which is financed by the
institution in advance, he must expect to ‘drop’ 1% of the expected yield. That
is, it becomes 6.5% as against 5.5% which would be expected from a development
which is financed by the developer himself.
It is perhaps important to note that the
headed paper has at the top of the sheet the words ‘commercial and professional
department’. That was, as the evidence indicated, effectively Mr Withers and Mr
Thomas, Mr Shepherd’s evidence was that if he had not received that letter,
which I have just quoted, he would have abandoned the project in respect of
Kennelwood.
On October 18 1982 Mr Thomas wrote to Mr
Shepherd saying that he had had the opportunity of showing Kennelwood to Mr
Forbes of St Quintin, thus, by implication, saying that Mr Forbes had not seen
it previously. On January 5 1983, Clark Quinney submitted an account for the
fees which were due to that date. It is for a total of £4,795.50 including
value added tax, and it is said to be ‘to commission charges in respect of
acting on behalf of Civic Properties in negotiating with the Commission for the
New Towns and forwarding the matter to eventual acquisition of Kennelwood
House’.
According to Mr Shepherd, the overall
total paid, which included a fee for letting the shops and offices of
Kennelwood to tenants which was not included in the account from which I have
just quoted, was about £10,000. It was Mr Thomas’ evidence that if Clark
Quinney had been advising on yield and Mr Shepherd was relying on that advice,
it would have been covered by the fees paid on the acquisition of the property;
in other words, the £4,795.50. However, it is the defendants’ case that Clark
Quinney were not advising on yield.
On June 11 1984 Mr Thomas wrote to Mr
Shepherd on the headed paper of the newly formed firm of Withers Thomas which
Mr Withers and Mr Thomas had formed. They, on their headed paper, are shown as
commercial and residential property agents and they were operating from an
address at Ware. The letter confirmed that Withers Thomas and St Quintin were
to be joint agents in the sale of the investment of Kennelwood. On July 6 1984
St Quintin agreed to carry out a valuation of Kennelwood for the purpose of a
proposed loan by Guinness Mahon & Co Ltd, the bankers. The value of the
freehold is put at £575,000. I would add only the comment that it is clearly a
very detailed document, covering a number of pages, and, if that is the
prototype for a valuation, then one has nothing of that kind passing from the
defendants in this case. But, of course, it is right to add that that was a
valuation for the purposes of a mortgage.
On August 6 1984 St Quintin wrote to Mr
Shepherd in pessimistic terms about their efforts to sell the investment,
saying that the main reason for the numerous rejections they had experienced
seemed to be the character of Hatfield as a centre. On September 4 1984 they
advised a substantial reduction in the asking price. A figure which would show
an investor a yield of 7% was suggested. Mr Shepherd described the letter as
‘disappointing’ and agreed to a sale on that basis as soon as possible. On
November 5 1984 St Quintin wrote to Mr Shepherd repeating that there had been
an extremely disappointing response to the proposal to reduce the purchase
price and containing the words:
Whilst I appreciate that it is a very
long way from the original advice on value that you received, I believe that it
will be necessary to quote a figure reflecting an initial yield of ten per
cent. This suggests a figure of, say, £450,000.
I have omitted inessential words.
Three days later, on November 8 1984, Mr
Shepherd replied to St Quintin enclosing a copy of Clark Quinney’s letter of
June 24 1982, with its reference to a yield of 5.5%, saying:
I find it impossible to reconcile the
suggestion that we sell the investment at ten percent against the advice
tendered by you through Clark Quinney, or against your firm’s valuation made
only a few months ago. In these circumstances I have no option but to withdraw
the property from you and reserve what rights we have in this matter.
Mr Shepherd sent a copy of that letter to
Mr Thomas with a covering letter which began ‘Dear Alan’. It includes the
words:
If the outturn is as disastrous as St
Quintin indicates, I shall have to consider whether an action lies in respect
of this matter. It is all very depressing, as it must be for you, because you,
too, appear to have been misled.
The defendants place emphasis on the
concluding sentence. In cross-examination Mr Shepherd put forward the
explanation that he did not write to Withers Thomas in terms similar to those
used in his letter to St Quintin because that letter was written to complain
about the sale of the investment, which was much more in St Quintin’s hands
than it had been in Clark Quinney’s. Mr Shepherd maintains that he now believes
that Mr Thomas’ letter of June 24 1982, with its reference to information from
his contact at St Quintin and a yield of 5.5%, was untrue. If he had realised
this on November 8 1984 he says that he would not have written, as he did, to
Mr Thomas on that date.
The ‘contact’ as he was called, Mr
Forbes, was not called as a witness by either party to these proceedings. Nor
was anybody else from St Quintin, his firm, called. The basis for Mr Shepherd’s
belief, he says, is that he is now convinced that Mr Forbes was not in a
position to confirm the yield, because the letter of June 24 1982 makes no
mention of a visit to the property, without which he believes St Quintin would
not have given the confirmation. I have already referred to Mr Thomas’ letter
of October 18 1982, with its implication that Mr Forbes had only recently seen
Kennelwood.
Mr Shepherd added in evidence that he was
mentally reserving his rights against Mr Thomas and awaiting legal advice. I
have had regard to Mr Shepherd’s explanations. I do not take the view that they
are put forward deliberately to deceive the court. However, I think that they
are advanced with the benefit of hindsight, aided, no doubt, by the expert
evidence to the effect that a surveyor would not commit himself to a
determination of the yield without a view of a property with which he was
unfamiliar.
On March 1 1985 Mr G de Mornay Davies,
the plaintiffs’ ‘in-house solicitor’ wrote to the defendants drawing their
attention to the 5.5% yield figure in their letter of June 24 1982, contrasting
it with the 10% figure in St Quintin’s letter of November 5 1984, and inviting
Clark Quinney to offer some clarification. Thereafter, correspondence continued
in first-name terms between Mr Shepherd and Mr Thomas. On October 4 1985, to
complete the picture, the writ was issued.
A further document produced by the
plaintiffs upon which the defendants place reliance in support of their case
was one of the letters which were the subject of a Civil Evidence Act notice
served by the plaintiffs under Ord 38, r 22 of the Rules of the Supreme Court.
It is a letter dated May 8 1986 from Mr Myles (now deceased) of Peter Myles
& Co Ltd to Mr de Mornay Davies. Mr Myles had been asked to confirm that
figures contained in his letter to Mr Shepherd dated July 20 1982, and his
accompanying appraisal relating to Kennelwood, were given to him by Mr Thomas —
or a partner or member of the firm Clark Quinney. That letter of July 20 1982
refers to a 5.5% yield. In his reply to the solicitor’s letter, Mr Myles
explained that his file relating to Kennelwood had been destroyed but his
recollections were, nevertheless, fairly clear. I quote substantially from the
letter:
As I remember it, Mr Shepherd asked my
opinion of the current funding market in relation to this particular
development, construction of which was about to start, and also said that a
yield of 5.5 per cent would be necessary to achieve an adequate profit. I
replied that in my view it would be difficult to obtain such a yield, but said
that I would discuss rental values, etc with Clark Quinney and would prepare an
appraisal based upon a 5.5 per cent yield. I then spoke to Clark Quinney. I
cannot remember for sure to whom I spoke, but it doubtless was Mr Thomas, and
confirmed the rental values for the appraisal. In this conversation I think
that reference was made to the question of what yield might apply. It was only
in very general terms since my recollection is that Mr Thomas had no definite
views on the matter.
It is the last-quoted sentence upon which
a great deal of emphasis is laid. The letter continues:
I then prepared the appraisal in the
light of the information given to me basing it on a 5.5 per cent yield and sent
it to Mr Shepherd in the letter to which you refer.
I shall return to the significance of the
letter in due course. In general the defendants rely on it as supporting their
case that they were not advising Mr Shepherd on yield and that he had his own
views on that subject. In general terms Mr Shepherd’s evidence was that it is
his practice to rely on local estate agents. He saw the defendants’
advertisement describing them as leading commercial agents and telephoned them
to ask if they were interested in working with his company to secure the
investment in Kennelwood. Most of his dealings were with Mr Thomas. The yield
figure of 5.5% came from the defendants in January 1982. Originally he could
not remember whether it was given by Mr Thomas or Mr Withers, but later he said
that the judgment on yield was Mr Thomas’. The defendants evaluated the
property and no one else did. He had very little memory of events, apart from
the documents, but he had no doubt that he asked Clark Quinney for their views
on yield. Without them he would have been ‘like a man without a head’, to quote
his own phrase. Mr Shepherd told me in evidence that Mr Thomas had very
positive views on yield and added that 5.5% was Mr Thomas’ judgment and not
his, Mr Shepherd’s.
Under cross-examination about his having
put faith in what Clark Quinney had told him, he replied: ‘If memory has let me
down I apologise.’ He added that if the
plaintiffs had asked them for a detailed valuation of the property Clark
Quinney would have charged for it, but not for simply advising on yield. Mr
Thomas did not say that he was not qualified to advise on yield according to Mr
Shepherd.
Mr M J Redman [FRICS], the senior partner
of a firm of estate agents in Hertford, described Clark Quinney as a medium-to-large
local firm. He said they were the leading commercial agents in Hertford. It was
his view that a developer could get an accurate value of a property only by
consulting a local agent. Mr Thomas agreed that Clark Quinney was one of the
larger commercial practices in the area and that Mr Withers and he ran the
commercial and professional department together. However, he maintained that he
was not in a position to advise a developer on yields. Given the yield figure
and the rent, he could calculate the capital value. I would add the personal
comment that the calculation is not a difficult task once one knows the
formula, which is very simple. The determination of the yield itself is,
however, something which requires skill and judgment and experience and is a
different proposition.
Returning to a summary of Mr Thomas’
evidence, it was that on the occasion of their first telephone conversation he
told Mr Shepherd that he was not competent to advise on yield. He added that Mr
Shepherd himself was more experienced in this field than he was and Mr Shepherd
did not ask him to advise. Mr Shepherd was very enthusiastic about the
development from the beginning. Mr Thomas’ calculations, which appear in the
agreed file, such as they were, were done to satisfy himself that the scheme
was a practical possibility in order to avoid his wasting his time. In June
1982 Mr Shepherd told Mr Thomas that he was still looking to a yield of 5.5%
and that his contacts in two very large firms of London agents had confirmed it.
He asked Mr Thomas to confirm the figure with his contact at St Quintin, hence
Mr Thomas spoke to Mr Forbes on the telephone and retailed the result in the
familiar letter of June 24, having first told Mr Shepherd about it orally —
probably on the telephone — when Mr Shepherd asked him to put it in writing,
with the result that the letter was written.
Mr Forbes did not ask to see the
property. The request to him was very informal, of a kind which is very common
between agents. Mr D T H Deagle [FRICS], one of the plaintiffs’ expert
witnesses, agreed that very often agents are helped on the telephone on a
casual basis by their professional acquaintances without there being any
question of liability if the advice given is wrong. Similarly, developers
telephone agents and ask them for advice without instructing them formally. If
Mr Shepherd had been asking for professional advice on which he was going to
rely, Mr Thomas said that he would have required Mr Forbes to visit the
property before giving an opinion. Afterwards Mr Shepherd did not suggest that
Mr Thomas had advised him on yield or reproach him for giving misleading
advice. Mr Thomas did give advice to Mr Shepherd on the rents to be charged for
the shops and offices but said that as to yield it was Mr Shepherd himself who
told Thomas what he wanted: namely 5.5% or 6%.
Mr Withers confirmed that Clark Quinney
did not carry out valuations for investment and development purposes. He said
that developers were very experienced and had their own views about value. If
Mr Shepherd had asked his views about yield — which he did not — Mr Withers
might have expressed a very qualified opinion only on the basis that it was not
to be relied upon. He described the purchase of Kennelwood as ‘a client-led
acquisition’ and said that Mr Shepherd instigated the ultimate offer price of
£278,000.
Mr Clark, the founding partner of Clark
Quinney, gave evidence that the role of the commercial and professional
department, consisting effectively of Mr Withers and Mr Thomas, did not, so far
as he was aware, extend to practising in the field of commercial property
investment: certainly not in the sense of their giving advice on investment and
yields.
I turn now to the arguments advanced by
counsel on both sides on Tuesday of this week. Mr Stephen Desch QC, for the
defendants, emphasised that the events in this case are now nine years old,
therefore memory will have declined. Mr Shepherd has conceded that his memory
was not so good as it was. He must, therefore, rely to some extent on
reconstruction, aided where possible by documents. It is the defendants’ case
that some of the contemporaneous documents are inconsistent with the
plaintiffs’ case and so are the inherent probabilities. Mr Desch submits that,
by contrast, when Messrs Thomas, Withers and Clark gave evidence that Clark
Quinney did not advise on yield for investment purposes, they were giving
evidence upon a matter on which their memory could not be defective, therefore
they would have to be guilty of a conspiracy to give false evidence if their
testimony were to be rejected. The defendants submit that the contemporaneous
documents support their case. In particular, Mr Thomas’ rough notes are, it is
submitted, consistent with his explanation that he was making calculations in
order to confirm that the scheme was a viable one and that he was not wasting
his time. The notes are not indicative of Mr Thomas’ doing calculations to
arrive at a yield figure or of his getting information from others on that
topic.
Mr Barry Green QC, for the plaintiffs,
makes the point that in a number of the manuscript notes a yield of 5.5% or 6%
features. He invited me to reject Mr Thomas’ explanation as to why he did the
calculations and why he retained them in the file. The plaintiffs argue that
they were retained because they were done for the benefit of Mr Shepherd and
not for Mr Thomas’ personal satisfaction.
It was urged on behalf of the defendants
that the absence of written confirmation of advice on yield indicates that
there was no such advice. It was Mr Thomas’ evidence that if he had given
advice, for example on the telephone, he would have confirmed it in writing.
When Mr Shepherd was invited to instruct the defendants as to the offer they
should submit on his behalf by way of informal tender, Mr Thomas’ letter to Mr
Shepherd concluded with the words ‘it would be appreciated therefore if I could
have your instructions’. When the tender of £278,000 had been submitted, Mr
Thomas wrote to Mr Shepherd, saying ‘I have now submitted your offer’. The
point was
amount. Mr Green submitted that the absence of written confirmation was
inconclusive because, for example, there was no confirmation to Mr Shepherd of
the defendants’ admitted advice about rents or of their being instructed to
negotiate the purchase of Kennelwood from the commission.
A further point was made by Mr Desch
arising from Mr Thomas’ letter of May 17 1985 to Mr Shepherd in which he wrote:
I would not wish to comment specifically
about value; but it certainly did appear from the earlier marketing that the
consensus of opinion was around the 9 to ten per cent mark, but you should
perhaps take your own advice on this if you require our assurance.
It was submitted that the letter was
inconsistent with Mr Thomas’ knowing that he had previously advised Mr Shepherd
on yield.
My attention was drawn to documents
emanating from Mr Shepherd which, it was submitted, are inconsistent with his
case. In Mr Shepherd’s letter of June 18 to Mr Myles, which ended with the
sentence ‘I really cannot take less than 5.5 per cent on this’, there was no
indication that the 5.5% figure came from the defendants. By contrast, in the
letter of August 17 1982, between the same persons, the revision of the
expected rents — I emphasise that word — is attributed to Mr Thomas. The
possibility of having to accept a 6% yield is mentioned but without attribution
of its source.
Mr Desch submitted that Mr Shepherd’s
letters of November 8 1984 to Mr Thomas and to Mr R H F Merriam of St Quintin
effectively reflect the defendants’ case. I have referred to these letters, in
which Mr Shepherd was withdrawing property from St Quintin and reserving his
rights in the matter, concluding the letter to Mr Thomas with the words ‘It is
all very depressing as it must be for you, because you, too, appear to have
been misled’. Thus, it was in November 1984 that Mr Shepherd wrote to St
Quintin reserving his rights in the matter. A writ was issued against the
defendants on October 4 1985. Between these dates, in May 1985, Mr Shepherd
wrote the three letters in which he expressed concern about the price which
might be obtained for Kennelwood and invited Mr Thomas to advise whether there
was any prospect of getting someone to offer more. After jogging Mr Thomas’
memory and receiving his letter, to which I have already referred, Mr Shepherd
wrote on May 20 expressing gratitude for Mr Thomas’ assistance. Mr Desch makes
the point that the correspondence is inconsistent with the plaintiffs’ case in
that Mr Shepherd must, by then at least, have suspected that Mr Thomas had been
negligent if Mr Shepherd’s contentions are correct. Yet he is ‘grateful’ for Mr
Thomas’ help.
The defendants argue that the crucial
letter of June 24 1982 did not constitute advice nor was it expressed in terms
which are consistent with its being advice. It is submitted that Mr Thomas’
explanation of the circumstances in which the letter was written is a credible
one. He said in evidence that Mr Shepherd asked him to put the results of his
inquiry at St Quintin into writing. Mr Thomas did not think that the request indicated
that Mr Shepherd attached importance to the contents of the letter. Mr Thomas
accepted that what he did amounted to nothing more than humouring his client.
Mr Forbes’ opinion about yield could have no value; it was purely an informal
opinion. Mr Thomas understood that Mr Shepherd had himself taken informal views
from estate agents and had asked Mr Thomas to do the same.
I turn now to a more detailed
consideration of the two letters of November 8 1984 addressed to Mr Thomas and
to St Quintin respectively. Mr Green argued that it is understandable that at
this stage Mr Shepherd had in mind Mr Thomas’ letter of June 24, attributing
the further information that a yield of 5.5% might be expected to his contact
at St Quintin. It was only after Mr Shepherd had access to Mr Thomas’
manuscript notes in the correspondence that he realised that advice about yield
and price must have been given by the defendants during the early period — that
is from December 1981 to February 1982. Therefore, Mr Green submits, when Mr
Shepherd wrote ‘you, too, appear to have been misled’, it was not right to say
that he was, to use a phrase which has been used in cross-examination, ‘letting
Mr Thomas off the hook’.
Mr Desch drew my attention to the
explanations put forward by Mr Shepherd for the two letters of November 8 1984.
Under cross-examination Mr Shepherd conceded that it might have been better to
let Mr Thomas know that he was contemplating suing him, but he attributed his
failure to do so to his being ‘charitable and gracious’, to quote his words. Mr
Desch poured scorn on that part of the answer. It was further submitted that
the relevant fact which came to Mr Shepherd’s notice after November 8 was that
Mr Forbes and St Quintin had not seen Kennelwood. The source of that information
was, as Mr Shepherd accepted in cross-examination, the letter of October 18
1982 to which I have referred. Therefore Mr Shepherd had the means of knowing
that Mr Forbes had not visited the property from that date, long before
November 1984.
In essence, the defendants submit that
the two letters of November 8 1984 cannot be explained in the way Mr Shepherd
sought to explain them. I was invited to reject the explanations and to
conclude that no reliance was placed upon Clark Quinney in regard to yield.
Furthermore, the correspondence is confined to the subject of the letter of
June 24 1982, a copy of which, as I have indicated, was sent to St Quintin. Mr
Desch submits that this is inconsistent with advice having been given by Clark
Quinney at the end of 1981 or the beginning of 1982.
A further point made by Mr Desch with
regard to the status of the letter of June 24 1982 was to this effect: if Mr
Shepherd had regarded it as having contained advice upon which he was relying,
he would, on receipt of the letter of October 18, have realised that Mr Forbes’
advice was worthless. At that time he was not committed to the purchase. On
September 16 the commission had expressed concern about delay in exchanging
contracts. A memorandum by the plaintiffs’ in-house solicitor dated October 13
stated that exchange must be by the end of October. On October 25 a letter from
the firm of solicitors acting for the plaintiffs in the transaction makes it
clear that the exchange had still not taken place. Therefore, says Mr Desch,
there was an opportunity for the plaintiffs to get proper advice about yield
and to withdraw from the transaction if it were unfavourable. That this did not
happen and there was no complaint about the fact that Mr Forbes had not
inspected the property indicates, it is submitted, that Mr Shepherd was not
relying upon the contents of the letter of June 24 1982. Therefore the approach
to Mr Forbes through Mr Thomas was an informal one, non-contractual and
involving no responsibility on the part of Mr Thomas or Mr Forbes.
Mr Green counters this argument by
reference to the correspondence immediately preceding the June 24 letter
showing that Mr Thomas was saying that he had made further inquiries with Mr
Forbes and expected to be able to report back to Mr Shepherd within the next
day or so. Then Mr Thomas noted his telephone conversation with Mr Forbes. Mr
Shepherd asked him to confirm it in writing, which, of course, resulted in the
letter of June 24. It was common ground that Mr Shepherd made the request. Mr
Green argued that even if Mr Thomas was only ‘humouring the client’, the
defendants are still liable if Mr Shepherd accepted the advice on yield.
A subsidiary matter which has arisen
during the course of the hearing relates to the fact, already noted, that Mr
Forbes has not been called as a witness to deal with the advice or information
which he gave to Mr Thomas and the circumstances in which it was given. I was
told that Mr Forbes was in court, apparently as a result of a subpoena issued
by the defendants, on at least one occasion during the trial. Mr Green
submitted that it fell naturally to the defendants to call the witness. He
asked me to reject the defendants’ explanation for not calling him: namely that
he might feel that he had to justify himself and might pass responsibility to
the defendants. Mr Green said that there was no reason why Mr Forbes should
tell other than the truth. He invited me to draw an inference unfavourable to
the defendants from their failure to call him. I find difficulty in applying
that proposition fairly and logically in practice.
In his closing speech Mr Desch complained
that no explanation was forthcoming for the plaintiffs’ fundamental amendment
to their case. As originally pleaded, it alleged that the defendants were instructed,
or agreed, to advise on the viability of the Kennelwood project in or about May
of 1982. Further, it was alleged that they did advise the plaintiffs that a
yield of 5.5% might be expected in the letter of June 24. It was not until the
second day of the trial of this action that an application was made to amend.
It was opposed, but I thought it proper to grant it. Consequently, the amended
case was that the defendants were instructed, or agreed, to advise on the
viability of the project in December 1981 or January 1982. It was alleged that
on numerous occasions between December and the following July the defendants
advised orally on the telephone and in the letter of June 24 that ‘a yield of
5.5% may be expected on the completed development’.
It was submitted on behalf of the
defendants that the reason for the amendment alleging that the advice was being
given between
the documents. The defendants’ case is that, once he knew his offer for
Kennelwood was accepted, Mr Shepherd went ahead with his plans for the
development. For example, on March 30 1982, Mr Thomas wrote to Mr Shepherd
reporting that matters were moving ahead and enclosing copies of agreements and
leases from the commission. The letter confirms that Mr Thomas was writing to
tenants of Kennelwood about specified matters. Thus it is argued that in
reality Mr Shepherd had no misgivings about the scheme and had no need to
obtain legally binding advice from the defendants of the kind alleged to have
been contained in the June 24 letter. Therefore it was argued that it was
necessary for the plaintiffs to allege, as the amended statement of claim did,
that the advice began to come from the defendants as early as December 1981.
Mr Desch submitted that it was
inconceivable that Mr Shepherd’s in-house solicitor should have incorrectly
instructed the plaintiffs’ then counsel or that experienced counsel would have
failed to plead the case as it now appears in the amended statement of claim.
It is argued on behalf of the defendants
that further light is thrown on the status of the June 24 letter, and the
evidence of Mr Thomas with regard to it is corroborated, by the exhibited
documents. In the minutes of a meeting of June 18 it is recorded that Mr Thomas
would be getting in touch with St Quintin about a possible finance institution
to take the development. As we have seen, Mr Thomas’ letter of June 22 records
his inquiries with his contact at St Quintin regarding yield, etc. On August 26
Mr Thomas wrote to Mr Shepherd reporting his discussion with Mr Forbes about
various aspects of the specifications for Kennelwood. These matters, it is
submitted, are consistent with Mr Thomas’ evidence that his approach to Mr
Forbes was an informal one, not creating any obligation or liability.
As I have already stated, the defendants
placed reliance in support of their case on Mr Myles’ letter of May 8 1986. I
have already quoted the document substantially. The defendants say that the
letter is an independent piece of evidence and that it is irreconcilable with
the plaintiffs’ case but consistent with that of the defendants. Mr Green
emphasises that in the letter Mr Myles wrote: ‘. . . my recollection is that Mr
Thomas had no definite views on the matter.’
Those words, it is suggested, indicate uncertainty of recollection. What
Mr Myles said cannot now be tested by cross-examination and the precise
circumstances of the conversation are unknown. Mr Green submitted that, as Mr
Myles’ function was to find an institution to buy Kennelwood before it was
developed, the reference to Mr Thomas’ having no definite views on the matter
of yield must be a reference to yield for prefunding purposes. It is apparent
from the evidence that such a yield would be about 1% higher than normal. Mr
Green says that it does not follow that Mr Thomas did not express definite
views about yield to Mr Shepherd in the December 1981-February 1982 period and
in the letter of June 24 1982. In assessing the importance of Mr Myles’ letter,
I bear in mind all these submissions.
I now turn to a number of points raised
by Mr Green on behalf of the plaintiffs to which I have not yet sufficiently
adverted. I was reminded of Mr Shepherd’s evidence that he would not be aware
of the appropriate rates for yield in different parts of the country. Therefore
it was mandatory for him to go to a local agent for advice. In this connection
I was directed to exhibit P1 which, as I have already said, is a list of Mr
Shepherd’s developments, one version of which shows the agents concerned. They
are mostly local, as opposed to London, agents. I am asked to infer that Mr
Shepherd consulted them about yield as he said that he did. I was reminded of
the expert evidence given on behalf of the plaintiffs to the effect that it was
essential to go to local agents for advice on yield. Mr Thomas’ manuscript
notes, to which I have already referred, have references to yields of 5.5% and
6%. I am asked to reject his explanation of why he made the notes and why he kept
them. Mr Green says that they are viability appraisals made for the benefit of
Mr Shepherd. As to Mr Thomas’ evidence that Mr Shepherd had told him of two
firms of London agents, both of whom had said that the right deal was 5.5%, Mr
Green makes the point that it is too much of a coincidence that those agents
should have arrived at the same inaccurate figure as we are concerned with in
this case.
However, Mr Shepherd denies that he had
or said that he had such advice. The evidence of the defendants is that the
figure came to them from Mr Shepherd. They cannot say for certain what its
ultimate source was. For my part, I do not find it inherently unlikely that Mr
Shepherd, who was certainly an experienced developer and whose company employed
its own solicitor, should have, from some source or other, firm views about the
yield to be expected. I should find it more surprising if he relied almost
solely on the advice of an unqualified estate agent, who was relatively young
and wholly unknown to him previously, in so large an enterprise as the
Kennelwood development.
A major topic in this case has been that
of the expertise of Mr Thomas and Mr Withers in the assessment of yield
figures. The point is made that the defendants’ own expert agreed that the
so-called investment method of valuation was the appropriate one for
Kennelwood. At the material time the shops and offices were all let. Emphasis
was laid upon Clark Quinney’s ‘with compliments’ slip, which is headed ‘advice
in all property matters by qualified professional staff’ and contains a
reference to ‘commercial agency, business transfer, shop, office and factory
letting, sales, management, valuations’. One of the plaintiffs’ experts, Mr
Readman, gave evidence that in 1982 the defendants were a leading firm of
commercial agents in Hertford. He added that to his mind they were the leading
agents. Mr Green argued that the defendants had tried to draw a spurious
distinction between investment sales, as to which they said they were not
qualified to advise on yield, and other sales. In counsel’s submission, the
investment method was the appropriate one for assessing the market, whoever or
whatever the intending purchaser may be. He pointed out that the bundle of
Withers Thomas sales particulars, exhibit P5, relates to 10 commercial
industrial properties all of which, with one possible exception, were already
let. Therefore, the investment method would be appropriate. Therefore, it is
said that the distinction advanced by the defendants is invalid. However, as I
have already noted, the evidence indicates that there is a real distinction
between the level of yield applicable to prefunded developments and other
properties intended for sale for investment purposes.
I do not find it incredible that Mr
Thomas might feel that the exercise of assessing yield on Kennelwood was beyond
the limit of his then experience. It was the plaintiffs’ submission that it
would be highly unlikely that Mr Thomas would tell Mr Shepherd that he was, in
effect, not qualified to deal with this topic. Mr Green suggested that in such
a situation Mr Thomas could have played for time and taken the resulting
opportunity to ask somebody else’s view. For my part, I find that a somewhat
disturbing suggestion. Mr Green, however, supported it by reference to one of
Mr Thomas’ pages of calculations where the words ‘sort of yield’ appear. Mr
Thomas said that he wrote those words as a memorandum that he should find out
what sort of yield might be expected and added that he assumed he would have
done so by asking somebody. In my judgment, there is a substantial difference
between advising a client on yield and arriving at a figure for some
calculations which depended to some extent on estimates. Counsel urged me to
the view that at any rate it is unlikely Mr Thomas would be undertaking a
viability appraisal merely to avoid the possibility of his wasting his time.
Because there was, unfortunately, a
substantial gap between the conclusion of the evidence and the closing speeches
of counsel, I have thought it right to reassure the parties by an unusually
detailed survey of counsel’s submissions as well as by some reference to the
evidence. I hope thereby to show that the separated parts of the case have been
brought together at its conclusion. Both counsel were good enough to reduce
their submissions to writing as well as addressing me upon them. Mr Green asked
me to read the concluding pages of his address to myself and further commended
to me the reports and evidence of the experts. In the circumstances I have not
thought it necessary to cover all of the material contained in the final
submissions, though I have referred, I hope, to most of it.
One aspect of the defendants’ case was
that the absence of written advice by the defendants as to yield indicates that
such advice was not given. It was Mr Thomas’ evidence that he was meticulous in
confirming advice when he gave it. Mr Green set out to show that Mr Thomas did
not always confirm important matters in writing. Examples included the fact
that there was no instruction sheet or letter confirming the defendants’
instructions to negotiate the purchase of Kennelwood. Until June 14 1982 there
was no confirmation of Mr Thomas’ advice on shop rents.
A number of points were made about the
documents actually found in Mr Thomas’ file. They include what he describes as
a note of his first telephone conversation with Mr Shepherd. The note contains
a reference to £250,000 against the word ‘cost’. From this I am invited to
infer that the note must have been written before January
submission is made that it is unlikely that Mr Thomas would be concerning
himself with the viability of the project so early. Therefore it is suggested
that he was advising Mr Shepherd on, inter alia, purchase price, basing
himself on yield. Various other examples were advanced of Mr Thomas not
confirming matters of importance.
In cross-examination of Mr Shepherd it
was suggested that from the time of the October 1982 letter he must have
appreciated that Mr Forbes had not seen the property. However, Mr Green submits
that the responsibility for revising the yield advice remained on the defendants
until contracts were exchanged in December. Mr Shepherd could then have
abandoned the project at a loss of about £16,000 in expenditure already
incurred. There was no reason why Mr Shepherd should, at this stage, have
registered the fact that the advice of June 24 was valueless.
Among the matters in the closing pages of
the summary of Mr Green’s submissions, a point is taken that Mr Thomas omitted
to correct Mr Shepherd when the latter wrote to him on December 16 1982 in
these terms: ‘I am glad that you have increased your asking prices here since I
did feel that they were a bit on the low side if one regards the shops as being
in a prime trading position.’ Because
there was evidence from experts on both sides that Kennelwood was not in a
prime trading position, this is said to be negligence on Mr Thomas’ part. It is
argued that incompetence in this matter makes it more likely that incompetence
would occur in the matter of yield. I record this submission primarily in
tribute to the thoroughness of Mr Green’s presentation of the plaintiffs’ case.
A further submission related to Mr
Shepherd’s request for an opinion as to the selling price of Kennelwood in
January 1983. Mr Thomas’ reply dated January 31 gives a figure of £733,000
based upon a yield not exceeding 6%, and a rent of £44,000. Mr Thomas is
criticised for explaining that his ability then to talk in terms of yield arose
from what he had learned during the course of the Kennelwood transaction.
Furthermore, when pressed as to the absence of calculations enabling him to
arrive at yields, Mr Thomas says that yields were not calculated in that way.
The plaintiffs relied upon that answer as contradicting the defendants’
argument that the absence of calculations shows that they were not, in fact,
advising on yield.
The submissions on behalf of the
plaintiffs ended with a list which Mr Green, in effect, dictated to me of
matters of importance not covered by documents in the defendants’ files. This
exercise was the basis of a further submission that the absence of written
confirmation cannot show that the advice on yield was not given.
I conclude my summary of the contentions
on both sides and turn now to my own conclusions.
At the beginning of his written summary
of his closing speech, Mr Desch set out what he submitted to be the main issues
for determination. In due course I invited Mr Green to say whether he agreed
that they were the appropriate ones and he said that he did. I therefore adopt
them with reinforced confidence.
The first two issues are whether Clark
Quinney agreed to advise the plaintiffs on yield in the period from December
1981 to February 1982 and whether they in fact did so. In the light of Mr
Thomas’ evidence that, if he had been asked to advise, he would not have
expected his firm to be paid a fee specifically for that work because it would
have been covered by the fees on the purchase of the property, I can derive no
help from the fact that a special fee was not paid.
Mr Shepherd maintains that he asked for
the defendants’ views on yield at this stage. However, it is clear that until
the letter of June 24 1982 there is no document to which the plaintiffs can
point as any form of written advice on that subject. I was impressed by Mr
Thomas’ evidence that, had he given such advice as is alleged, he would have
confirmed it in writing, though I accept the plaintiffs’ criticism that the
documentation in this case reveals some omissions to follow that admirable
practice.
Looking at the matter from another point
of view, Mr Shepherd was clearly an experienced and methodical developer. He
was, in relation to Kennelwood, embarking on an important scheme. As events
have regrettably shown, he was likely to sustain substantial losses if any
necessary part of the preparation or execution went wrong. In those
circumstances I find it at least surprising, if he got advice on yield as a
basis for deciding whether to proceed, that he failed to insist on its being
expressed in written form. It is common ground that in June 1982 Mr Shepherd
asked Mr Thomas to put in writing the information or advice, if that is what it
was, which he was then tendering. The result was the crucial letter of June 24.
I find it evidentially significant that the original advice on yield which Mr
Shepherd ultimately said came from Mr Thomas and which, if it were given, was
of extreme importance was not similarly treated. One has to bear in mind in
this connection that this was the first transaction in which the plaintiffs had
dealt with the defendants and not the continuation of an established course of
business.
The argument which was advanced on behalf
of the defendants to the effect that there would have been pages of
calculations in their files if Mr Thomas had been engaged on an assessment of
yield fails, in my judgment, in the light of the expert evidence to which I
have referred.
The argument which hinges on the very
late amendment of the statement of claim is, however, in a different category.
If there had been oral advice in January 1982, as Mr Shepherd said in evidence,
I can see no good reason why an inconsistent version of events should have been
pleaded. It would have been important to put forward the final version, namely
that Mr Thomas was giving his own and his firm’s advice upon yield
substantially before the letter of June 24. In fact, that letter was
specifically pleaded as being in itself the advice on that topic. I am
impressed with Mr Desch’s argument as to why the amended version was logically
necessary. However, I do not accuse Mr Shepherd of deliberately falsifying the
evidence. As I have said, he is dealing from memory with matters of
considerable antiquity. The documents are his most accessible guide to what
happened. In these circumstances there is the danger that a witness will
unwittingly reconstruct what he believes to have happened on the basis of what
he perceives should have happened. Another example of this process is that Mr
Shepherd maintains that it was mandatory for him to get the advice of a local
agent upon yield before committing himself. No doubt he feels himself supported
in the conclusion that he did obtain the defendants’ advice by the expert
evidence that a prudent developer would act in that way.
I accept the defendants’ evidence that on
this occasion Mr Shepherd was, to quote an inelegant phrase of mine which one
of the witnesses adopted, ‘making the running’ over this project. It is for
that reason that, in my judgment, he omitted his usual and the sensible
precaution of obtaining the advice.
When I came to examine the June 24
letter, I found it difficult to reconcile its terms with the plaintiffs’
amended case that Clark Quinney had already advised Mr Shepherd orally on yield
about five months earlier and that it was the defendants’ own and original
professional advice. One would expect Mr Thomas to incorporate something in the
letter to show that his own advice was now being confirmed and supported by the
information from St Quintin if it had, in fact, been given.
The plaintiffs contend that, having
regard to the wording of the ‘with compliments’ slip, the fact that, with one
possible exception, the properties comprised in the Withers Thomas particulars
— P5 — are stated to be for investment and the evidence of the experts as to
the practice of the defendants and what would be expected of them, I should
draw the conclusion that the defendants’ witnesses are lying or wrong when they
say that they were not holding themselves out as competent to advise on yield
for investment purposes. I am invited also to conclude that the distinction
drawn by the defendants between advising on yield for investment purposes and
advising on valuation for commercial properties generally is a spurious one.
I find nothing inherently improbable in
the defendants indicating their unwillingness, in the first half of 1982, to
embark on a valuation in relation to a transaction which potentially involved
the complication of prefunding, as the Kennelwood project did. I do not reject
as incredible their evidence that the defendants did not regard themselves as
competent to advise on yield in the situation which arises in this case. Mr
Thomas said that he had made the reservation clear to Mr Shepherd. Whether or
not he exposed his lack of confidence to Mr Shepherd is clearly a matter to
which I should have regard. However, the root question is whether the advice
was sought and given. The question of the defendants’ competence and what they
said about it cannot conclude the issue as to whether they actually did advise
the plaintiff. I must look to the other material to which I have referred to
find the answer.
Mr Shepherd was modest about the
reliability of his memory, as I have already indicated. From my observation of
him, he need not apologise in respect of his age. He carries it, if I may say
so, with distinction. He was also modest enough to contemplate the possibility
that he might be mistaken about these matters. The burden is on the plaintiffs
to establish the facts in issue in this case on
relation to the first two issues. In coming to that conclusion I have had
regard to the arguments put before me on both sides in this dispute. It is my
view that the defendants neither agreed to advise nor actually advised Mr
Shepherd on the appropriate yield figure in or about January 1982.
I turn now to the third issue, which
consists of two parts, both of which relate to June 1982, in line with the case
as it was originally pleaded, namely that the defendants were instructed to
advise in about May and did advise in June. Issue 3A asks the question: did the
defendants agree to advise the plaintiffs on yield in June or did they merely
agree to obtain and pass on the views of St Quintin? Issue 3B asks: was the giving of such advice
or the passing on of St Quintin’s views being done in circumstances in which
liability would attach to the defendants or was it merely casual and without
obligation?
The answers turn to a large extent on the
view which I form of the nature and effect of the June 24 letter. To set it in
context again, it will be recalled that two days earlier Mr Thomas wrote to Mr
Shepherd a letter which contained these words: ‘I have made further inquiries
with my contact at St Quintin regarding yield, type of purchaser,
specification, etcetera and expect to be able to report back to you in the next
day or so.’ I note that Mr Forbes, who
clearly was the contact referred to, is not identified at this stage, nor
apparently was he for some time afterwards.
The crucial letter, as to which I have to
form an impression, contains the words:
I have received further information from
my contact at St Quintin’s. A yield of 5.5 per cent may be expected on the
completed development and it is likely to interest insurance companies. The
offices should be completed to a good standard with gas fired central heating
to radiators. It will need to be fully let to achieve 5.5 per cent; for
pre-funding 6.5 per cent should be expected. I trust this provides the
information you require at this stage . . . .
Mr Thomas’ note of his telephone
conversation with Mr Forbes is reflected in the letter.
I have considered with care the
submissions made by Mr Green and I have approached them and the documents with
an open mind, as he asked me to do. I regret to say that I still remain of the view
which I originally formed that it would be a distortion of language to describe
the letter as the giving of advice on yield. It is, in my judgment, clearly a
letter in which Mr Thomas is confirming the result of the telephone
conversation with the unnamed Mr Forbes. If Mr Shepherd set store by the
‘contact’s’ opinion, he would have wanted at least to know who he was and
perhaps would have wanted some direct communication with him. The indications
are that Mr Thomas is right when he says that the approach to Mr Forbes was a
purely informal gratuitous one. I can find no indication in the letter that Mr
Thomas was tendering original advice of his own. I accept that the use of the
word ‘may’ in the phrase ‘a yield of 5.5 per cent may be expected’ is of no significance
against the plaintiffs’ case.
However, the word ‘information’, which
appears twice, is, in my view, of some importance. It is used to describe the
material coming from Mr Thomas’ contact at St Quintin and later occurs in the
phrase: ‘I trust this provides the information you require at this stage.’ I find the terms of the letter inconsistent
with the defendants having agreed to advise and then advising the plaintiff,
but consistent with Mr Thomas’ evidence that he had merely agreed to obtain and
pass on the views of his contact at St Quintin.
I revert to the expert evidence to the
effect that such informal requests for a view as between agents are commonly
made and met without recompense, obligation or liability. Mr Desch drew a
parallel with the informal opinions given by one barrister to another on, for
example, quantum in a civil case. In my judgment, that was the position
in the present case as Mr Thomas said that it was.
I am fortified in the conclusion I have
formed by the two letters of November 8 1984. If Mr Shepherd had then thought
that he had been advised in any formal sense by Clark Quinney in June 1982, he
would not have written to St Quintin complaining about the advice tendered by
them to Clark Quinney in the June 24 letter and simultaneously written to Clark
Quinney. When, in that letter, Mr Shepherd referred to his having to consider
whether an action lay, he clearly meant an action against St Quintin. He
concluded with the words: ‘It is all very depressing, as it must have been for
you, because you, too, appear to have been misled.’ If it had been Mr Shepherd’s view in November
1984 — much closer to the events than we are now — that Clark Quinney had
advised him wrongly about yield, in circumstances in which liability could
attach to them, he would surely have said so, no doubt after consultation with
the plaintiffs’ resident solicitor.
For completeness, I add that I have
considered the explanations put forward by Mr Shepherd for writing these
letters. Having stated them once in summary, I need not repeat them. It is
sufficient to say that they do not affect my judgment on the issues under
consideration. I have come to the conclusion that Clark Quinney did not agree
to advise the plaintiffs on yield in June 1982 but merely agreed to obtain the
views of Mr Thomas’ contact at St Quintin and pass them on to Mr Shepherd. In
my judgment, the true position is that the passing on of Mr Forbes’ views,
which were not entirely confined to the yield question, was done casually and
without obligation.
I come now to the final issue, which is
stated in these terms: did Mr Shepherd materially rely on any advice of Clark
Quinney about yield? In my judgment, and
for the reasons which I have already stated, including the November 8 letters,
the answer to that question must be ‘no’. I have concluded that on the balance
of probabilities the only function performed by the defendants in relation to
yield was to sound out the views of Mr Forbes informally and to pass them on to
Mr Shepherd in response to the concern which the latter was feeling on the subject
of yield in the summer of 1982. The plaintiffs have not established that there
was any advice coming from the defendants as their own original advice at any
stage.
In opening his case, and in his final
submissions, Mr Green referred me in very general terms to a passage in the
judgment of Devlin J, as he then was, in Heskell v Continental
Express Ltd [1950] 1 All ER 1033, beginning at letter C on p 1047. In the
written summary of his opening, Mr Green put the point in these words: ‘The
plaintiff contends that even if there were anything in the suggestion that the
plaintiff relied both upon the advice of the defendants and also upon the
advice of St Quintin, its — that is the plaintiff’s — loss resulted from two
causes, of which the defendants’ advice was at least of equal efficacy with the
second cause and the plaintiff is entitled to succeed under the principle in
the case cited.’ I would add that the
reference to ‘a cause of equal efficacy’ is derived from Lord Devlin’s judgment
at p 1048A. In his closing speech Mr Desch submitted that the question of what
he conveniently referred to as ‘double causation’ does not arise in the present
case because either Mr Shepherd was relying on Clark Quinney for advice or he
was depending on his own experience and judgment. I have said already that, in
my view, Mr Shepherd has not shown that he was relying on advice from the
defendants. I repeat that my conclusion is that he decided to rely on his own
appreciation of the viability of the project, perhaps assisted by the views of
others to which he had access. In those circumstances, the principle in the
cited case has no application.
In conclusion, I wish to say that I am
sorry for Mr Shepherd. On this occasion he suffered a very substantial loss. I
am, however, unable to find that he is entitled to recoup his loss from the
defendants or those who may stand behind them. It is my view that the true
cause of the loss lies in the relatively poor location of Kennelwood in its
relation to other properties in the area, together, no doubt, with the
disadvantages which resulted from the addition of the ramp at the front of the
building and the consequent restriction of access to the shops. Furthermore,
the shops were too small in area to attract what have been referred to as ‘multiples’.
It was the failure to realise these factors and their effect on value, which
led to disaster for the plaintiffs. On my findings, that failure cannot be laid
at the door of the defendants. For the reasons I have indicated, I find for the
defendants.
