Portfolio purchase – Negligent advice of estate agent with respect to resale price of property in portfolio – Whether estate agent protected by disclaimer – Whether damages to be awarded on basis of aggregate value of individual properties or portfolio value
The plaintiff was a property and investment company owned and controlled by R. U was a partner in the defendant firm of estate agents instructed by receivers to sell 16 properties in the Northampton area. U viewed the properties with R who expressed interest in purchasing them with a view to reselling them individually at a profit. At R’s request U told R in relation to each property what he suggested should be the asking price and the “minimum achieve” price on resale, that being understood as the minimum price which could reasonably be expected to be realised on a resale within six months. The total of the asking prices for the 16 properties was £613,400, more than £100,000 less than the aggregate of the asking prices suggested by U. The aggregate of the minimum achieve prices suggested by U was £622,500. R’s offer of £530,000 was accepted on December 21 1991. In the meantime on December 3 1991, U sent to the plaintiff separate sales particulars for the properties, which included a printed disclaimer. In February 1992 contracts were exchanged and completion followed between March and April in respect of 15 of the 16 properties. The purchase of the remaining property was never completed. The plaintiff eventually resold the 15 properties through other agents, suffering a substantial loss. In subsequent proceedings against the defendants, it was agreed that the figures for the asking and minimum achieve prices given by U were negligent. The aggregate of the values agreed for each of the 15 properties amounted to £415,250, compared with a price of £465,200 paid for the 15 properties and with £547,500 being the aggregate of the minimum achieve prices advised by U for the 15 properties. The judge found that the defendants owed the plaintiff a duty of care in advising on the possible resale values, that they were in breach of that duty and were not protected by the disclaimer. He also held that the plaintiff was entitled to recover the difference between the price which it paid for the 15 properties and the value of the portfolio at the contract date. The defendants appealed contending: (1) that the claim was defeated by the disclaimer; and (2) that the judge had erred in basing his calculation of damages of £148,253 on the portfolio value of the properties.
Held The appeal was allowed.
1. The disclaimer, printed at the foot of every set of particulars of a residential property being sold through the defendants, had not been intended to, and did not, cover circumstances outside the transaction and the judge had not erred in finding that the disclaimer did not operate.
2. The judge had awarded damages based upon the portfolio value. It was clear that R had intended to sell the properties individually. The defendants had not been asked to advise on the appropriate purchase price, whether on a portfolio basis or at all; they were merely asked to give the asking and minimum achieve prices for the resale of the properties individually within six months. Quantum was to be decided upon the application of the principles set out in South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191. To measure the basis of valuation which was not that on which the defendants were asked to advise would impose on the valuer a liability greater than he could reasonably have thought he was undertaking. Accordingly the appropriate figure to be deducted from the price paid was the aggregate value of the individual properties.
3. The award of damages was therefore reduced and the rate of interest to be applied to the sum of £41,190 which fell to be repaid was the judgment rate of 8% and not any lesser rate obtainable on investment.
Dominic Chambers (instructed by Edge & Ellison, of Birmingham) appeared for the appellants; Dirik Jackson (instructed by Eversheds, of Norwich) appeared for the respondent.