Sale by mortgagee — Ransom strip sold to owners of ransomed land — Entirety of land sold on — Whether mortgagee breaching duty to sell for best price reasonably obtainable — Basis upon which ransom strip to be valued — Claim dismissed
The claimant owned a small parcel of land that had ransom value as the sole means of access to an adjacent field, for which there was planning permission for residential development. The defendant bank, in exercise of its power of sale as mortgagee, sold the ransom strip to the owners of the field for £60,000. The field and the ransom strip were then sold as one unit for £527,000.
The claimant brought proceedings in which she alleged a breach of the defendant’s duty to obtain the best price reasonably obtainable. She argued that the proper price for the ransom strip was in the region of £260,000. She based her contention upon the proposition that the value of a ransom strip was generally between 33% and 50% of the development value of the ransomed land, and submitted that, in the present case, the figure should be close to 50% of the £527,000 sale price. The defendant argued that £60,000 had been a proper price for the ransom strip at the time at which it had chosen to realise its security, and that the amount of £527,000 had come “out of the blue” and was far higher than the true value of the land. It was not disputed that the only realistic way of obtaining a proper price was to market the ransom strip to the very people to whom the defendant had in fact sold it.
Held: The claim was dismissed.
Where mortgaged land was a ransom strip, the best price reasonably obtainable on a sale by the mortgagee was not the open market value but the price that could be obtained from the person who had a special interest in purchasing it, namely the owner of the ransomed land. It followed that the mortgagee’s duty to secure the best price reasonably obtainable could not be achieved without resort to that interested purchaser; whether the best price had or had not been achieved at the time at which the mortgagee decided, as it was entitled to do, that it wished to realise its security was very substantially dependent upon what that person was prepared to pay at that specific time. The valuation principles upon which the claimant relied were determined by the artificial concept that both the defendant and the purchasers were a willing seller and wiling buyers respectively at the hypothetical figure. However, there was no evidence to confirm that the purchasers had been willing to purchase the ransom strip at a price above £60,000. Evidence suggested that they would not have been prepared to do so. In those circumstances, the claimant had not shown that £60,000 was below the proper price achievable at the time at which the defendant decided to realise its security: Stokes v City of Cambridge (1961) 180 EG 839 distinguished.
Roger Freeguard, the claimant’s husband, appeared on her behalf; Teresa Peacocke (instructed by Cobbetts, of Manchester) appeared for the defendant.
Sally Dobson, barrister
