Action for negligence against three firms of estate agents — During the trial two of the firms reached a compromise with the plaintiff, who withdrew his claims against them, the action continuing against the third firm — The claim was by a property developer in his capacity as a mortgagor against the mortgagees’ selling agents in connection with the sale of the mortgaged property — Plaintiff alleged that he had suffered damage through the sale of the mortgaged property at an undervalue due to wrong advice given to the mortgagees by the defendant firm and the failure of the latter to take proper steps in marketing the property — The facts were somewhat complex, but eventually the property, a block of buildings in Westbourne Grove, London W2, was sold for £75,000 — Plaintiff claimed that the true market value at the time of the sale was £461,000 — There was a mass of expert valuation evidence given at the trial which is analysed in detail in the judgment — Some of this evidence related to the state of the development property market in the early part of 1977 — The judge drew attention to the fact that there was no contractual relation between the plaintiff and the defendants; that the action was one in tort; and that the plaintiff had to establish (1) a duty of care owed to him by the defendants, (2) a breach of that duty, and (3) resultant damage
held that there was a duty of care owed by the defendants as the mortgagees’
selling agents to the plaintiff as mortgagor, the standard of care required
being the ordinary professional standard — There had been certain breaches of
duty in regard to the preparation and distribution of particulars and advice as
to the state of the market in the spring of 1977 — The judge, however, after a
lengthy review of the evidence, rejected the allegation that the asking price,
of the order of £100,000, was too low — As to damage, there was much
conflicting evidence (of considerable interest to valuers) — The judge’s
conclusion was that if the property had been properly marketed in the spring of
1977 it would probably have fetched a somewhat higher price than £75,000,
perhaps a figure in the range of £85,000 to £125,000 — But owing to the
existence of an agreement between the plaintiff and the mortgagees, by which,
in consideration of the plaintiff’s consent to the sale, the mortgagees forgave
him a large portion of his indebtedness, the plaintiff had in fact suffered no
loss in consequence of any breaches by the defendants — The judge rejected a
submission that this agreement was res inter alios acta — The claim against the
defendants accordingly failed
As explained
in the first paragraph of the judgment below, the claims brought by the
plaintiff, James Andrew Garland, against the first two defendant firms, Ralph
Pay & Ransom and Aylesford & Co, were withdrawn during the trial, as a
result of a compromise between the parties, and the action proceeded against
the third defendants, Douglas Young & Co. The claims were for alleged
professional negligence.
C F Dehn QC
and W D Ainger (instructed by Watkins, Pulleyn & Ellison) appeared on
behalf of the plaintiff; J Hicks QC and Colin Smith (instructed by Reynolds
Porter Chamberlain) represented the third defendants.
Giving
judgment, NICHOLLS J said: In this action the plaintiff, Mr James Andrew
Garland, is suing three firms of estate agents for professional negligence.
Before the trial it was ordered that the trial proceed in two parts — first,
against the first two defendants, Ralph Pay & Ransom and Aylesford & Co
(Estate Agents) Ltd, and thereafter against the third defendants, Douglas Young
& Co. On the seventh day of the first part of the trial the plaintiff and
the first two defendants reached a compromise, the plaintiff withdrawing his
claims against those defendants. I am now concerned with the plaintiff’s claim
against Douglas Young & Co.
The claim
In a nutshell,
the plaintiff’s claim against Douglas Young arises as follows: by a number of
transactions entered into principally over the period of two years starting in
May 1971 Mr Garland acquired piecemeal the freehold interest with vacant
possession of a block of buildings in Westbourne Grove, London W2, namely 98,
100, 102 and 104 Westbourne Grove and 6 Botts Mews. I shall refer to this
property compendiously as ‘the property’.
In June 1977,
in exercise of its power of sale as mortgagee under a legal charge dated
September 10 1973, the merchant bank, Singer & Friedlander Ltd (‘Singer’)
agreed to sell the property at a price of £75,000. The sale was completed in
August 1977. Singer instructed Douglas Young to act as agents on its behalf in
connection with the sale, and in March 1977 that firm advised Singer that the
sum of £75,000 represented a fair current market value for the property in its
then condition.
Mr Garland’s
case is that in giving that advice and in marketing the property prior thereto,
Douglas Young owed a duty of care to him as mortgagor; that in breach of that
duty Douglas Young failed properly to advertise the property, failed to quote a
proper asking price and failed to give proper advice to Singer about the value
of the property; and that by reason of those breaches of duty, he suffered
damage, being (shortly stated) the difference between the sale price and the
sum of £461,000, which Mr Garland claims was the true market value of the
property in June 1977, plus interest thereon.
The
property and its acquisition
Nos 98, 100,
102 and 104 Westbourne Grove form an end-of-terrace block, each property
consisting of a basement, ground floor and three upper floors and (with the
exception of no 98) each having a single-storey rear addition, and there being
also a first-floor studio at the rear of no 102. Botts Mews runs at the rear of
these properties and 6 Botts Mews is a two-storey rear addition to 104
Westbourne Grove, served by a separate rear entrance. The property is
brick-built and was erected about the middle of the last century. It occupies a
site with a frontage to Westbourne Grove of 87 ft; the site is irregular in
shape, but its depth to Botts Mews behind 104 Westbourne Grove is about 112 ft.
The total site area is
26,800 sq ft. At the time of the acquisition of the property by Mr Garland, the
existing uses comprised a mixture of shop, workroom, office and residential.
In the early
1970s, Mr Garland owned, as a personal investment, several residential
properties, let as furnished lettings, in the Knightsbridge area of London.
Prior to this he had spent about five years in the investment department of a
merchant bank and, somewhat less usually by way of background for a would-be
property developer, had spent six years engaged in research philosophy. In
about May 1971 he purchased 102 Westbourne Grove as an investment. Later he had
the opportunity, which he took, to buy no 100 with vacant possession and also
to buy out the tenants in occupation of no 102. In October 1971 he made an
application to the local planning authority (City of Westminster) for
permission to extend and alter no 100 and no 102 and to use those properties,
as improved, for shop, office and residential use in the case of no 100 and for
shop and office use in the case of no 102. Permission was granted in February
1972. By May 1972, Mr Garland had acquired the freehold interests in 98 and 104
Westbourne Grove and 6 Botts Mews and by June 1973, when the development
property boom in the market was at or nearing its peak, Mr Garland had acquired
vacant possession of no 104. He subsequently acquired vacant possession of no
98 by August 1974. After each part of the property became vacant, it remained
empty and unused until after the property was sold in 1977.
The events
leading up to the sale
Mr Garland’s
several acquisitions had been financed largely, if not wholly, by bank loans
made, principally, by Barclays Bank. The total acquisition cost (including some
design fees) was about £260,000. Barclays Bank had made clear to Mr Garland
that it was not interested in providing him with finance for any development of
the site. In June 1973, Singer offered to advance to Mr Garland, on the
security of a first legal charge on the property, the sum of £230,000 for a
period of 12 months, subject to receiving a valuation of the property by
Cluttons, chartered surveyors, showing the property to be worth at least
£350,000. Mr Garland accepted the offer and in July 1973 Cluttons valued the
property, on the basis of its existing use, but with the benefit of the 1972
planning consent, at £350,000. On September 10 1973, Mr Garland executed a
formal legal charge in favour of Singer, and Barclays Bank was repaid out of
the money advanced by Singer. In charge of Mr Garland’s account with Singer was
Mr A R J Dyas, who was then in charge of Singer’s property lending and is now
one of Singer’s managing directors. Mr Garland’s expectation was that in due
course Singer would be likely to provide him with the necessary finance for the
development of the property. At about this time (autumn 1973) on the advice and
with the assistance of Hillier Parker May & Rowden, Mr Garland attempted to
obtain a tenant qualifying for an office development permit for the property,
but without success.
On October 14
1974, the City of Westminster granted Mr Garland permission for a comprehensive
redevelopment of the property. This development involved the demolition of the
existing buildings and the erection of a new structure, comprising a basement
car park, ground-floor shops and five upper floors for a mixture of workroom,
office and residential uses. The permission was subject to a condition
restricting office user to 10,000 sq ft. In August 1974, in expectation of
receiving this permission, Mr Garland approached Singer for development
finance. Singer declined to assist, but in September offered him a very modest
increase in the amount of his existing advance for a period of about three
months, subject to receiving an updated report from Cluttons, showing a
valuation of at least £360,000. Mr Garland accepted this offer, but in October
Cluttons valued the property at £280,000. They expressed the view that a
favourable outcome to the planning application which was still before the City
of Westminster would not materially affect their valuation under the conditions
then current in the market, and that in the event of the value of £280,000 having
to be realised, they were not confident of finding a purchaser in the
foreseeable future.
Not
unnaturally, Singer was concerned at this advice and Mr Dyas instructed Mr B N
Gorst (now a managing director of Singer but then its property manager) to look
into the position. Mr Gorst is a chartered surveyor. He inspected the property
and formed a poor opinion of it, a view which he never really changed
thereafter. He thought that it was in a very poor condition — ‘filthy,
disgusting’ and ‘a revolting slum’; that (save for 6 Botts Mews, which could be
sold for a typical mews home) the property was unsaleable and worthless (no
price other than a nominal one would be obtainable for its use either developed
or undeveloped); and that the only hope lay in getting a planning permission
enabling a suitable development to take place. Cluttons were asked to clarify
their valuation report and, on November 8, they did so, in terms which
reflected the difficult market conditions then existing. Cluttons wrote to
Singer that, at that time, there was virtually no market for development sites
and that they (Cluttons) would not be confident of finding a purchaser in the
foreseeable future and that, therefore, if the property had any value, that
could only be tested by offering the property as it stood on an invited offer
basis. Cluttons added that if, as they understood it, Singer was not prepared
to give further support to the development of the property, it was quite clear
that any valuation of the property directly related to the completed
development was somewhat academic in the absence of a market which had
virtually ceased to exist, due to lack of confidence and finance.
From about
this time, Singer sought to persuade Mr Garland to sell the property or to find
a partner for a joint development of it, although it seems that Singer, or
other companies in the Bowring group (of which Singer forms part) might have
been willing to consider financing a development if Mr Garland had been able to
find a forward tenant. Mr Garland’s attitude was that he still wished, if at
all possible, to undertake the development which he found an interesting —
indeed exciting — project, as well as one expected to be very successful
financially. To that end, he continued with his efforts to obtain a tenant or
purchaser of the proposed new building, or development finance from a source
other than Singer.
Despite
Cluttons’ gloomy assessment of the market, two persons did express some
interest in buying the property. In November 1974 Crown House Properties Ltd
expressed interest in the proposed development if the scheme were substantially
remodelled, at a price of not more than £300,000 plus a half share of any
profit in excess of a percentage to be agreed; and in January 1975 Chestertons,
chartered surveyors, reported to Mr Garland an oral offer made by a Mr James,
through his agent, in the sum of £450,000, with an indication that that price
could be increased if Mr Garland were looking for a figure in the region of
£650,000. Because of his interest and confidence in the proposed development
and his extreme reluctance not to proceed with it himself, Mr Garland did not
pursue either of these approaches. His attitude towards a sale of the site was
that if an offer of the order of £800,000 to £900,000 were made, he would have
had to give it serious consideration, but otherwise his aim was to carry out
the development.
In November
1974 Mr Garland met Mr Dyas and Mr Gorst and among the matters discussed was
the interest shown by Crown House Properties Ltd and (although he had not then
made an offer) Chestertons’ client. Mr Garland bought more time from Singer by
agreeing to give, and thereafter giving, to Singer, additional security in the
form of second and third charges over further properties of his. The extension
of time for repayment of the loan was until June 24 1975. Early in February
1975 a further meeting took place between Mr Garland and Mr Gorst. The current
position regarding the property was discussed and Mr Gorst urged Mr Garland to
negotiate further with Crown House Properties Ltd and Chestertons, and Mr
Garland agreed to do so. Mr Garland obtained planning permission on appeal for
the use of the workroom accommodation comprised in the 1974 planning permission
as showrooms and for shop purposes. Early in June, on learning of this, Mr
Gorst expressed interest in a further planning application, relating to no 104
and 6 Botts Mews, lodged by Mr Garland. He also asked to be informed of the
progress being made regarding the sale of the property. Following the
expiration of the six-month extension of time for repayment of the loan in June
1975, and another meeting between Mr Dyas and Mr Garland, Mr Dyas wrote to Mr
Garland confirming that it was Singer’s intention to give immediate
consideration to the best method of disposing of the property and informing him
that this would include giving consideration to a revised planning application
incorporating 10,000 sq ft of offices and the maximum density of residential
flats. From July to September of that year, month by month, Mr Garland paid to
Singer the interest accruing on his overdraft (he paid no interest thereafter)
and he began to advertise the property in ESTATES
between April and June 1976 and two in February/March 1977. Virtually all these
advertisements were for a purchaser or tenant of a building to be completed on
the site; they did not advertise the property for sale as it stood. Mr Garland
received about seven replies to each advertisement, but none of them bore
fruit.
In November,
Churston Heard & Co, estate agents, wrote to Mr Garland regarding the
interest of a client of theirs in purchasing the property, but stating that
they did not think that their client would be keen to pay more than about
£300,000. Their client was T Elliott & Sons Ltd, trading as shoe retailers
at 112 Westbourne Grove.
In January
1976 Mr Garland applied for planning permission for what he described as a more
modest scheme for the development of part only of the property, namely no 100
to no 104. This scheme provided for the erection of a building comprising
basement, ground and upper floors; the intended use was as shops and storage on
the ground-floor levels, offices on the first, second and third floors and a
residential flat on the fourth floor.
I now come to
the first involvement of Douglas Young with the property. Early in March 1976
Mr Gorst asked Mr C A Macqueen [FRICS] of Douglas Young, whom he knew socially,
to assist him as a friend by visiting the property and expressing his opinion
on its value and what should be done with it. Mr Macqueen agreed and Mr Gorst
made the necessary arrangements with Mr Garland, telling Mr Garland that he
knew someone whom he would like to show over the property whose views he would
value as to what might be done with it. At the meeting, which was held at the
property on March 8, Mr Garland met Mr Gorst and was introduced to Mr Macqueen.
Mr Garland showed his plans relating to his latest, more modest, scheme of
development to Mr Macqueen. Mr Garland also accompanied Mr Macqueen over the
property. Mr Macqueen took no measurements and made no notes. The following day
Mr Macqueen made some written calculations of the value of the property. He
valued all the units on a refurbishment basis (that is, on the basis of the
existing use of the property but with money being spent on repairs and
redecoration and some refurbishment). He also valued nos 100-104 on a
development basis (that is, assuming that nos 100-104 were sold for
redevelopment in accordance with Mr Garland’s pending planning application for
his more modest scheme). He valued no 98 at £47,841; he valued nos 100-104 and
6 Botts Mews on a refurbishment basis at £122,000; he valued nos 100-104 on a
development basis at £18,000. Thus, on a refurbishment basis, these figures
attributed to the property an overall value of approximately £170,000. Two days
later Mr Gorst met Mr Macqueen and discussed his calculations with him; Mr
Macqueen did not prepare a written report. These calculations alerted Mr Gorst
to the possibility that, after all, the property might have some value, either
on a refurbishment basis or on a development basis, but he remained unconvinced
that the property was saleable.
On May 5
planning permission for the more modest scheme was granted subject, again, to a
condition that the extent of floorspace in the building used as office premises
should not exceed 10,000 sq ft. In mid-May, following a meeting with Mr
Garland, Mr Gorst made some calculations on the value of nos 100-104 as a
development site in the light of this planning permission. Using the budget
price recently obtained by Mr Garland from a building contractor, C P Roberts
& Co Ltd, he arrived at a sum of £252,000 to cover the site value, interest
thereon and developers’ profit. Mr Gorst’s note recorded that he ‘suggested
that the site now had a value instead of the negative value previously, but was
still not sufficiently attractive for the bank to proceed’.
In July 1976
the sale of Wilbraham House was completed. Wilbraham House was a fine property
near Sloane Square which Mr Garland had bought in 1972 with the assistance of a
loan from the National Westminster Bank, intending to carry out certain
alterations and then to make this his home. Singer had a second charge over
this house granted in January 1975 and, after repaying the sum due to the
National Westminster Bank as first mortgagee, the balance paid to Singer on
completion of the sale was approximately £44,263. After crediting this sum to
his account, the amount owed by Mr Garland to Singer was approximately
£264,000.
Early in
September, Mr Gorst orally asked Mr Macqueen to inspect the property again and
to bring his valuation figures up to date with a view to putting the property
on the market. Mr Gorst told Mr Macqueen that Singer had given Mr Garland
sufficient time to find a purchaser and now had to take action. Although there
was no discussion regarding commission, Mr Macqueen understood that, whereas
previously he had been asked to act as a friend, he would now be acting on the
basis that he would be paid if he found a purchaser. On September 13 Mr
Macqueen made a further inspection — again taking no measurements and making no
notes or valuation report. He made a number of calculations, in whole or in
part, using widely differing figures and producing widely differing results.
His final calculation valued no 98 on a refurbishment basis at £34,148; nos
100-104 and 6 Botts Mews on the like basis at £31,904; and nos 100-104 on a
development basis at £89,488. So that now he valued the property on a
refurbishment basis at approximately £66,000 or (bringing in nos 100-104 on a
development basis) at about £124,000. He discussed these figures with Mr Gorst.
Mr Gorst had no confidence that the property was really saleable on a
development basis and he gave Mr Macqueen the impression that if on a sale
Douglas Young realised anything like the sums comprised in those calculations,
he would be delighted. Mr Gorst instructed Mr Macqueen to erect a board on the
property and to try to find a purchaser. Mr Macqueen suggested marketing the
property on the basis of seeking offers in the region of £100,000.
Early in
November 1976, but after the rating valuation officer’s inspection on November
5 (which I shall mention in a moment), a board was affixed to the outside of
the property at the ground-floor level of no 100. The wording on the board,
decided upon by Mr Macqueen, was to the effect that ‘All Inquiries’ should be
made to Douglas Young. The erection of this board was the only form of
advertising conducted by Douglas Young; no particulars were prepared by Douglas
Young for distribution either to their own clients or to other agents, and no
advertisements were placed by Douglas Young, then or thereafter, in any journal
or newspaper.
When
reinspecting the property in September, Mr Macqueen did not tell Mr Garland
that Singer was proposing to put the property on the market and when Mr Garland
saw the ‘All Inquiries’ board, he took it for granted that he would be informed
of any inquiries. He had not been asked by Singer to agree to the property
being put on the market for sale by agents, nor had he been told that Douglas
Young had been so instructed. It never occurred to him that Douglas Young would
quote an asking price for the property without consulting him.
On November 8
a Mr King telephoned the offices of Douglas Young, seeking information
regarding the property. Whether, by this date, the board had been erected and,
if so, whether Mr King’s inquiries came in response to it are not clear. Mr
King telephoned again on November 10 or 11 and, when Mr Macqueen returned his
call, he gave Mr King information regarding the property including, presumably,
the asking price. On November 15 Mr Macqueen showed Mr King over the property.
The rating
valuation officer’s involvement came about as follows: as a result of
applications made by him between June and October 1972, Mr Garland had already
succeeded in obtaining a reduction in the rating assessment of parts of the
ground floor and basements of no 100 and no 102 to nil, ‘pending completion of
building works’. In those parts boreholes had been made. In September 1976 Mr
Garland received a rating demand for some £16,000. He was unable to pay this
and what he decided to do, and in due course did, was to carry out work with
the intention and effect of rendering the property uninhabitable. The work
comprised making holes in the floors and the ceilings at some 19 strategic
points inside the property. The holes were about 4 ft x 3 ft or less in size
and Mr Garland made them in this way, working from the ground floor upwards:
first, he took up the floorboards for the appropriate area, scattering the
loose boards around with the nails left uninvitingly upwards. Then, taking care
to avoid any mouldings or wiring, with a hammer he knocked through the plaster
of the ceiling below, which then crashed down for one or more floors. Having
done this work, on October 2 Mr Garland put forward to the district valuer and
valuation officer proposals for a reduction in the assessment of the property
to nil, on the ground that it was in a derelict state. The property was
inspected by the valuation officer on November 5 and, thereafter, Mr Garland’s
proposals were accepted, the description of the various hereditaments being
amended to read ‘uninhabitable’.
A supplemental
proposal was made by Mr Garland in December in respect of parts of no 102 which
constituted separate hereditaments
proposal. The supplemental proposal, which had the same successful outcome, was
made on the ground that the premises were ‘in a derelict state
(uninhabitable)’.
In the middle
of December the Secretary of State for the Environment dismissed an appeal
lodged by Mr Garland against the planning authority’s refusal to give
permission for an increase of 5,000 sq ft in the amount of accommodation in the
building comprised in Mr Garland’s more modest scheme permitted to be used for
office purposes. The department’s letter notifying Mr Garland of the decision
described nos 100-104 as ‘three vacant and dilapidated terrace buildings’.
Mr Garland
then lodged three further applications for planning permission, relating to the
parts of the property not comprised in his more modest scheme — namely 98
Westbourne Grove and 6 Botts Mews. On January 6 1977 Mr S A J Powell, a partner
in Churston Heard & Co, telephoned Douglas Young, leaving a message that he
had a client (Elliott) which owned an adjacent site and could be interested in
the property. On January 11 Mr Powell wrote to Mr Macqueen confirming that
Elliott was particularly interested and arranging for an inspection to take
place on January 19. Two days before that inspection took place, on Monday,
January 17, Mr King telephoned Mr Macqueen and made an offer of £65,000. This
was the first offer Douglas Young had received. On January 19 Elliott inspected
the property with its agents and architects. Elliott and Mr King were the only
two potential purchasers ever shown over the property by Douglas Young. On the
day following this inspection, Mr Powell wrote to Mr Macqueen to the effect
that a few days were needed to work out the figures but that he hoped to make a
proposal to Mr Macqueen about the middle of the following week. On the
following day (Friday, January 21) Mr Macqueen received from Mr King’s
solicitors, Payne, Hicks, Beach & Co, a written offer of £65,000. On the
same day, Mr Macqueen sent to Mr Gorst, by hand, a copy of Payne, Hicks,
Beach’s letter, with a covering letter confirming the inspection by Elliott and
stating that Elliott hoped to be in a position to put forward a proposal by the
middle of the following week; that Mr Macqueen had the impression that Elliott
might be talking in the region of £80,000 but that Elliott could not be more
definite until it had received an architect’s report. Mr Macqueen expressed a
wish to discuss the position with Mr Gorst that day. A discussion duly took
place on the telephone, probably later that same day — namely, the day on which
the first written offer for the property was received — and Mr Gorst instructed
Mr Macqueen to accept Mr King’s offer, without waiting to see if a higher offer
were forthcoming from Elliott.
On the
following Monday (January 24) Mr Macqueen wrote appropriately to Payne, Hicks,
Beach, to the solicitors acting for Singer on the proposed sale (Howlett &
Clarke Cree & Co) and to Mr Gorst himself. On Thursday, January 27, Mr
Gorst told Mr Garland of the offer of £65,000. Mr Garland then telephoned Mr
Macqueen and in the course of this and a further telephone conversation which
took place between them on the same day Mr Garland was told by Mr Macqueen that
Douglas Young had been mentioning a figure of the order of £100,000 to all
persons interested. Mr Garland expressed the view that such an asking price
bore no relation to the value of the property, and he asked that if anyone who
Mr Macqueen thought might be in touch with Mr Garland should speak to Mr
Macqueen regarding the property, then Mr Macqueen should be very careful in
what he said. To this Mr Macqueen replied that he would take names only and say
that the matter was in a ‘state of flux’. Neither Mr Gorst nor Mr Macqueen told
Mr Garland that Singer had accepted the offer of £65,000. On the following
Tuesday (February 1) Mr Macqueen was told by Mr Powell of Churston Heard &
Co over the telephone that Elliott was considering making an offer of £75,000.
By a letter received by Mr Macqueen on February 4, Churston Heard confirmed
their client’s serious interest and offered the sum of £75,000. On the same day
Mr Macqueen informed Mr King that Douglas Young had received a higher offer. Mr
King asked for a few days to consider his position. Thereafter he made an
improved offer, exactly matching Elliott’s offer. Elliott was not prepared to
make an increased offer, as (according to Elliott’s surveyors’ statement to Mr
Macqueen) it did not feel that the property ‘would prove viable’ at a higher
figure.
On the
following Tuesday (February 8) Mr Macqueen informed Mr King that his improved
offer was acceptable. Two days later Mr Macqueen received a further oral offer,
this time in the sum of £100,000, from James Sanders & Co, estate agents,
on behalf of a client named Dilg. On hearing of this, Mr Gorst’s response was
that Singer would have to satisfy itself that the purchaser had the necessary
funds available, and asked Mr Macqueen to make further inquiries. Mr Dilg did
not inspect the inside of the property. His offer was never put in writing and
nothing further was heard of it.
Early in
February, Mr Garland, who knew nothing of any intervening negotiations or
offers, was told by Mr Dyas that the offer for the property had been increased
to £75,000 and on February 12 Mr Garland received a draft contract from Howlett
& Clarke, which provided for the sale of the property by Mr Garland to Mr
King at that price. Following a meeting between Mr Garland and Mr Dyas,
regarding this offer on March 2, Mr Gorst wrote on behalf of Singer to Mr
Macqueen on March 7, asking him to confirm that the sale price agreed at
£75,000 was ‘the maximum figure that could reasonably be obtained in an open
market, and that the property has been adequately advertised’.
On March 8 Mr
Garland had a meeting with Mr G A Cooke, managing director of C T Bowring &
Co Ltd. Mr Garland protested at Singer’s proposal to sell, for £75,000 and
without any marketing, a property worth very much more. On March 10 Mr Macqueen
replied to Singer’s letter. He confirmed that Douglas Young had been marketing
the property since the end of the previous summer. His letter concluded:
You will
appreciate that at the present time it is very difficult to state categorically
that the figure of £75,000 is the best price obtainable but on the day it was
higher than I expected. The condition of the Property has seriously
deteriorated over the winter and the anti-squatter works which have been
undertaken throughout, although proving successful, do not enhance the
appearance.
The
anti-squatter works referred to by Mr Macqueen were the holes made by Mr
Garland, to which I have already referred. Mr Gorst was not satisfied with this
reply and he wrote again, seeking confirmation that in Mr Macqueen’s opinion
the agreed sale price represented the current market value of the property in
its existing condition.
On March 21
the director of architecture and planning of the City of Westminster wrote to
Mr Garland regarding the three planning applications relating to 98 Westbourne
Grove and 6 Botts Mews, which Mr Garland had made the previous December. Mr
Garland was told that the city council had considered the applications in
principle and was of the opinion that the proposed rearrangement of the
existing uses and introduction of non-residential uses on the first and second
floors of 98 was acceptable. Mr Garland regarded his expression of approval in
principle as a ‘breakthrough’, because it involved the approval of office user
for an additional 1,500 sq ft.
On March 24,
Mr Macqueen replied to Mr Gorst’s letter. He wrote:
I do not feel
that the market for this type of property has materially altered since the
beginning of the year and, therefore, in my opinion, the figure of £75,000 represents
a fair current market value for the Property in its present condition.
Mr Garland was
not aware of this advice being given at the time.
Then, on March
29, Mr Gorst wrote to Mr Garland:
Since you
have now had a considerable period in which to obtain an offer in excess of
£75,000 for the sale of these properties, I should like you to confirm that, in
your view, this is the best price which is obtainable and to let me know if you
will assist in the sale which has been agreed.
Mr Garland
replied on April 6 setting out reasons why he considered that acceptance of the
offer of £75,000, or any sum of that order, was not in the interests of himself
or Singer. Summarised, his three reasons were: that the property had not been
adequately marketed and that the asking price was wholly inappropriate; that
£75,000 was far below the realisable value of the property in current market
conditions (and reference was made to the recently expressed views of Mr P L
Cope of Oldham Estate); and that it appeared (from Mr Garland’s conversation
with Mr Cooke) that Singer’s wish for an immediate sale was based on
considerations of convenience rather than any assessment of the present state
or future prospects of the property market. (On the latter point, I should add
that Mr Garland’s view was that a bank in a group which advertised that in the
conduct of its business it put the customer’s needs first ought not to have
sold the property but ought to have seen the development scheme through.)
On April 14
Singer formally called in the loan outstanding to Mr Garland, the sum in
question being £283,160.17.
Following the
City of Westminster’s encouraging letter of March 21, Mr Garland prepared a new
overall scheme of development, his idea being to combine the office space
relating to nos 100-104, for which permission had been granted in May 1976,
with the office space relating to 98 Westbourne Grove and 6 Botts Mews, for
which approval in principle had been expressed in the March letter. This new
scheme, sometimes referred to as the ”L’-shaped scheme’, was embodied in a
further planning application made by Mr Garland, on April 29.
Shortly after
this, another possible purchaser of the property came on to the scene. On May
11 Mr Powell of Churston Heard telephoned Douglas Young and a week later, on
behalf of a Mr Dass, submitted a written offer of £80,000, subject to a formal
inspection of the site. Mr Dass had viewed the property from the outside and Mr
Powell, who had already inspected the interior, had been able to give Mr Dass
information about its nature and state. On the same day (May 18) Mr Dass
himself telephoned Douglas Young and spoke to Mr Macqueen. He made an oral
offer of £85,000 and indicated that he did not need to inspect. Mr Macqueen
asked him to give the name of his bank, to show that he had funds available. On
May 23 Mr Dass spoke again to Mr Macqueen on the telephone. Mr Dass said he was
not prepared to arrange finance and therefore to tell his bank, unless the
vendors were able to say definitely that they would proceed. Mr Macqueen, on Mr
Gorst’s instructions, was not prepared to give any such assurance, and so the
discussions with Mr Dass reached an impasse.
Despite the
approval in principle given by the local authority in March and Mr Garland’s
application for approval of his ‘L’-shaped scheme made on April 29, Singer was
not prepared to countenance any further delay in the realisation of its
security. On May 17 or 18 Mr Dyas telephoned Mr Garland and told him that
Singer had now decided definitely to accept the offer of £75,000. Mr Garland
made it clear that he did not approve of that decision, and a meeting was
arranged. Mr Dyas and Mr Garland met on May 19 and again on May 20. In the
course of the latter meeting Mr Garland, and Mr Dyas on behalf of Singer,
signed a letter in these terms. The letter was written by Mr Garland and
addressed to Singer.
Dear Sirs, 98-104
Westbourne Grove & 6 Botts Mews. In consideration of you accepting to
reduce any sums which may now be due to yourselves from me by the sum of
£250,000, I hereby agree to pay to you the sum of £200 per month from the
rental income recovered by me from the letting rental of the properties known
as 15 and 19 Richards Place, London SW3, until such time as the balance of my
indebtedness to you is repaid. The first such payment to be made one month
after the said properties are first income producing.
In further
consideration of your agreeing to reduce my said indebtedness, I hereby
authorise you to sell or dispose of the Property known as 98-104 Westbourne
Grove and 6 Botts Mews at such price as you shall, in your absolute discretion,
deem proper.
The total
sale proceeds, if less than £250,000, shall be retained by Singer &
Friedlander Ltd for your own use absolutely and shall not be deemed to reduce
my indebtedness to Singer & Friedlander Ltd, in any way whatsoever.
Singer’s
agreement was confirmed by the letter being countersigned on its behalf. I
shall refer to this as ‘the 1977 agreement’ and I shall have to return to these
two meetings at a later stage. Thereafter, on June 15, contracts were exchanged
by Singer for the sale of the property for the price of £75,000 to Mr King (or,
as he may have been named in the contract, which was not in evidence, K Hing or
D Kwong-Hing). The contract was completed belatedly, towards the end of August,
and the provision in the 1977 agreement for Mr Garland’s accounts with Singer
to be credited with £250,000 was implemented. This left the sum of £40,627.61
outstanding and owing from Garland to Singer at the end of September 1977.
I should
mention shortly three other events which occurred after exchange of contracts.
On June 16 Churston Heard wrote to Mr Macqueen concerning the names of the
solicitors and bankers of Mr Dass and, on being told of the exchange of
contracts, asked Mr Macqueen to inquire if there was any chance of the
purchaser considering a sale of his contract.
On July 25 Mr
P R Tennant, a chartered surveyor of Ruck & Ruck, prepared a mortgage
valuation report for Manson Finance Trust Ltd which, it seems, had been
approached by the purchaser of the property for financial assistance. Mr
Tennant’s valuation of the property was £80,000 or as a ‘forced sale valuation’
£70,000.
Then, on
November 9 1977 and following only an external inspection of the property,
Cluttons wrote to Mr Gorst, valuing the property at £40,000.
The
plaintiff’s claim
It is
essential to keep in mind that the plaintiff’s claim in this action is not a
claim by a principal against an agent employed by him (Douglas Young were not
employed by Mr Garland); nor is it a claim brought by a mortgagor against his
mortgagee for breach of the duty owed by it in realising its security (Mr
Garland is not suing Singer). The claim is brought by a mortgagor against
selling agents employed by a mortgagee. For such a claim to succeed, the
plaintiff must establish:
(a) a duty of care owed by those agents to the
mortgagor;
(b) a breach of that duty; and
(c) resultant damage suffered by the plaintiff.
Duty of
care
While seeking
to reserve the opportunity to argue otherwise elsewhere, Mr Hicks, for Douglas
Young, accepted that a selling agent acting for a mortgagee may owe a duty of
care, in and about the way he markets the mortgaged property and advises
regarding its marketing and value, within certain limits. He submitted that
such a duty is limited in two ways: first, that the duty cannot exceed that
owed by the mortgagee himself to the mortgagor. Thus, the standard of care is
no higher than that required of the mortgagee, in accordance with the principles
enunciated or referred to in the well-known decision of the Court of Appeal in Cuckmere
Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 and the recent Privy
Council decision of Tse Kwong Lam v Wong Cit Sen [1983] 3 All ER
54.
To this, Mr
Dehn, for Mr Garland, observed that the standard of care required of an agent
carrying on a profession was that appropriate to a professional man, even
though his client (the mortgagee) might not be skilled in that profession. I
did not understand Mr Hicks to dissent from that submission which, plainly,
must be right. Again, the duty cannot extend to matters for which the mortgagee
has no responsibility, such as spending money on making the mortgaged property
more attractive before marketing it. On this, also, there was no dispute,
Douglas Young’s failure to draw Mr Garland’s attention to disrepair of the
property (save on two comparative minor points) or to advise on steps necessary
to put the property into repair before marketing it being relied upon by Mr
Garland, not as a breach of duty, but as evidence that the property was not in
a state of disrepair: Douglas Young took no action on these matters, because
the state of the property was such that no action was called for.
The second way
in which Mr Hicks submitted that the duty is limited was that the duty of the
agent cannot exceed or conflict with that owed by him to his principal, the
mortgagee: he has a duty to carry out the mortgagee’s instructions, and he is
not liable to the mortgagor for doing so, or for failing to take steps outside
his instructions. I need not pursue this point either, because the breaches set
up by Mr Garland in the present case would not be caught by this suggested
limitation in any event.
Breach of
duty
Mr Garland
alleges four breaches: first, that when marketing the property Douglas Young
did not prepare particulars of the property and distribute them to their
clients and other agents in the usual way. Although Mr Macqueen, when giving
evidence, did not himself altogether agree that this criticism was
well-founded, his counsel, in the course of his submissions, accepted that
preparation and distribution of particulars were steps which a careful surveyor
would have taken. In my view, that concession was rightly made: indeed, in the
light of the evidence given by Mr Rose, the expert witness called on behalf of
Douglas Young, such a concession was inevitable.
Second, it was
said that the board affixed to the property in November 1976 was worded and
located inappropriately. Worded inappropriately because it did not state
expressly that the freehold was for sale. Passers-by, it was said, would not
have had their attention drawn to the property as a property for sale because,
from the form of words (‘All Inquiries’), they would not necessarily have
appreciated that the property was for sale. I am unable to accept this
criticism. It seems to me that any passer-by who saw this board and was
interested in buying a freehold property such as this would be as likely to
respond to the invitation of this board and
‘Freehold for Sale’. Located inappropriately, because (it was said) there was
only one board and it was so placed as not to make obvious that it related to
all four properties, as distinct from 100 Westbourne Grove, which was the
particular property to the ground-floor-level structure of which the board was
attached. I do not accept this. The four properties were empty and dilapidated
and part of a terraced block and it seems to me that no one who might have been
interested in acquiring them would be likely to have been misled by the
position of the board into refraining from inquiring of Douglas Young, in the
mistaken belief that only no 100 was the subject of the board.
The third
alleged breach was that the asking price ‘of the order of £100,000’ was far too
low: for Mr Garland, it was submitted that the asking price should have been of
the order of £450,000. This criticism is bound up closely with what was the
market value of the property at the time and I shall return, therefore, to this
criticism after I have considered the question of market value.
The fourth
breach alleged concerns Douglas Young’s advice to Singer in March 1977, to the
effect that £75,000 was the then current market value of the property. As will
appear, having regard to the then state of the market and the nature and
condition of the property, the true market value of the property in the spring
of 1977 was very difficult to assess with precision. This being so, it seems to
me that in the absence of normal marketing, no reasonable surveyor could have
given Singer the confirmation which it then sought from Douglas Young: contrary
to the clear implication in his letter of March 10 1977, Mr Macqueen ought to have
drawn Singer’s attention expressly to the fact that not all the normal
marketing steps had been taken with regard to the property.
Thus, leaving
on one side, for a moment, the third head, in my view the first and fourth
heads of breach of duty alleged against Douglas Young are established.
Damages
Prima facie the loss suffered by Mr Garland by Douglas Young’s negligence was
the difference (if any) between the price at which the property was sold in
June 1977 and the true market value of the property at that time. So I turn to
consider the market value of the property in the spring and early summer of
1977: what would the property be likely to have fetched if it had been properly
marketed? This is (to use Mr Hicks’
expression) an exercise in imprecision, it being common ground that no
valuation of the property at the relevant time could be exact.
Two valuers
inspected the property at the time and made valuations or calculations — Mr
Macqueen and Mr Tennant. Mr Tennant’s calculations culminated in a formal
valuation report to his client — Mr Macqueen’s did not. Mr Macqueen is a
chartered surveyor, qualified in 1969. The substance of his calculations made
in September 1976 on a refurbishment basis were as follows: to floor areas of
the ‘gross commercial area’, set out in Cluttons’ report of July 1973, he
attributed annual rentals of £3 per sq ft for the ground-floor shops, 75p for
the basement storage and between £2 and £1 for the upper-floor office or
residential accommodation (other than no 98). He attributed no rent to the
third floor of no 104. These rentals totalled £39,710. At a yield of 11%
deferred for one year, the value of the property so let would be £325,223. He
estimated the necessary cost of repair and refurbishment at £10 per sq ft for
these floor areas, fees at 10% of the building cost and interest on these costs
and fees at 14% for one year. These items totalled £289,121. He valued the
three flats in no 98, in their existing condition, as worth £10,000 each. These
figures produced a net valuation of a little over £66,000. None of Mr
Macqueen’s contemporary notes contain any description of the state of the
property, although in his letter to Mr Gorst dated March 10 1977 Mr Macqueen
did say that the condition of the property had seriously deteriorated over the
winter. In his evidence, Mr Macqueen said that in March 1976 there were signs
of water penetration in the upper floors, slates had slipped on the main roof
and there were broken windows, droppings and feathers from pigeons, cracked and
defective plasterwork (bulging if not off) on the walls and ceilings, and some
doors off their hinges. He said that externally the window sills required
painting, that the stucco paint was peeling off, that the electric wiring
appeared old and that he took the view that the toilet and plumbing would have
to be renewed. In September he considered that the property had deteriorated in
the long, hot summer of 1976 and that it was in a slightly worse state of
repair. In making his refurbishment calculation, he considered what would have
had to be done internally and externally to make the property habitable,
because no one would occupy it as it was. His aim was to calculate the cost of
carrying out a refurbishment which would produce a building in repair which
could be let to reasonable tenants, who were committed to paying a proportion
of the cost of repair of the property in the future. By this means, at least a
reasonable investment would be created.
Mr Macqueen’s
redevelopment calculation for no 100 to no 104 showed £89,448 as the present
value of the site. On this, his evidence was that, although he came out with
this higher figure for development value, he was not at all confident that it
could be realised, since for this type of development there was no activity in
the development market at the time. I should add that this development value
calculation was the final one of four such calculations made by Mr Macqueen at
this time, the other three in order of preparation have resulted in attributing
to the site development values of minus £175,000, minus £74,000 and £38,000.
Mr
Tennant’s calculation was as follows: he estimated
the annual rentals of the shop accommodation at £3 per sq ft, the basement at
£1.50 and all the upper floors (save for no 98) as offices at £4. Applying
these to Cluttons’ floor areas (supplied to him by Mr Macqueen) and deducting a
management fee of 2 1/2%, produced an estimated annual rental of £64,636. This
sum he capitalised, using an interest yield of 12 1/2%. He added the sum of
£8,000 for each of the three flats in no 98, making a total of £541,088. He
deducted the following costs: £20 per sq ft for the refurbishment of the office
areas (£174,120); £5 per sq ft overall for repairs to roof, exterior etc.
(£47,118); interest at 14% for one year on those building costs; and a profit
of 20% on the capital value of £541,088. The resultant residual value was
£71,633.
Thus, the end
result of Mr Tennant’s calculation was similar to Mr Macqueen’s refurbishment
calculation, but his route was different. His estimated annual rentals,
excluding the three flats at no 98, exceeded £66,000 (compared with Mr
Macqueen’s £40,000); but his building costs were much higher (£314,000 compared
with £230,000). From Mr Tennant’s oral evidence, it was apparent that in
certain respects he envisaged a higher standard of refurbishment than Mr
Macqueen.
Mr Tennant did
not prepare a calculation of the value of the property on a redevelopment
basis, since he took the view that marketed as a site for development the
property would have no takers.
As to the
state of repair of the property in the summer of 1977, Mr Tennant described it
as follows in his valuation report:
Exterior: In need of complete overhaul and redecoration. Many slates are
broken or missing to main roof and the lead has been removed from studio roof
of no 102.
Interior: In poor state of repair. Ceilings and floors broken to deter
squatters and all properties are in general need of complete overhaul and
modernisation.
He then set
out a schedule of work, which read as follows:
1. Overhaul all roofs.
2. Carry out all necessary repairs to the
exterior and redecorate all wood, iron and stonework previously painted.
3. Properly carry out a scheme of
refurbishment and modernisation to provide office accommodation on first,
second and third floors to 100, 102 and 104 Westbourne Grove.
4. Overhaul and redecorate the three
self-contained flats at 98 Westbourne Grove, together with the common entrance
hall and staircase.
5. Make good all damaged floors and ceilings
throughout the properties and generally overhaul and modernise them so that
they are ready for letting.
To this work he
attributed an approximate cost of £300,000, and in his report he added the
comment ‘as will be seen from the amount to be spent on the buildings, they are
at present in a near derelict state’.
I now turn to
the other valuation evidence. Mr Andrew Wilson, then a director of Andrew
Wilson & Co (Estate Agents) Ltd but now a partner in the firm of Nathan
Wilson & Co, made his first valuation report on August 15 1979. He had had
the advantage of inspecting the property with Mr Garland in the spring of 1976.
His report included the following passage under the heading ‘Condition’:
Based on the
file notes made at that time [spring 1976] we would report as follows:
The ground
floor shops, whilst being in a reasonable state of repair, required new shop
fronts and replastering in parts internally. In addition, the WCs within the
ground floor of the premises were, at that time, substandard, and would have to
be replaced should the premises be relet for existing use purposes. The upper
floors, whilst being rather scruffy, could be let on the open market, provided
that minor repairs and redecoration were carried out. All flats were in a
reasonable state of repair. 6 Botts Mews: This property was in a reasonable
state of repair.
Broadly
stated, Mr Wilson estimated rental at the following rates per sq ft: for the
basement storage 70-90p; the ground-floor shops between £4-£5; the offices in
the upper floors of no 102 at £1.50; the upper floors of no 104, as ancillary
to the ground-floor shops, at 45p; the garage at 6 Botts Mews at £1, and the
first-floor offices at about £3. The rentals of the residential accommodation
in the upper parts of no 98 and no 100 he estimated at £800 per annum (each of
the three-roomed flats) and £600 per annum (each of the two-roomed flats). The
total annual rental thus estimated was £36,304. Adopting a yield of 10 1/2%, he
estimated the capital value of the property to be £344,800. The report does not
state expressly that any deduction or allowance was made in respect of any lack
of repair of the property.
In his oral evidence
Mr Wilson said that certain, comparatively minor, work would have had to be
done: in particular, the holes made by Mr Garland would have had to be made
good, the slipped slates replaced and the lead-stripped roof made good; and the
drains would have had to be unblocked. He estimated that all the necessary,
comparatively minor, works would have cost not more than £10,000 to £15,000 and
that such a small sum would have made a negligible difference to the value of
the property. He said that his office rentals assumed that the tenants would
put the property occupied by them into repair and that, save for minor repairs,
the ground-floor shops and basements of the property could have been let in
their existing state.
In September
1983 Mr Wilson made a further report, this time on the value of the property as
a site for redevelopment. He valued nos 100-104 on the basis of the 1976
planning permission as worth £335,000. Adding to this the sum of £101,500 as
the value of no 98 and 6 Botts Mews on the basis of their existing use,
produced a total of £436,500. In Mr Wilson’s view, it was not unreasonable to
assume that consent for redevelopment of the whole site would, in due course,
have been given and that had consent been given for the L-shaped scheme, a sale
could well have been achieved between £490,000 and £530,000. Mr Wilson
considered that in May 1977 planning consent for this scheme could reasonably
expect to have been granted, so that an additional £25,000 ‘hope value’ should
be added to his figure of £436,500, making a total valuation of about £461,000.
Mr I Leslie
Aarons [BSc ARICS], a chartered surveyor and partner in the firm of Baker
Lorenz, made his first report in December 1982. His valuation of the property
as at May 1977 was £315,000. Although differing somewhat from building to
building and floor to floor, Mr Aarons’ estimate of the overall rental
obtainable for the property was, at the sum of £34,680, very similar to that of
Mr Wilson (£36,304). To this, Mr Aarons applied a yield of 11%, producing a
capital value for the property of £318,500, rounded down to £315,000. Mr Aarons
did not inspect the property in 1977 and he first inspected it, exterior only,
in 1982. In his report he said that although substantially built it would
appear that the property was generally in a dilapidated state in 1977. He
added:
For the
purpose of this valuation, we have assumed that the premises could be relet to
their former uses but, in our opinion, some works of repair and decoration
would have been necessary to secure reasonable rack rents for the premises.
In his oral
evidence he said that he looked on the property as comprising four shop
properties with their own ancillary upper parts, that he assumed a poor state
of repair, but that the property could have been let in that state and that his
rentals for the upper parts were ‘knock-down rents’.
On August 30
1983 Mr Aarons valued nos 100-104 on a development basis at about £300,000.
Adding £70,000 for the existing value of no 98 and £20,000 for 6 Botts Mews,
this produced an overall valuation of £390,000. On the assumption that planning
consent for an overall development of the whole property, such as proposed in
the L-shaped scheme, would have been obtained, the site would have been worth
in the region of £500,000. Since the possibility of a consent for the entire
property would have been reasonably strong, Mr Aarons’ view was that to the
value of £390,000 an element of ‘hope value’ of some £50,000 was to be added,
making the development value of the property in May 1977 £440,000.
For Douglas
Young expert evidence was given by Mr Norman J Rose [BSc FRICS FCIArb], a
chartered surveyor of De Groot Collis. When he made his principal report he had
had the advantage of having seen Mr Wilson’s first report. Mr Rose did not
inspect the property in 1977 or earlier. He noted that the major difference
between the parties related to the condition of the property at the time it was
sold. On the assumption that the condition of the property was as described by
Mr Tennant in his report, Cluttons, in their report of November 1977 and Mr
Garland, in his rating proposals, Mr Rose considered that Mr Wilson was in
error in making no allowance for the cost of remedying the substantial items of
disrepair existing in 1977. Mr Rose added this:
In my
experience, any potential purchaser of the subject premises in 1977 would have
calculated the price he could have afforded to pay by preparing a residual
calculation. This is a calculation which assesses the value the Property would
command when placed in a fit state for occupation, and deducts therefrom the
cost of putting the property into that state, including an element of profit to
compensate for the risks of buying such a property as opposed to one which is
already in reasonable condition.
As to rental
values, Mr Rose observed that, allowing for the different floor areas used, the
difference in the rentals used by Mr Wilson and Mr Macqueen was so small (about
5%) that it could reasonably be assumed that they were in agreement. Making his
own calculations with hindsight, he considered that these rent levels were
about right. Applying these rent levels to the floor areas used by Mr Wilson
and capitalising them by taking 8.5 years’ purchase (an interest yield of about
12%) and adding Mr Macqueen’s (higher) value for the unimproved flats in no 98
(£30,000), the resultant gross value of the property was £318,184. Mr Rose
considered that Mr Macqueen’s estimate of building costs at the rate of £10 per
sq ft of the net lettable floor area was very conservative. So, in his
calculation, Mr Rose estimated the building costs at £186,370 and adding fees
at 10%, a half year’s interest at the rate of 14% on those costs and fees and a
profit of 25% on the costs, his deductions totalled £274,196, leaving the sum
of £43,988 for the cost of the land, cost of acquisition, interest and profit
thereon. Deducting 3% for acquisition costs, a year’s interest at 14% on the
purchase price and the costs of acquisition, leaves a final net value for the
property of £30,000. Mr Rose commented on this figure as follows:
Having
prepared a residual valuation showing a value of £30,000, I think I would have
come to the conclusion on the basis of my general experience that this was a
very modest figure for such a substantial parcel of property, albeit one in
poor condition. In view of this and in view of the difficulties inherent in
producing a valuation by the residual method, I would have advised the vendors
to test the market by quoting an appreciably higher figure. I understand that
the plaintiff in this action has suggested the Property was worth in the region
of £350,000. Presumably, therefore, he considers that it should have been
placed on the market at an even higher figure. In my view an asking price of
£350,000 to £400,000 was so unrealistic that it would have discouraged such
potential purchasers as there were from even considering the Property. The
precise figure that it would have been reasonable to quote is a matter of
conjecture at this late stage but, in my view, the figure of £100,000 which was
quoted by the defendants seems, in all the circumstances, to have been in the
right parish.
That residual
valuation was prepared on the assumption that the property was in a worse state
of repair in 1977 than was described by Mr Garland in the course of giving his
evidence. Mr Garland’s evidence regarding the state of the property in 1976
before he made the holes, was to the following effect: the buildings were
perfectly good structurally throughout; the roofs of no 98, no 104, 6 Botts
Mews and the studio at the rear of no 102 were all weatherproof, at least to
the extent of not showing damp penetration marks on the ceilings; as to no 100,
there was a leak in the main roof, a broken French window at the rear, and that
building had been broken into once or twice and furniture and kitchen fittings
removed; as to no 102, there was possibly a leak to the roof, in the spring of
1976 lead had been removed from the roof at the rear at first-floor level and
there was a broken window and a broken skylight and pigeons had got in;
possibly there were broken skylights in other properties; the security wall was
very effective at no 104 and that property was in good condition. As to the
paintwork, no 104 was in good condition but the other properties were not so
good in 1973, and by 1977 the
fascia boards had been removed from no 98.
Internally, starting
with no 98, the basement condition was fair or average; on the ground floor
Wimpy Bar fittings had been ripped from the wall but all the double plate-glass
doors remained perfect, and the upper floors were still in a very respectable
order. In no 100 there was a bore-hole 2 in-3 in in diameter, fittings had been
ripped out, birds had got in and with their droppings etc, the place looked ‘a
bit of a mess’; the flats were ‘all right’ except for the leak to the top
floor. As to no 102, the shop was empty, dusty and shut up (with a borehole in
the floor) and the offices were scruffy but in a fair condition. As to no 104,
the former supermarket, the condition of this was as good as when it was left;
all the skylights being virtually perfect and the upper parts — the old staff
quarters — being in very good condition. Finally, 6 Botts Mews — the ground
floor was scruffy and the upper parts were reasonable. Later in his evidence,
Mr Garland accepted that the wiring and the lavatory facilities in the property
were old and that the holes made by him in 1976 did not, as Mr Macqueen wrote
in one of his letters, enhance the appearance of the property.
In the course
of his evidence Mr Rose recalculated his figures on the assumption that in the
spring of 1977 the property was in the condition described by Mr Garland. He
estimated the necessary building costs at the reduced amount of £111,822 (being
£6 per sq ft of the net floor area of 18,637 sq ft, which area excludes the
three flats on the upper floors of no 98 and the third-floor flat in no 100).
Adding fees, interest for one half of the reduced estimated period needed for
the building work (nine months) and a reduced profit of 22 1/2% produced a
total of £158,589. Deducting this and estimated purchase costs and profit on
the cost of the acquisition of the land and the purchase costs at the rate of
22 1/2% from the same starting point of £318,184 attributed to the property a
value of £110,953.
Finally, I
should mention the evidence of Mr P L Cope [FRICS], a chartered surveyor. In
1977 he was employed by the Oldham Estate Co Ltd, a substantial property
development and investment company. Responding to an advertisement inserted by
Mr Garland in the February 1977 edition of ESTATES GAZETTE Mr Cope visited the
property with Mr Garland in March 1977. He formed the view that the property
was not of interest to his company because his company normally did not want
offices with a greater depth than 45 ft from window to window, but also because
he was a little concerned regarding the mixed uses and the smallness of the
size of the proposed development. Without making a detailed calculation, he
formed the opinion — and expressed it at that time to Mr Garland — that nos
100-104, as a development site, was probably worth a sum of the order of
£300,000-£350,000.
Conclusions
as to value
1 The offers received by Douglas Young were of
varying amounts, the highest one being an oral one of £100,000. Having regard
to the strictly limited amount of advertising that had taken place, these offers
cannot be taken as necessarily indicating the market value of the property. I
think they are, nevertheless, a very important factor to be taken into account.
2 In particular, one of the bidders was
Elliott. I agree with the submission made on behalf of Mr Garland that there
may be reasons why even a purchaser with a special interest (such as Elliott,
owner and occupier of an adjacent property) is not prepared to outbid other
purchasers who lack any special interest. But Elliott was seriously interested
and had been so for a considerable time; its architects had inspected the
property and it was acting through Churston Heard, a firm of estate agents
experienced in the shop property field. I think that it is really inconceivable
that Elliott would not have improved upon its offer of £75,000 if its directors
considered or were advised that the property was worth sums anywhere near those
put forward on behalf of Mr Garland. Hence, while I do not regard the fact that
Elliott was one of the competing bidders as in itself demonstrating that the
price which Elliott declined to improve upon was the true market value of the
property at the time, I do think this is cogent evidence that the property was
not worth several times the sum of £75,000 or, I think, even as much as twice
that sum.
3 I turn to the valuations. In the absence of
any useful comparable property, all the valuers proceeded on the basis of
valuing the property by capitalising the rentals which could be expected to be
obtained from lettings of the property as it stood (with or without
refurbishment) or, in the case of development valuations, as it would be after
development. I approach all the valuation calculations with caution, having in
mind that they contain a number of variables so that, particularly when
prepared years after the event, they may be an unreliable and an uncertain
guide. Especially is this so when, as here, the property was one peculiarly
difficult to value because of the combination of its nature (multi-user), its
condition and the state of the property market in the first half of 1977.
4 Looking at the refurbishment calculations,
the most marked disparity lies in the estimated building costs. The estimates
vary from £314,000 to nil. Accordingly, I shall consider first the condition of
the property in spring 1977 and the sum required to put the property into a
condition (which I shall call a ‘lettable condition’) in which it could
reasonably be expected to be let to reasonable tenants without a rent-free
period and with the tenants, or most of them, covenanting for the future to pay
a due proportion of the cost of repair of the structure and external
decoration. No valuer has in his calculations allowed for a rent-free period,
and without such tenants’ covenants and without first doing the work necessary
to put the structure into a reasonable state of repair and external decoration,
a purchaser would be merely postponing (and probably making more expensive) the
day of reckoning.
I heard Mr
Garland give evidence in both parts of the trial over many days. He was a
transparently honest witness, possessed, among other qualities, of an excellent
(but not infallible) memory. Given his thoroughness and attention to detail, I
think that in general he would be likely to have noticed significant, readily
visible items of disrepair and so I accept that, by and large, the significant,
specific items of disrepair affecting the property and readily visible at the
relevant time (such as the extent to which plaster was off the walls or
ceilings) were as listed by him. But, as to the general state of the property,
words such as ‘scruffy’, ‘fair’, ‘all right’ and ‘reasonable’ are very
imprecise; they suffer from the defect that they can cover a very wide range of
conditions. Indeed, even as to the word ‘derelict’, applied to parts of the
property by Mr Garland in his rating proposals (and which word also appeared in
Mr Tennant’s contemporary record — ‘a near derelict state’), Mr Garland sought
to interpret this as meaning simply ‘forsaken’. I am satisfied that the
property was not in a lettable condition early in 1977 and that to put it into
a lettable condition substantial expenditure was needed. I have heard much
evidence on the approximate cost of carrying out specific items or heads of
repair and decoration, on the practice of valuers and developers of making
overall costs calculations at a rate per square foot of floor areas, and on why
such a practice could not sensibly be applied to this property. In my view, the
sum required to put the property into a lettable condition, at the rental
levels contemplated by Mr Wilson and adopted by Mr Rose, was of the order of
the sum of £110,000 odd used by Mr Rose in his second calculation. This, I
emphasise, is necessarily a very approximate estimate; but I do not think that
either party suggests that the evidence available attains the degree of detail
necessary to make a more precise calculation after the lapse of so many years.
5 Having heard and seen all the valuers giving
their evidence, the valuation evidence which impressed me most was that given
by Mr Rose. I mean no disrespect to Mr Aarons or Mr Wilson when I say that, in
this case, where there are conflicts of expert evidence about the valuation of
the property, in general I prefer the evidence of Mr Rose. I accept his
evidence regarding rentals, years’ purchase and interest and profit margins.
Hence, of all
the existing use or refurbishment valuations, the one which I found most
helpful and persuasive was Mr Rose’s second calculation.
6 The residual value which this calculation
produced (about £110,000) was considerably more than that shown in the
contemporary valuations of Mr Macqueen and Mr Tennant. However, I have felt
unable to rely with any confidence on Mr Macqueen’s calculations, for several
reasons, of which I shall mention some.
First, in
March 1976 he valued the property on a refurbishment basis at about £170,000,
to be compared with his valuation of about £66,000 six months later. This sharp
reduction derived, not from any substantial increase in his estimate of
building costs, but principally from a reduction in his gross valuation of the
property in its assumed refurbished state — from about £458,000 to £354,000.
In evidence Mr Macqueen sought to stand by both these calculations, but I have
heard no convincing explanation of this reduction.
Second, Mr
Macqueen made no measurements of his own of the property. He used, without
checking, the figures appearing in Cluttons’ July 1973 valuation, the relevant
page of which was supplied to him by Mr Gorst. Mr Macqueen treated those
figures as representing the actual floor areas of the property, whereas, in
part, they represented the floor areas comprised in the development of no 100
and no 102 for which planning permission had been granted in 1972. In the
result, his floor areas were wrong by some 25%. Again, he attributed no value
to one of the floors of one of the buildings. Further, he calculated his years’
purchase by deferring the interest yield for one year, an approach not adopted
or really supported by any other valuer.
Mr Tennant’s
valuation suffers from the same defect as Mr Macqueen’s regarding floor areas.
But a paramount reason why I feel his valuation is of less use for my purpose
than it otherwise might have been is that when preparing it Mr Tennant knew,
quite properly, of the price paid for the property by Mr King; he had also been
told by Mr Macqueen that the asking price had been £90,000. I have no doubt
that these matters, again quite properly, were taken into account by Mr
Tennant; but since I am concerned to inquire into whether the price paid and
the asking price were proper prices, a report which assumes that they were and
is, in part, based upon that assumption is of strictly limited value to me.
7 As to the valuations and evidence of Mr
Wilson and Mr Aarons, it seems to me that in making their reports they both
proceeded on the assumption that the property was in a better state of repair
in 1977 than it was. The statement of the condition of the property in Mr
Wilson’s first report is based on his inspection of the property in the spring
of 1976. Although, in his evidence, Mr Wilson said that he had regard to the
detailed account Mr Garland gave him about the state of the property in 1977,
there is no reference to this in his report. Indeed, in his report Mr Wilson
prefaced his rental estimates with a statement of the condition of the property
to the effect that (with some stated exceptions) the property was in a
reasonable state of repair.
I am unable to
accept the view that a comparatively insignificant sum (£10,000 to £15,000) was
all that was needed to make the property wind and water tight, to clear up the
mess and to fill in the holes and that then the property would have been
lettable.
Mr Aarons was
not involved in 1977 or earlier and when he made his existing use valuation he
did not know of the damage done by Mr Garland to the property, or of the nil
rating valuations or of Mr Tennant’s description of the state of the property.
8 As to other indicia of value, I do not derive
much assistance from the price at which the various parts of the property were
purchased or from the valuations made some years earlier (July 1973 and
October/November 1974); nor, since Cluttons did not then inspect the interior,
from Cluttons’ report made in November 1977. Again, the expressions of interest
by Crown House Properties in November 1974 and the oral offer by Mr James in
January 1975 seem to me to be too nebulous and distant in time to assist.
Churston Heard’s letter on behalf of Elliott in November 1975 has to be read in
the light of Elliott’s actual offer in February 1977, after Elliott had carried
out a fuller investigation.
9 I turn to consider the value of the property
as a development site. For Douglas Young it was submitted that the evidence,
that in the spring of 1977 there was no market for the property as a
development site, was overwhelming. I agree. First, it is not irrelevant that,
although his efforts had not been directed at finding an outright purchaser for
the site as it was, Mr Garland had tried without success since 1974 to launch a
development scheme, by obtaining finance for development, or a purchaser or
tenant of the proposed new building. Secondly, a successful development of this
site would (save for an owner-occupier) necessitate tenants, and a potential
developer, when considering the prospect of being able to let the building in
due course, would have been faced with the bleak fact that virtually next door
to the property was Grove House, which had been standing empty and unlet since
June 1975. In fact, no development was carried out in Westbourne Grove between
1975 and 1979. Thirdly, I have already referred to the views expressed in
evidence by Mr Macqueen and Mr Tennant regarding the possibility of development
at the time. Mr Aarons’ evidence was that in spring 1977 the company, of which
he was then the surveyor, was starting to commit itself to three major
development schemes for sites in central London which it had owned for many
years and that this reflected a general feeling that the property market was
out of the worst, most of the properties put on the market following the
property crash having been taken up by 1977. He agreed that early in 1977 it
was still a difficult market, but added that one could see light at the end of
the tunnel.
Mr Wilson gave
evidence of the banks starting to lend selectively and life returning to the
market in 1977. In his written report, Mr Rose summed up the position as
follows:
By 1977 the
commercial development market had all but collapsed. Whilst a limited number of
developers were still undertaking first class schemes, this description cannot
be applied to a development in this rather secondary location. I very much
doubt whether any developer would have been prepared to acquire the subject
properties in 1977 for the purposes of a total redevelopment, irrespective of
the price quoted.
In his oral
evidence, he said that the property market fell in 1974 through 1975 into 1976;
that the extreme depression in the market was gradually lifting in 1977, with
some degree of confidence being restored, but that he was sure that there was
no demand for the development of the property at the time; developers were
looking at sites but not buying, although there was the odd exception.
10 For Mr Garland much importance was sought to
be attached to the evidence of Mr Cope. Here was a real live developer, not
otherwise connected with Mr Garland, expressing a developer’s view of the value
of no 100 to no 104 at the time. Mr Cope said he was surprised that other
developers had not shown an interest in this site. This indicates, it was said,
that there were developers taking a bullish view at the time, in contrast with
the bearish views of others: and that, properly marketed, with two or more
interested developers in the field, the property could well have achieved a
price of over £300,000. I do not feel able to give so much weight to this
expression of view by Mr Cope. He came to the site, responding to an
advertisement for an office development and penthouse. He found a mixed-user
development. He was not a ‘shopping man’ as he frankly admitted; he was not
familiar with mixed developments and this scheme was not one which appealed to
him. I do not think that this being so, a casual view on the value of no 100 to
no 104, expressed by a developer to whom the site was not of interest, can
carry much weight as evidence of the view then being taken by developers who
might have been interested in acquiring the property.
11 This is not a case in which, in spite of
having had the benefit of an abundance of expert evidence, all of which has
been tested by very thorough cross-examination, it is possible to state the
market value of the property in June 1977 with anything approaching precision.
My overall conclusion is that if the property had been properly marketed in the
spring of 1977, it probably would have fetched a somewhat higher price than the
£75,000 for which it was sold by Singer and that that higher price would have
been somewhere between (at the bottom end of the likely range) about £85,000
and (at the top end) about £125,000. I think it is very unlikely that the
property would have fetched more than that.
The 1977
agreement
The effect of
the 1977 agreement, on its face, was that, in consideration of Singer agreeing
to reduce Mr Garland’s indebtedness to it by the sum of £250,000, first, Mr
Garland agreed to pay to Singer £200 per month from the rental income of 15-19
Richards Place until the balance of his indebtedness was repaid and, second, Mr
Garland authorised Singer to sell the property at such price as it should in
its absolute discretion deem proper, the total proceeds in such event, if less
than £250,000, being retained by Singer and not going in further reduction of
Mr Garland’s indebtedness. It is common ground that it was orally agreed on May
20 that this reduction of £250,000 would be ‘value May 20 1977’ — that is, that
interest would not be charged to Mr Garland’s account on that sum after that
date.
Accordingly,
for Douglas Young it was submitted that even if Douglas Young owed a duty of
care to Mr Garland in advising Singer regarding the value and the marketing of
the property and even if Douglas Young committed a breach or breaches of duty,
and even if, given proper marketing and proper advice, a higher sale price
would or might have been obtainable, still Mr Garland has suffered no loss
unless that higher price would have exceeded £250,000. It seems to me that prima
facie that submission is well founded.
To this a
number of answers were submitted on behalf of Mr Garland. First, that the 1977
agreement should be wholly disregarded, as res inter alios acta. By May
20 1977 Mr Garland had a good cause of action against Douglas Young; under the
1977 agreement Mr Garland, in effect, assigned to Singer his interest in the
proceeds of sale (less than they would have been because of the negligence),
and the consideration provided by Singer for this assignment is irrelevant to
Mr Garland’s claim against Douglas Young.
Secondly, it
was submitted that the credit of £250,000 was irrelevant to Mr Garland’s claim
against Douglas Young, because on Singer’s own evidence, the credit was not
provided in respect of any obligation incurred by Singer towards Mr Garland on
the ground of the property being sold at an under-value, or not having been
marketed properly: it was an ex gratia payment, given in return for Mr
Garland’s consent which he was in no position to withhold. I am unable to
accept either of these submissions. The complaint in this action is that
because of Douglas Young’s negligence, the property was sold for a reduced sum
— that is Mr Garland received less from the sale of the property than he
otherwise would. In fact, by virtue of an agreement negotiated between Mr
Garland and Singer before the property was sold, and in exchange for Mr
Garland’s agreement to the proposed sale, Mr Garland received a credit of
£250,000 altogether from Singer. I do not see how, in all commonsense, in
considering what loss Mr Garland suffered by that sale — namely a sale for
£75,000 rather than £85,000 to £125,000 — one can ignore that credit. The
credit was not unrelated to the sale; it was given in consideration of Mr
Garland’s agreeing to that sale.
Mr Garland’s
third submission was to the following effect: he says that although the 1977
agreement refers to a global £250,000, this sum was made up of the expected
sale proceeds of £75,000 (the bank intending to exchange contracts with Mr King
for a sale at that price) plus £175,000. Stated more precisely, the breakdown
was the exact sum which, taking into account apportionments on completion,
interest and so forth, a sale at a price of £75,000 would produce on
completion, plus the balance needed to raise that exact sum to £250,000. Mr
Garland’s case is that if in the spring of 1977 a higher price than £75,000 had
been obtained (as claimed by him and postulated by this argument), and given
his dissatisfaction with what he saw as shortcomings by Singer in the conduct
of his account, he would still have been able to negotiate with Singer a credit
of £175,000 on top of that higher price.
His primary
contention was that he would have been able to negotiate such an agreement even
if the result of adding £175,000 to the sale price would have been to put his
account with the bank into credit, so that Singer would have owed money to him.
His alternative contention was that at least he would have been able to
negotiate the grant to him of credit to the extent necessary wholly to extinguish
the amount of his indebtedness (then approximately £290,000) or, at the very
least, that he would have been able to negotiate a credit of a total sum which,
when added to the increased sale proceeds, would have exceeded the £250,000
negotiated on the basis of a sale at £75,000.
Whether Mr
Garland’s belief that he would have been able to conclude any such agreement is
well founded necessitates a consideration of Singer’s reasons for arriving at
and agreeing the overall figure of £250,000. In November 1976 Mr Garland had
furnished to Singer a statement of his assets and liabilities, and from this Mr
Dyas noted that there was between £25,000 and £30,000 worth of equity in
various properties of Mr Garland, after discharging existing mortgages. Mr
Dyas’ evidence was to the effect that in May 1977 he was satisfied that £75,000
was a proper price at which Singer should sell the property, but that this was
the first occasion on which Singer had ever realised a customer’s property
without the customer’s concurrence. Mr Dyas knew of Mr Garland’s unhappiness
regarding the proposed sale price of £75,000 and Singer wished to gain Mr
Garland’s approval. Accordingly, Mr Dyas discussed the matter with the chairman
and chief executive of Singer, Mr A N Solomons. Singer had no wish to bankrupt
Mr Garland and it was decided that Mr Dyas would put a proposition to Mr
Garland, whereby Singer would forgive a portion of his indebtedness in exchange
for his agreement to the sale. On May 19 a meeting took place between Mr Dyas and
Mr Garland. At this meeting, Mr Dyas stated that Singer intended to accept an
offer of £75,000 for the property, which was the best offer received, and
sought Mr Garland’s agreement (which was refused). Whatever were the precise
words used, Mr Dyas then offered to Mr Garland the inducement that if he would
agree, Singer would credit him with, altogether the sum of £150,000. Mr Dyas
indicating that if Mr Garland declined to agree, Singer would none the less
accept the offer, credit him with the amount of the sale proceeds and pursue
all courses open to Singer (including bankruptcy) to recover the balance of the
indebtedness. Mr Garland still refused to agree. It was arranged that Mr
Garland would telephone Mr Dyas on the following day.
Mr Dyas then
had a further discussion with the chairman of Singer. Mr Dyas calculated the
equity in Mr Garland’s properties, other than the property, was worth
approximately £40,000. Given that the amount of Mr Garland’s overall
indebtedness was then about £290,000, Mr Dyas, in consultation with Mr
Solomons, decided to offer Mr Garland a credit of £250,000. Singer had no wish
to embarrass Mr Garland and Mr Dyas felt that the amount of the indebtedness
which this proposal would leave with Mr Garland (about £40,000) was one which,
given time, he would be able to repay.
When Mr
Garland telephoned, Mr Dyas, without beating about the bush, told him that
Singer was prepared to increase the total amount of the ‘credit’ to £250,000.
Mr Garland’s response was that, with the greatest reluctance, he would accept
£250,000 on top of the sale proceeds. Mr Dyas refused this counteroffer,
stating that he was not bargaining. So Mr Garland accepted Mr Dyas’s offer. Mr
Garland then went to Singer’s offices to sign the agreement. At the meeting he sought
from Mr Dyas, and was given by him, an assurance that (as was the fact) Singer
intended to accept the offer of £75,000.
Mr Dyas’
evidence was that the sum of £250,000 having been arrived at in this way,
Singer would not have been prepared to forgo any greater amount of Mr Garland’s
indebtedness, Singer considering the balance to be a recoverable amount. I
accept this evidence. It was no skin off the bank’s nose to release Mr
Garland’s indebtedness to the extent of £250,000 (inclusive of the proceeds of
sale of the property). Although there was a reasonable prospect that in time,
Mr Garland could repay the balance of £40,000, he did not have resources beyond
that — beyond that, the debt was likely to be a bad debt. Contrast this with a
release of a total sum in excess of £250,000: to the extent of any such excess,
such a release would have involved Singer releasing a debt thought likely to be
recoverable. I would not underrate Mr Garland’s tenacity, but if in the spring
of 1977 a sale of the property had been negotiated at a price of £85,000 to
£125,000, I think that Mr Garland would still only have been offered a total
credit of £250,000 and I think that Mr Garland, no doubt with the greatest
reluctance, would have accepted that offer.
It follows
from this that, as I see it, having regard to the 1977 agreement and its
implementation, Douglas Young’s failure properly to handle the sale of the
property caused Mr Garland no financial loss.
Miscellaneous
I would add
the following points.
First, I
should return, briefly, to the question whether Douglas Young were
professionally negligent in advising as they did on what the asking price
should be. I do not think that on the evidence it is possible to conclude that
no reasonable surveyor could have formed the view that an asking price in the
region of £100,000 was a reasonable and proper one.
Second, one of
Mr Hicks’ arguments for Douglas Young, as part of his submission that any duty
of care owed by the mortgagee’s selling agent to the mortgagor cannot exceed the
duty owed by the mortgagee himself to the mortgagor, was that by the terms of
the 1977 agreement, authorising Singer to sell the property at such price as
Singer should in its absolute discretion deem proper, Singer (and hence Douglas
Young) were wholly freed from any duty of care regarding the price. In view of
the conclusion I have already reached, it is not necessary for me to express an
opinion on this point and I do not do so.
Third, Mr Dehn
advanced an alternative submission on damages, to the effect that the court
should assess the value of the opportunity lost to Mr Garland by Douglas
Young’s negligence, the opportunity being the chance that the property might
have been sold for a much higher sum. I do not think that that is the correct
approach to the measure of damages in this case. True it is, that the value of
the
from what I have said already, I think that it is possible to form a reasonable
view on the range of prices within which, properly marketed, the property would
be likely to have been sold. Of course, this leaves out of account a freak
purchaser; so be it.
Fourth, in the
course of cross-examination of some of the witnesses called by Douglas Young,
the suggestion was made that Mr King was a purchaser introduced by Singer, to
whom Singer particularly wished to sell the property and that Singer was not
really interested in finding another buyer or getting a higher price than that
initially offered by Mr King. It is right that I should record that I have seen
no evidence to support this suggestion, which I reject.
Fifth, it was
submitted for Douglas Young that Mr Garland failed to mitigate his damage by
not accepting an offer made by Singer in the course of correspondence in August
1977, to the effect that Singer would be prepared to agree a mutually
acceptable valuer and have the property valued on an open market basis,
provided that if the value came out at less than £250,000, Singer would bear
the cost of the valuation equally with Mr Garland, but if the value came out in
excess of £250,000, Singer would bear the cost of the valuation and reconsider
its position on providing Mr Garland with compensation. I do not think that Mr
Garland’s failure to accept such an offer, with no more than a promise to
reconsider the position, was unreasonable.
