Valuation of farm for the purpose of an option to purchase — Whether ‘Bwllfa principle’ applied — Testator’s will granted options to purchase farm to be offered to his six sons in succession until option was exercised by one of them — Farm in its then state was, subject to a subsisting lease, to be purchased at a fair market value between a willing buyer and a willing seller at the date of the exercise of the option, ‘such value to be ascertained by a valuation in the usual way’ — Option exercised by one of the sons — Whether the farm should be valued for the purpose of the option according to the ‘Bwllfa principle’, ie whether account should be taken of events which had happened at the date when the valuation was made notwithstanding that the value had to be ascertained as at the earlier date when the option was exercised — In particular whether account should be taken not only of the possibility that the lease of the farm might be surrendered, but also of the fact that it had been surrendered if that had happened before the valuation was made — Distinction explained between compensation for loss or damage, to which the ‘Bwllfa principle’ applies, and the valuation of property as at a particular date, to which it does not apply — Held that the farm had to be valued at the date when the option was exercised, including not only its actualities but also its inherent possibilities and prospects at that date, but valuation should not take into account subsequent events which showed how these possibilities and prospects in fact turned out — ‘Bwllfa principle’ not applicable — Various subsidiary matters also determined
This was an
originating summons issued by executors as plaintiffs for the purpose of
determining questions arising in the course of
options to purchase his freehold farm known as Flint Hall Farm situated at
Harling, in Norfolk, comprising some 484 acres. The defendants were the
testator’s six sons, his daughter, Mrs Diane Harvey, and her children. The
plaintiffs were Clement Ernest John Gaze and Martin Philip Manning Prentiss.
Derek Wood QC
and G W Jaques (instructed by Fowell, Thorold & Prentice, of Diss, Norfolk)
appeared on behalf of the plaintiffs: J H Weeks (instructed by Mills &
Reeve, of Norwich) represented the first, second and third defendants, Norman,
John and Brian Holden respectively; G M Shillingford (instructed by J
Cunningham, of Thetford) represented the fourth and sixth defendants, Nicholas
and Robin Holden; J G Ross Martyn (instructed by Manning, Rollin & Co, of
Diss, Norfolk) represented the fifth defendant, David Holden; M Buckley
(instructed by Greenland, Houchen & Co, of Norwich) represented the
seventh, eighth and ninth defendants, the two children of Mrs Diane Harvey and
Mrs Harvey herself respectively.
Giving
judgment, JUDGE FINLAY QC said: The testator, Harry Eaton Holden, died on
August 30 1976 and on June 20 1979 probate of his will, which was dated May 20
1968, with a codicil thereto dated June 9 1975, was granted out of the district
probate registry at Ipswich to the plaintiffs Clement Ernest John Gaze and
Martin Philip Manning Prentiss and to the second defendant John William Holden.
The defendant, Mr Holden, is party to the proceedings on that side of the
record because he has, as well as his interest in the matter as one of the
three executors, also a beneficial interest under the will. He was appointed by
the codicil as one of the three executors, in place of one who was originally
appointed by the will.
After making
provision for the event (which did not happen) of his widow surviving him and
giving certain legacies, the testator devised to his trustees his freehold farm
known as Flint Hall Farm, a property situated at Harling in the county of
Norfolk and comprising some 484 acres, upon trust to sell the same but, so long
as his son Robin, who is the sixth defendant, should be over 21 and under the
age of 30 years, only with his consent in writing; and then upon trust to offer
the farm to his sons Robin, David, Nicholas, Norman, John and Brian severally
and successively in that order, giving each of them an option to purchase the
farm upon the terms which were set out in the first schedule to the will. It is
in relation to that option that the two plaintiff executors have issued the
present originating summons, raising the questions which arise in the course of
giving effect to it and to the contract which has arisen by reason of the
exercise of the option.
The first
schedule provided that, unless the trustees should otherwise determine, no such
option as provided for by the will should be offered or exercised until the son
Robin had attained the age of 30 years, an event which has happened. Subject to
that provision, the trustees were directed by clause 2 of the first schedule to
offer in writing to sell to the testator’s son Robin, and unless accepted by
him, then to offer in succession to sell to each of the other of the testator’s
named sons in the order named in the will, until such option should be
exercised by one of them, the freehold farm which I have mentioned, with the
farmhouse and other appurtenances, in its then state and area and subject to
any such lease as is mentioned in the provision in clause 2(5) of the will, at
a fair market value thereof between a willing buyer and a willing seller at the
date of exercise of the option, such value to be ascertained by a valuation in
the usual way. Clause 3 of the first schedule provided that the trustees should
determine the time and manner in which the option should be offered; the time
and manner of the acceptance thereof and the terms of the payment of purchase
price and the other terms upon which the sale and purchase should be made on
the exercise of the option. Then there followed a provision in clause 4 of the
first schedule that the successive options should be personal to the testator’s
sons respectively and should not be exercisable by their representatives or by
any other persons claiming through them; but finally it provided that any such
son might exercise his option on behalf of himself and other persons.
Immediately
before his death, the testator was carrying on the business of farming, in
partnership with his son Robin, under a partnership agreement dated March 28
1967, made between the testator of the first part, his wife Sylvia Doris Holden
of the second part and Robin Stephen Harry Holden, to whom I have already
referred as ‘Robin’, of the third part. I will refer where necessary and
appropriate to the several sons by the names with which the testator referred
to them in the clauses of the will which I have mentioned; it is thus that they
have been referred to in the course of the hearing and I hope that none of them
will think that in doing so any kind of disrespect is intended by me.
The provisions
of the partnership agreement are many of them in common form but the relevant
provisions are few in number: clause 5(2) provided that the initial capital in
the partnership should be contributed by the partners ‘in the following
shares’; and then provision is made for contribution by the testator of
three-fifths, by his wife of one-fifth, and by the junior partner of one-fifth.
There is provision also for the division of net profits in the like shares and
proportions and clause 13 of the partnership agreement contained provisions
under which on the death of a partner the surviving or continuing partners
should have the option of purchasing the share of the partner so dying. These
provisions were not brought into operation upon the death of the testator’s
wife, who predeceased the testator and, on her death, the testator, on her
intestacy, became entitled to her one-fifth share, with the result that at his
own death he was entitled to a four-fifths interest in the partnership and the
remaining one-fifth belonged to his son Robin. Robin has, I understand,
continued in occupation of the farm and, in the result, he has a one-fifth
interest in the partnership and the remaining four-fifths belong to the estate.
At the same
date as the partnership agreement there was granted by the testator a lease to
the partners of the farm. That lease dated, as I have indicated, March 28 1967
and made between the testator of the one part and himself, his wife and son
Robin of the other part granted the farm to the three lessees for a term of 20
years from April 6 1967 at the yearly rent of £2,500 payable as therein
provided and the lease contained covenants not only by the lessor with the
lessees but also covenants by the lessees with the lessor and, among those, one
which is peculiarly material to the present application; that is to say, a
covenant which is set out in the schedule containing the lessees’ covenants,
namely, the third schedule and is to be found at paragraph 7 thereof, a
covenant that the lessees will not assign, underlet or part with the possession
of the demised property or any part thereof. The partners were in occupation of
the farm under that lease at the date of the testator’s death and that lease
continues, vested as it now is in the survivor of the three lessees, Robin, and
there remains unexpired, of the original term granted in 1967, the residue of
the 20 years from April 6 of that year. Accordingly, the lease has rather less
than five years still to run.
The executors
duly offered the farm, first to Robin and then to David and, thirdly (neither
of these two sons having exercised the option offered to them) to Nicholas: and
they did so, in each case, on terms which were set out in a document that has
been put in evidence. That document (which in the case of the offer to Nicholas
is dated February 7 1980) recited the grant of the option by the testator’s
will, the fact that the option had been offered to Robin and David and not
exercised by either, and the circumstance that at the date of the testator’s
death the farm was subject to the lease dated March 28 1967. The document
containing the offer then, having called attention to the provisions of the
first schedule to the testator’s will, stated that the price to be paid on the
exercise of the option was to be ascertained by valuation and stated that the
trustees appointed as their valuers T W Gaze & Son of Crown Street, Diss,
Norfolk. Clause 8 of the document provided that the option was to be exercised,
if at all, by a written notice not later than the first post on Monday February
18 1980 and that the notice exercising the option should specify the name and
address of the valuer who would be acting for the son exercising the option,
for the purposes of the valuation. There then followed administrative
provisions as to the manner in which the valuation was to be effected and
provision that if the valuers were unable to agree, the value should be
determined by the award of a single arbitrator to be appointed either by
agreement or upon the nomination of the president of the Norwich and Norfolk
Law Society. The document then further contained provisions as to completion of
the sale and as to conditions of sale.
By a notice
dated February 8 1980, solicitors acting for Nicholas gave notice to the
executors that Nicholas elected to purchase the property, Flint Hall Farm, as
more particularly described in the notice or document offering the option which
I have mentioned, at a price to be fixed in accordance with the will of the
deceased and the document giving notice of the offer of the option (‘the option
notice’) by the valuers appointed by the trustees of the deceased and Nicholas’
nominated valuer, Mr Barry Hawkins of Charles Hawkins
further stated that the option was exercised on behalf of Nicholas, Robin and
David.
The first six
defendants to this originating summons are the six sons of the testator named
in his will and to whom the option to purchase the farm was successively to be
offered until one of them should exercise his option. The seventh and eighth
defendants are children of the testator’s daughter, Mrs Harvey, who herself is
the ninth defendant.
By his will,
the testator, having made the provisions which I have already indicated as to
the offer of the option and making provision for the event (which did not
happen) of his wife surviving him, provided in clause 5(4) of his will that,
subject to these matters, the trustees should hold the freehold farm, Flint
Hall Farm, upon trust to divide the net proceeds of sale thereof and the net
income thereof pending sale among his children or child, if only one living at
his death, and if more than one in equal shares as tenants in common, with a
substitutionary provision which did not operate, in the event of any child
predeceasing him, and a further proviso that the share of his daughter, Diane
(that is Mrs Harvey), should not vest absolutely in her but should be retained
by his trustees and held upon trust as set out in the third schedule of his
will which, in brief, gives a life interest to Mrs Harvey and with remainders
under which her children are beneficially interested. By clause 6, the residue
of the testator’s estate was directed to be held upon the like trusts for the
benefit of his children and their issue and subject to the like provisos as
were declared by clause 5(4) of and concerning Flint Hall Farm or the proceeds
of sale thereof, ie the provisions which I have just indicated.
The first
matter raised by paragraph 1 of the originating summons is expressed in these
terms:
The trustees
apply for directions whether on any sale of the freehold farm Flint Hall Farm,
East Harling, Norfolk, comprised in the deceased’s estate, subject to the lease
dated March 28 1967, pursuant to an exercise of the option to purchase the same
contained in the deceased’s will dated May 20 1968, the arbitrators valuing
such freehold interest ought to have regard to the possibility that the said
lease might be surrendered before the expiration of the term created thereby,
due to the fact that it contains an absolute covenant against assignment or
under-letting and is held by the tenant thereunder upon trust for sale in trust
for himself and the estate of his former partner, the deceased, as an asset of
their former partnership.
Mr Weeks, who
appears for the first, second and third defendants, submitted (I should say,
and I hope that I do not put the matter inaccurately, that his submissions were
put before me felicitously and persuasively by Mr Dumont who held his brief in
the earlier stages of this hearing) that in ascertaining the value of the
freehold for the purposes of the valuation called for by the will, the option
notice and the notice exercising the option, there should be applied that
principle which is well known as the Bwllfa principle; in brief, that in
determining what the value of the property is one was entitled to take account
not only of possible and prospective events but of events which had actually
happened at the date of the valuation, notwithstanding that the value had to be
ascertained as at some earlier date. In particular, it was submitted that in
determining the value of the farm the valuer or arbitrator should take account
not only of the possibility that the lease might be surrendered but also of the
fact that it had been surrendered, if that had happened prior to the date when
the valuer or arbitrator embarked upon the consideration of the matter, and of
any other events which had happened between the date of exercise of the option,
February 8 1980, and the date when the question of valuation fell to be
considered. In particular, it was suggested that the valuer should take account
of the circumstance that on March 24 1980 Robin issued proceedings, in which he
was plaintiff and the executors were defendants, in which he sought a
declaration that the partnership was dissolved by the death of the deceased and
an order for the winding-up of the partnership, all necessary accounts and
inquiries and the appointment of a receiver. It was also suggested to me that
the application by motion, made in the action thus instituted, indicated a
likelihood, to put it no higher, that Robin would surrender the lease.
The Bwllfa principle
is to be found in the decision of the House of Lords in Bwllfa and Merthyr
Dare Steam Collieries (1891) Ltd v The Pontypridd Waterworks Company [1903]
AC 426. At p 431 Lord Macnaghten says this:
If the
question goes to arbitration, the arbitrator’s duty is to determine the amount
of compensation payable. In order to enable him to come to a just and true
conclusion it is his duty, I think, to avail himself of all information at hand
at the time of making his award which may be laid before him. Why should he
listen to conjecture on a matter which has become an accomplished fact? Why should he guess when he can
calculate? With the light before him,
why should he shut his eyes and grope in the dark?
And it was
submitted to me that the same principle should be applied in the present case.
Now the appeal in the Bwllfa case was one which arose by reason of the
fact that owners of coal mines under and near certain waterworks gave the
undertakers notice under the relevant statute that they intended to work the
coal. The water undertakers served a counternotice requiring the mineowners not
to work the coal and stating their willingness to make compensation. The
question then was what compensation was to be paid to the owners of the coal
mines and on what principle it fell to be assessed. And at p 428, the Earl of
Halsbury LC, giving the first opinion of their Lordships, said this:
My Lords, I
think in this case that Phillimore J
and I should
say that he was the judge in the Divisional Court which dealt with the matter
in the first place
stated the
question for debate with perfect accuracy when he said that ‘the true inquiry
here is not what is the value of the coalfield or of the coal, but what would
the colliery company, if they had not been prohibited, have made out of the
coal during the time it would have taken them to get it’.
It was not a
purchase of the coal, nor is it analogous to a purchase of the coal. It is what
it is, and it appears to me that considering what it is I think the question
propounded is solved by the statement of what it is. If it were a purchase, the
rights and liabilities and profits, if there were any, would pass to the
purchaser, and its value, with all its possibilities, would pass at the time
notice to treat was given; but, if the question is that which I think it was,
then the person who had to make the calculation of what was the compensation
ought to have arrived at the sum which experience has now shewn to be the
correct amount.
It is true
that he probably would not have been able to arrive at that sum accurately, but
he ought to have contemplated upon such material as he had what would be the
true sum. He ought to have considered the possible rise or fall of prices; but,
as I have said, he probably would have made a mistake. We now know what would
have been the true sum, and the proposition baldly stated appears to be that,
because you could not arrive at the true sum when the notice was given, you
should shut your eyes to the true sum now you do know it, because you could not
have guessed it then.
It is, of
course, only an accident that the true sum can now be ascertained with
precision; but what does that matter? It
seems to me that the whole fallacy of the contention that you may not look to
the facts that have occurred rests upon the false analogy of a sale.
I am of
opinion that the analogy is a false one, and I move your Lordships that the
decision of the Court of Appeal be reversed and the original judgment restored
. . .
and he then
made a proposal as to the costs.
It will be
noted that in that case the opinion of Lord Halsbury on this matter (and the
opinions stated by Lord Macnaghten and Lord Robinson and Lord Lindley were to
the same effect) was that the submissions which they were rejecting were based
upon the false analogy of a sale and that what they were dealing with there was
not the question: ‘What price should be paid upon sale?’ but what compensation should be paid to the
colliery company by reason of the fact that they were deprived of the
opportunity of working the coal in question. That principle, it was submitted,
had been applied in other cases and I would refer to Re Bradberry: National
Provincial Bank Ltd v Bradberry [1943] Ch 35, a case where an
annuity fell to be valued and the annuitant had died before a valuation of the
annuity fell to be made. Uthwatt J said at p 42:
If one bears
in mind that the question is one of administration only, and that the duty of
the court is to do the best it can, there can, in my view, be but one answer to
the question and that is that the court should take into account every relevant
fact that is known at the date when the decision is to be made and work out the
rights of the parties accordingly. The death of an annuitant before the court’s
decision enables the court exactly to measure what was in fact given to him.
Why should the court neglect known facts and put itself in the position of a
prophet who, when he knows all the facts, projects himself to an earlier date
and predicts as the span of life of a person known to be dead the length of
life of the hypothetical person who lives his actuarial life? Few would trouble to acquire the mantle of
Elijah to make such a prophecy. In my view, one who did so would be only
wasting his coupons.
And there is an
explanatory footnote on the significance of that last now somewhat dated
observation.
At p 45,
having considered the Bwllfa case and other authorities, Uthwatt J said
this:
A principle
is to be drawn from these authorities, namely, that where facts are available
they are to be preferred to prophecies.
I was also
referred to Re Hayes’ Will Trusts [1971] 1 WLR 758 in support of the
submission that it was the duty of the executors to produce for distribution
among the beneficiaries the highest amount that could be produced by the sale
pursuant to the exercise of the option and it was, as I understand the
submission, suggested that in order to achieve that result they should see that
the Bwllfa principle was applied. Further on the Bwllfa principle,
I was referred to a decision of Megarry J (as he then was) in Re Goodwin [1969]
1 Ch 283, where, at p 289, he said:
In a recent
revenue case, Simpson v Jones [1968] 1 WLR 1066, 1075, I had to
consider what I there stated as being ‘a general principle in the law that
where facts are available they are to be preferred to prophecies’. This is
sometimes called the Bwllfa principle, from the well-known case of Bwllfa
and Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co.
If, on a compulsory acquisition, compensation depends upon the value of
minerals, the actual value of these minerals at the time when the compensation
comes to be assessed is to be preferred to the estimate of that value which
would have been made when the notice to treat was served. Where a widow’s
damages under Lord Campbell’s Act 1846 depends on her expectation of life, and
she dies before damages come to be assessed, what is to be taken is her actual
expectation of life at the time of her husband’s death rather than her
actuarial expectation then. If a testator’s estate is insufficient to pay all
the legacies in full, the abated capital sums payable in respect of
testamentary annuitants who have died prior to the time of assessment must be
based on their actual expectations of life at the date of the testator’s death
and not on their actuarial expectations then.
And he refers
to the authorities on these points as being collected in Re Bradberry.
Megarry J applied the Bwllfa principle in the case before him, which was
an application under the Inheritance (Family Provision) Act 1938 as then
amended.
The suggestion
that the Bwllfa principle should be applied was opposed by both Mr
Shillingford, who appeared for the fourth and sixth defendants, ie two of the
three defendants who are interested as purchasers under and by reason of the
exercise by Nicholas of the option, and also by Mr Ross Martyn, who appears for
the third of the three purchasers who are thus interested and by Mr Buckley,
who appears for the seventh, eighth and ninth defendants, who are interested in
the residue, the ninth defendant as a life tenant of a share of the residue and
her two children, the seventh and eighth defendants, as remaindermen interested
in their settled share. Mr Buckley submitted that there was indeed no present
material upon which the Bwllfa principle could apply, but if there were
any circumstances in which it might be said to be applicable he submitted that
it was not.
The burden of
countering the submission that the Bwllfa principle was applicable was
then taken up by Mr Wood, with whom Mr Jaques appears for the plaintiffs. He
submitted that the true ratio of the Bwllfa principle, both in the House
of Lords and as it has been applied from time to time, is that it is a
principle applicable in cases where what falls to be assessed is compensation
for loss or damage or injury and that it is not applicable in a case where the
question is: what value is to be put upon land or other property at some
particular date? Where, he submitted,
land or other property is to be valued as at a certain date it is not
permissible to have regard to events which happened after that date except
possibly to a very limited extent, to which I will return in a moment. He
referred me to the decision of the Court of Appeal in Bwllfa (which is
reported at [1902] 2 KB 135) and the justification for looking back from the
House of Lords to the Court of Appeal was, he submitted, that whereas in the
House of Lords their Lordships decided the matter on the footing that what they
were concerned with was a case of ascertaining compensation, the Court of
Appeal approached the matter in a different way and treated it rather as a
matter of valuation, but, so treating it, held that the value was to be
ascertained by regarding the facts as they were at the date as at which the
value fell to be determined and not by having regard to events which had
happened subsequent to that date and before the actual determination. The
headnote in the Court of Appeal reads:
In an
arbitration under the Lands Clauses Acts and the Waterworks Clauses Act 1847 to
assess the compensation payable to the owner of coal mines in respect of his
being prevented from working seams of coal lying under and near to the
reservoir of a waterworks company, the arbitrator is not entitled to take into
consideration as an element in determining the amount of compensation to be
paid a rise in the value of coal which has occurred between the date of the
company’s notice to treat and the making of his award.
Vaughan
Williams LJ says at p 141, speaking about the task of the valuer:
If, for
instance, he has to assess the value of land which is used as agricultural
land, he is entitled to take into consideration its adaptability for building
land, because that is a fact which is in existence at the time the notice to treat
is given. If, after the notice to treat has been given and before the
assessment, some inherent value in the land is discovered which was neither
expected nor discovered at the time of giving the notice to treat, that
circumstance would properly be taken into consideration, because it was,
although unknown, a fact existing at the date of the notice to treat which
affected the value of the property. But when it is proposed to take into
account a contingency which cannot be anticipated and cannot be measured, that
is quite a different thing, and I think such a contingency ought not to be
taken into consideration at all.
He then goes
on to say that practically the rule is the same as the ordinary rule for
measuring damages for the breach of any contract.
I find from
the judgments in the Court of Appeal in Bwllfa some support for the
proposition that if the matter is looked at as a question of valuation only,
those circumstances should be looked at which exist at the date as at which the
value has to be ascertained.
Mr Wood also
referred me to Green’s Death Duties, 7th ed, where it is said at p 417,
dealing with the mode of ascertainment of the principal value of the property
for the purposes of the estate duty registration:
The property
must be valued in its actual state at the time of the death. And apart from
depreciation by reason of the death, the valuation is not affected by any
subsequent rise or fall in prices. Subsequent events, including sales, can be
relevant only as an indication of what the value was at the time of the death.
In practice, the best test of the price which property would fetch under
given conditions is the price which it actually fetches under equivalent
conditions.
Mr Wood, as I
understand it, was disposed to accept that the prices obtained, for example, on
subsequent sales could be looked at if they furnished evidence of what the
state of the market was at the date when the property fell to be valued. He
instanced the case where the prices obtained on subsequent sales might indicate
whether the hypothesis that the market trend was a rising one or a falling one
was well-or ill-founded. But subject to that exception that subsequent events
may furnish evidence of what the value was at the relevant date, his submission
was that you were not entitled to look at subsequent events for the purpose of
determining what weight should be given to contingencies which, at the relevant
date, for the purposes of the valuation, remained unresolved. He referred me to
some further cases dealing with rental valuation. In a case, reported
apparently only in ESTATES GAZETTE, Duvan Estates Ltd v Rossette
Sunshine Savouries Ltd (1982) 261 EG 364, [1982] 1 EGLR 20, Robert Goff J,
on an application seeking leave to appeal against an arbitrator’s award in
respect of a rent review clause in a lease, considered a submission which was
not contested on the other side but he had this to say about it at p 365:
The point, in
broad terms, Mr Neuberger says, is that in considering a valuation of this kind
it is proper to have regard to the relevant facts existing as at the review
date, which is July 17 1978, and not to have regard to facts and events
existing after that date. In support of that proposition he relied upon a
passage at the end of the judgment of Whitford J in Ponsford v HMS
Aerosols Ltd, a case which went on appeal [1979] AC 63; (1978) 247 EG 1171,
[1978] 2 EGLR 81; but I was provided with a transcript of Whitford J’s judgment
because on this point apparently the appeal was not pursued. As a general
principle, I entirely accept that.
Mr Wood also
referred to another case: a decision of Judge Fay QC in Industrial
Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd,
where, after stating his finding that ‘at Christmas 1973 there were virtually
no property sales being effected, and when later in 1974 a market redeveloped,
it was at values considerably lower and yields considerably higher than prior
to December 1973’, and having then referred to (among other cases) the Bwllfa
case and Re Bradberry he said:
If I were
dealing with quoted shares instead of land the position would be plain enough.
If shares have to be valued as at a certain day, for example for estate duty
purposes, the value is the mid-market price on that day and it would be idle to
urge that six months later their price was halved, or that on the day of
valuation they were on a downward trend because of apprehensions which later
were found to be well founded. No, I must ask myself what a skilled valuer would
have done at Christmas 1973, knowing all that had happened up to then but
denied foreknowledge of the catastrophes of 1974.
Under the
will, the farm is to be offered to the successive grantees of the option upon
the terms set out by the testator in the first
option, if he chooses to exercise it, to purchase the property subject to any
such lease as the testator has mentioned (which, in the events which have
happened, means subject to the lease of March 28 1967) at the fair market value
thereof between a willing buyer and a willing seller at the date of exercise of
the option, such value to be ascertained by ‘valuation in the usual way’.
I have come to
the conclusion that ‘valuation in the usual way’ means taking into account the
events which have happened as at the date when the property falls to be valued
— in this case, February 8 1980 — and taking into account not only the
actualities at that date but the possibilities in relation to all the
circumstances; and that the valuer has, as best he can, to form his own
judgment as to how these possibilities and the various prospects that are
inherent in the then existing situation affect the value of the property as at
that date; but that he is not entitled to take into account events which
happened subsequently and which resolve how these various possibilities and
prospects in fact turn out. To do so would be to introduce into the valuation a
species of foreknowledge which would not be available to any willing buyer or
willing seller entering into a contract as at the date upon which the property
falls to be valued. The real exercise which the valuer is carrying out in
making a valuation in accordance with the principles laid down by the testator
in the first schedule of his will is the exercise of determining, applying to
the problem all the skill and experience which he has, what a willing seller
would be prepared to accept as a price and what a willing buyer would be
prepared to pay. To endow either buyer or seller or both of them with
foreknowledge of how events were going to turn out would make that exercise one
that was entirely different in character to that which the testator has
indicated as the appropriate method of valuation.
In reaching
that conclusion I am fortified, on reconsidering the authorities to which I am
referred, by the fact that in the very first of them (the Bwllfa case)
it is made clear that the House of Lords was not dealing with the matter as a
case of valuation but as a case of determination of compensation. I have come
to the conclusion (fortified, as I say, in that way) that the Bwllfa principle
does not apply to the valuation that has to be effected for the purposes of
administering the testator’s estate in relation to this option.
The question
was mooted in relation to question 1 in the originating summons as whether
there should be any kind of gloss upon the direction there sought to be given
to an arbitrator, to the effect that he should disregard any prospective or
actual events which could either be foreseen at the time of exercising the
option or which happened thereafter in so far as these events could reasonably
be regarded as brought about in whole or part by the exercise of the option. I
do not think it is necessary in any kind of way to qualify the wording on which
a direction is sought under paragraph 1 of the originating summons, although at
one time it appeared to be, upon the basis of what Mr Shillingford and Mr Ross
Martyn were submitting, that there might be something to be said for it.
The second
question in the originating summons does not I think arise in the light of the
view I have formed on the first question.
The third
paragraph of the originating summons asked for directions whether the plaintiffs
and the second defendant, as executors of the deceased, ought to cause the said
leasehold interest to be valued at the same time and by the same arbitrator as
the said freehold interest is valued by him. Mr Weeks indicated that if it was
merely a matter of valuation, he had no objection to the same arbitrator or
valuer dealing with the value of the leasehold as was concerned with the
valuation of or arbitration upon the freehold. Neither Mr Shillingford nor Mr
Ross Martyn nor Mr Buckley had any objection to the question of the value of
the leasehold being referred to the same valuer or arbitrator.
In the course
of the hearing, however, it did emerge that what was contemplated as the
possibility in relation to the matter mooted by paragraph 3 of the originating
summons was that there should be, in effect, a reference to arbitration in
relation to the value of the leasehold, but there is no material before me that
indicates that at this juncture any kind of agreement has been reached by the
executors on the one hand and other interested parties on the other as to the
terms upon which either of the two questions (two questions which arise in
relation to the leasehold) should be referred to arbitration. The two questions
are: what would be a proper consideration to be given by the reversioner in
respect of a surrender of the leasehold term?
And, what would be the proper consideration to be given for the interest
of the other partner (if I can use that word to refer either to Robin on the
one hand or to the executors entitled to the partnership interest of the
deceased on the other) in respect of the interest of the other in the leasehold
property as an asset of the partnership?
I do not think that, on the material before me, I can give the executors
any directions as to arbitration in that regard. It appears to me that they
probably have ample powers to enter into some kind of agreement with whomsoever
is the other interested party in relation to an arbitration as to the value of
the leasehold interest if indeed they are able to come to appropriate terms.
So far as the
specific question raised by paragraph 3 is concerned, it appears that it has
become common ground that there is no objection to the matter of the valuation
of the leasehold in either of the two respects I have mentioned being referred
to the same person as is concerned with the valuation of the freehold.
Paragraph 4
raises a question which is expressed to be conditional upon the particular
answer to question 3 but I think it would arise in any event. The question is
whether in valuing the leasehold interest the arbitrator (or I think it might
be the valuer) ought to have regard to the fact that if a sufficient offer was
not forthcoming from the freehold owner of the said farm for the surrender of
the said lease it would be open to the tenant under such lease to hold the same
upon trust for sale in trust for himself and his former partner (the deceased)
as an asset of their former partnership, and to acquire the said former
partner’s beneficial interest in the said lease and continue to farm the said
farm thereunder, thus enjoying the protection afforded to agricultural tenants
by the Agricultural Holdings Act 1948.
In my
judgment, upon a valuation of the leasehold, either for the purpose of determining
what would be an appropriate consideration for the surrender thereof or for the
purpose of determining what the value of the different interests therein
arising under the partnership agreement are, it would be entirely appropriate
that a valuer making such valuation should have regard to all the relevant
circumstances. These would include any possibilities there might be of the
lease being surrendered, which would involve considering in whom the reversion
was vested and who was entitled to it; and also the fact that the lease is
vested in a surviving partner and is held as an asset of the partnership, with
all the possible consequences that flow from that circumstance. Briefly, what I
think it comes to is that a valuer should, in relation to any valuation of the
leasehold, have regard to all the actual relevant circumstances, including all
the facts as to how the lease has devolved and those provisions of the
testator’s will which have any bearing upon its valuation.
