Appellant company exercising option – Parties disagreeing as to method of valuing land – Whether price payable for land being its agricultural value only under clause 2.4.2 of agreement – Appeal dismissed
On February 21 1986 the appellant company conveyed to itself and Mr Leonard Griffiths, to hold as tenants in common, 100 acres of agricultural land at Ludgershall at a price of £100,000. The land was to be held on trust for sale; the beneficial interest of each party corresponded to its contribution. By a separate agreement made at the same time, Mr Griffiths granted the appellant an option to purchase his interest in the land in certain circumstances. Mr Griffiths subsequently died. The company then exercised its option. The respondent was the executor of Mr Griffiths’ estate. The parties disagreed on the method of valuation of the land. Clause 2.4 of the option agreement provided two sets of valuation criteria, dependant upon how the option was exercised. Both started from open market value and both were subject to an agricultural tenancy, which had been granted to the company in 1986. The difference was that in clause 2.4.1 substantial deductions fell to be made from the open market value and, in clause 2.4.2, the open market value was qualified with the words “by reference to the existing agricultural use”. The price fell to be fixed under clause 2.4.2. On July 11 1997 the court ordered that the price payable for the land, as specified in clause 2.4.2, included “any additional value the land might possess as a result of its potential for residential and/or industrial development”. The appellant company appealed on the ground that, on a true construction of clause 2.4.2, the intention of the parties was that Mr Griffiths would only be entitled to the agricultural value of his interest. The appellant submitted that the wording of clause 2.4.2 was clear and unambiguous. Any alternative construction would have rendered the words “by reference to the agricultural use” otiose and given a more favourable basis of valuation than under clause 2.4.1.
Held The appeal was dismissed.
It was not for the court to speculate as to what the parties had had in mind. The judge was correct in concluding as he did as to the meaning and effect of clause 2.4.2. The words “by reference to the existing agricultural use” did not import a restriction or limitation on the preceding phrase of the clause, namely “open market value”. They simply meant that the surveyor who valued the land had to have regard to its existing agricultural use and the effect it may have had, if any, on the value of the land. The fact that different valuation criteria applied did not mean that valuation pursuant to clause 2.4.2 was necessarily intended to have been less advantageous to the respondent. The respondent was correct in contending that valuation included any increase in the value of the land by reason of its development potential.
Jonathan Gaunt QC (instructed by Burges Salmon) appeared for the appellant; John Randall QC and Philip Capon (instructed by Dibb Lupton Alsop, of Birmingham) appeared for the respondent.
Sarah Addenbrooke, barrister
