Negligence — Action against receiver appointed by mortgagees — Borrowers had mortgaged tenanted properties, in many cases subject to rent reviews — Failure by receiver to serve trigger notices in time — Sale by mortgagees — Sale prices at auction depressed because rental income not increased in absence of review — Receiver held to have been negligent — Difficulties in quantification of damages
this case, a husband and wife, had mortgaged certain tenanted properties owned
by them as security for debts incurred by the husband and a business partner —
Some tenanted properties vested in the partnership were also mortgaged — The
mortgagees were an insurance company — Many of the tenancies were subject to
rent review provisions — The mortgagees appointed a receiver, the defendant in
the present action — The plaintiffs’ complaint against the receiver was that he
negligently failed to serve trigger notices within the time-limits laid down
under the appropriate rent review clauses, thereby missing the opportunity of
obtaining increases of rent — As a result, when the mortgagees came to exercise
their power of sale the prices realised were lower than they would have been if
the rents had been increased through a timely exercise of the review machinery
— It should be mentioned that neither the plaintiff husband’s former partner
who had become bankrupt nor the latter’s trustee in bankruptcy were parties to
the present action, an ‘oddity’ which led to certain complications in the
assessment of damages
plaintiffs’ claim was that the defendant as receiver was under a duty of care
to them and that he was in breach by failing to serve rent review notices in
time — The Vice-Chancellor found that the defendant was under such a duty and
was in breach of it — There was a direct causal link between the failure to
give the notice in due time and any diminution in the prices realised at the
sale — The Vice-Chancellor rejected a submission that the defendant as receiver
had no power to serve a rent review notice — He had such a power either under
section 109 of the Law of Property Act 1925 alone or by that section as
amplified by provisions of the legal charge — A suggestion that there had been
contributory negligence on the part of the plaintiffs was dismissed
quantification of damages was a matter of quite extraordinary difficulty, as
the second half of the Vice-Chancellor’s judgment shows — After a most detailed
examination of items making up the total there were questions calling for
further investigation which caused him to direct an inquiry as to damages — He
was, however, able to arrive at a minimum sum of damages due to the plaintiffs
of £18,200 and he made an order for interim payment of that sum — He directed
that his order be not drawn up for 28 days, allowing time for the trustee in
bankruptcy of the husband’s former partner to make an application if so advised
— He also declared that if, on inquiry, it was determined that Williams &
Glyn’s Bank or the City of Westminster Assurance Co Ltd were entitled to
further payments, the amount would be payable by way of extra damages
The following
cases are referred to in this report.
American
Express International Banking Corporation v Hurley
[1985] 3 All ER 564, DC
Pittortou
Re, ex parte Trustee of the property of the bankrupt [1985] 1 WLR 58; [1985] 1 All ER 285
Standard
Chartered Bank Ltd v Walker [1982] 1 WLR
1410; [1982] 3 All ER 938; (1982) 264 EG 345, [1982] 2 EGLR 152, CA
This was an
action by Mr and Mrs J W Knight claiming against the defendant, Mr Harvey
Lawrence, damages for alleged negligence when acting as a receiver appointed by
the City of Westminster Assurance Co Ltd in respect of properties charged by
the plaintiffs to the company for moneys borrowed. The negligence alleged was
the defendant’s failure to serve rent review notices on the tenants of the
mortgaged properties within the time-limits laid down.
Charles Purle
QC and Anthony de Garr Robinson (instructed by Ingham Clegg and Crowther &
Laytons, of Preston) appeared on behalf of the plaintiffs; Glen Tyrell (instructed
by Kennedys) represented the defendant.
Giving
judgment, SIR NICOLAS BROWNE-WILKINSON V-C said: In this case Mr and Mrs
Knight, the plaintiffs, were borrowers under a legal charge. They claim damages
for negligence against the defendant, Mr Lawrence, who was appointed as
receiver of the mortgaged property by the lenders. The title of the action
contains also the name of a firm of solicitors as third party, but for reasons
which have not been explained to me the third party proceedings have not come
before me.
The properties
in question were all let to tenants, many of the leases containing rent review
clauses. The time for serving certain trigger notices necessary to put in
motion those rent reviews expired during the period when Mr Lawrence was the
receiver of those properties. He did not serve the necessary notices. As a
result, it is said, the rents were not increased as they would have been had
the trigger notices been served. The mortgage properties having been sold by
the mortgagees under their power of sale, it is said that because the rental
income had not been increased the prices realised on the sale were depressed.
The background
of the case is this. For very many years Mr Knight has been engaged in the
business of developing tyre depots where people can take their motor cars to be
equipped with new tyres and, I think, possibly certain other motoring
accessories. In the distant past Mr Knight and Mrs Knight were engaged in that
process on premises belonging to Mr and Mrs Knight jointly. Having developed
the tyre depot the process was carried through by the tyre depot being sold off
together with the benefit of a lease. As a result Mr and Mrs Knight were left
with properties which were either freehold or long leasehold reversions subject
to tenancies granted to those who had taken over the tyre depot.
In 1971 Mr
Knight went into business with a Mr Sutton. The nature of the business was the
same. They, in turn, came to own certain properties as partnership assets.
Having been developed, the tyre
partnership between Mr Knight and Mr Sutton borrowed heavily from the lenders,
the City of Westminster Assurance Co Ltd. There were borrowings and charges on
the properties prior to the legal charge with which I am concerned.
That legal
charge was executed on May 13 1983. The borrowers in that legal charge were
expressed to be not only the two partners, Mr Knight and Mr Sutton, but also
Mrs Knight. The properties subject to the charge were not only the partnership
properties belonging to Mr Knight and Mr Sutton but also the properties vested
in the name of Mr Knight and Mrs Knight in the way that I have already
mentioned.
The moneys
borrowed amounted to £200,000. They carried interest at 16% per annum,
increased to 18% per annum in the event of prompt payment not being
forthcoming.
I must now
shortly mention the properties in question, of which there are seven.
The
partnership properties belonging to Mr Knight and Mr Sutton were a property at
Skelmersdale, a property at Skipton, a property at Alverstone, a property at
Fleetwood and a property at Preston. The remaining two properties, at Retford
and Doncaster, belonged to Mr and Mrs Knight. All seven of those properties
were charged under the legal charge to the City of Westminster Assurance Co
Ltd, which I will call the City of Westminster.
The moneys
borrowed were borrowed for the purposes of the partnership between Mr Knight
and Mr Sutton, not for the purposes of Mrs Knight.
The leases in
question are not all before me, but it is common ground that the rent review
clauses in each case were for five-yearly reviews and they required the service
of a notice not more than 12 and not less than six months before the review
dates.
In relation to
the Skelmersdale, Alverstone, Fleetwood and part of the Skipton properties, the
first date on which a trigger notice (requiring a review on September 1 1984)
could have been served was August 31 1983. On the same date the landlord became
entitled to serve a trigger notice in relation to the first part of the Skipton
premises — those premises being subject to five separate tenancies. On
September 30 1983 the landlord was entitled to serve a rent review notice in
relation to a second part of Skipton.
The receiver
was appointed by the City of Westminster on December 8 1983, at a time when
there was still a considerable period which might elapse before it was
necessary to serve the trigger notices. The time for service of the trigger
notices expired in relation to the Skelmersdale, Alverstone, Fleetwood and the
first part of the Skipton premises on February 28 1984. The right to serve a
rent trigger notice on the second part of the Skipton premises expired on March
31 1984. At that time no rent review notices had been served, either by the
receiver or by anyone else.
It has not
been discussed before me whether time was of the essence for the service of
such rent review notices or whether notices could be served at a later date.
What has emerged is that when notices were eventually served there was no
apparent protest by any of the tenants at the lateness of the notice.
The time for
the service of the review notices having passed, the matter proceeded in this
way. On May 14 1984, the City of Westminster decided to call in the loan. Up to
that date Mr Lawrence’s sole function had been as receiver of the rents and
profits, but on May 14 he was instructed to consider the possibility of the sale
of the property. Immediately thereafter he instructed Mr Roger Spyer [FRICS], a
valuer and agent (who also acted for the City of Westminster), to act in
relation to the sale. Mr Spyer proceeded to put in hand preparations for an
auction sale, which eventually took place on December 11 1984.
On June 6
1984, Titmuss Sainer & Webb, solicitors, called in the loans owed by Mr and
Mrs Knight and Mr Sutton. On July 10 Titmuss Sainer & Webb gave notice to
certain of the tenants in this form:
We, Titmuss
Sainer and Webb, as agents for Harvey Lawrence the receiver appointed by the
City of Westminster Assurance Company Limited, pursuant to a legal charge dated
the 13th May 1983
— and the
parties are given —
hereby give
you notice that C Sutton and J W Knight require the rent reserved by the said
lease to be reviewed on and as from the 1st September 1984.
So, at that
stage Titmuss Sainer & Webb regarded it as proper to give the notices as
agent for the receiver.
On the same
day Titmuss Sainer & Webb sent copies of those notices to the plaintiffs’
solicitors asking them whether Mr Knight or Mr Sutton had themselves previously
served any notices under the rent review clause. On September 3 the reply was
given that no notices had been previously served.
On November 14
the surveyor acting for the plaintiffs at that stage, Mr Clive Eckersley,
forwarded to Mr Lawrence an offer that had been received of some £293,500 for
all the properties. That offer, in the end, did not materialise because, I was
told, the would-be purchaser got wind of the auction and declined to go on,
knowing that there was an imminent auction.
The
non-service of the necessary trigger notices having come to the attention of Mr
Knight, he, through his solicitors, complained of the position. The matter came
to light when the auction brochure was produced showing only the old rents as
being the recoverable rents and referring to the next review dates as being not
1984 or 1985 but 1989.
Mr Knight
pressed the City of Westminster to postpone the auction until the increased
rents had been agreed. There was resistance to that by the City of Westminster.
They agreed to put off the auction provided there was a signed contract with
another purchaser shortly before the date of the auction but, as I have said,
that did not occur. Under continuing pressure, the City of Westminster began to
feel some concern about the position.
Mr Spyer, the
agent, had advised the City of Westminster that they should have comparatively
low reserve prices at the auction sale. Because of the pressure from Mr
Knight’s solicitors indicating that he would be inclined to hold the City of
Westminster, or the receiver, liable for the failure to serve the rent review
notices in time and a failure to agree them before the date of the auction,
there were instructions given by the City of Westminster, acting through Mr
Robert Browning, to Mr Spyer (their agent and one of the joint auctioneers) to
agree with Mr Eckersley, agent for Mr Knight, what the reserve figures should
be at the forthcoming auction. It is clear from the correspondence before me
that Mr Spyer was acting on instructions which indicated that the reserves
should be such as to prevent any subsequent complaint by Mr Knight against the
City of Westminster.
The auction
took place on December 11 1984. Mr Knight attended that sale. He told me — and
I accept — that in relation to those properties where the rent review had been
missed, the auctioneer made a public announcement to that effect before the lot
was put up.
The result of
the auction was as follows. The Preston property was sold at its reserve price
of £25,000, the Alverstone property was sold for £20,500, being £500 above the
reserve, the Doncaster property was sold for £29,000, the Retford property for
£26,050. Therefore, both the properties belonging to Mr and Mrs Knight were
sold at above or at their reserve figures. However, the Skelmersdale, Skipton
and Fleetwood properties did not sell, having failed to reach their reserves.
It is not
clear to me how far there was any genuine bidding for any of those premises. Mr
Knight told me that there was a bid up to £109,900 for the Skipton property,
being £100 below its reserve. At one stage in the correspondence Mr Spyer said
that a bid of approximately that amount, I think he said £110,000, was
received. At another stage in the correspondence Mr Spyer says that no bid was
received. I do not find myself able to get any guidance as to the value of the
properties deriving from any bids alleged to have been made at that auction. It
is not clear the extent to which the auctioneer was taking bids off the wall,
as opposed to genuine bids.
Those three
properties having failed to sell, each of them being properties where the rent
review had been missed, the next event that happened of direct importance was
that Mr Sutton had a bankruptcy petition presented against him. A receiving
order was made on that petition on April 9 1985. At that stage, if not before,
the partnership between Mr Knight and Mr Sutton came to an end.
As to the
properties, steps were taken by the City of Westminster to renegotiate rents as
to part of the Skipton property.
The Skipton
property had five tenants. In a transaction which is complicated, and which I
do not think it is necessary to expound, Motorway Tyres & Accessories Ltd,
which had occupied the part of the premises which consisted of a modern
warehouse and part of adjoining premises, gave up their tenancy of the part of
the adjoining premises, which was taken over by the other occupier of those
adjoining premises, ABC Engineering Ltd.
It is
apparently common ground in this case that the old rent of what was previously
leased to Motorway Tyres & Accessories of
As to another
part of the Skipton premises occupied by Retail Bakers (Yorkshire) Ltd, there
had been a fire before the first auction on September 7. As a result of that
the tenants were refusing to pay their rent. The property, so it is said, was
underinsured. There is no evidence that any revised rent was ever agreed as to
any part of the premises occupied by Retail Bakers.
In June 1985
the Skelmersdale property, which at the first auction had an agreed reserve of
£40,000, was sold by private treaty for £27,000. It is not clear to me whether
any agreed increase in rent pursuant to the rent review had been implemented or
agreement reached prior to that sale by private treaty.
The Fleetwood
premises had an old rent of £6,000 per annum. In the course of 1985 the
surveyors acting for the tenants and for City of Westminster agreed that as a
result of the rent review no increase should take place. The rent, therefore,
continued at £6,000 a year.
The Skipton
and Fleetwood properties were sold at public auction on November 28 1985.
Skipton, which had had an agreed reserve of £110,000 at the first auction, was
sold for £72,000. Fleetwood, which had a reserve at the first auction of
£48,000, was sold for £41,000.
The proceeds
of sale were paid over to the City of Westminster Assurance. The account, which
is produced to me, from the City of Westminster Assurance shows that having
continued to run the account and debit it with interest and with receipts, both
of rent from Mr Lawrence, as receiver, and of capital moneys as proceeds of
sale, the position was reached on March 25 1986 where there was still a debit
balance on the account of £12,103.50. The account records as the last item on
it ‘Interest written off £12,103.50’. Therefore, according to the City of
Westminster’s records, there was a debt still owing from Mr and Mrs Knight and
Mr Sutton of £12,103, but, as a matter of internal record-keeping, that debt
has been written off.
There is one
other matter that I should mention at this stage, since it enters into the
computation of damages. There was a second mortgage on all the premises to
secure a borrowing from Williams & Glyn’s, now Royal Bank of Scotland. I
will come to the significance of that later.
It is an
oddity of this case, which is one of the facts that gives rise to difficulty,
that Mr Sutton and his trustee in bankruptcy are not parties to the case at
all. There are, therefore, only two out of the three owners of the property and
borrowers subject to the legal charge making the claim against Mr Lawrence.
Their claim in outline was that Mr Lawrence was negligent in failing to serve
the trigger notices relating to each of the rent review clauses in due time, as
a result of which new and higher rents were not fixed prior to the date of the
first auction. That, in turn, it is said, led to a diminution in the purchase
price paid and received for the properties subject to those tenancies. They
allege that Mr Lawrence, as receiver, was under a duty of care to them and
failed to discharge that duty. Mr Lawrence says that in the circumstances of
this case, namely that he was a receiver appointed under section 109 of the Law
of Property Act 1925, being a receiver only of the rents and profits, he was under
no duty of care to the plaintiffs to ensure the service of the trigger notices.
Alternatively, if he be wrong on that, he says that though he might be under a
duty of care to Mr Knight as being one of the two owners of the properties in
relation to which there was a failure to serve the necessary trigger notices,
he could owe no such duty of care to Mrs Knight, none of whose properties were
the subject-matter of the failure to serve the trigger notices.
Alternatively,
Mr Lawrence submits that, if otherwise there would be a duty of care owed by
him either to Mr or to Mrs Knight, he had no power under his appointment to
serve rent review notices. He further contends that, since the period for the
service of notices triggering the rent reviews was running prior to his
appointment and no warning was given to him of the need for such notices, Mr
Knight was guilty of contributory negligence.
Finally, if
those submissions are wrong there is an extremely complex dispute as to the
quantification of damages.
I must now
fill in some of the details as to the nature of Mr Lawrence’s appointment.
Under section
109 of the Law of Property Act 1925 mortgagees are entitled, in circumstances
which existed in this case, to appoint a receiver. Under section 109(2) a
receiver so appointed is deemed to be the agent of the mortgagor. Under
subsection (3) the receiver has power to demand and recover all the income of
which he is appointed receiver, and to give receipts therefor, and to exercise
any powers which may have been delegated to him by the mortgagee pursuant to
this Act. Then there are other provisions to which I need not refer.
Those powers
are substantially widened by the legal charge in the present case. Clause 12 of
the legal charge, so far as relevant, reads as follows:
At any time
after the principal monies hereby secured shall have become immediately
payable, the lender may from time to time appoint by writing any person to be a
receiver of the property or any part thereof, and may from time to time in
writing remove any receiver so appointed from his receivership of the whole or
any part of the said property and may appoint another in his stead.
Clause 12(2)
provides that the receiver should be the agent of the borrowers. Clause 12(3)
confers on the receiver power (a) to enter upon and take possession of any
property in respect of which he is appointed or any part thereof; (b) to carry
on or manage or concur in carrying on or managing the business of the
borrowers; (c) to sell or concur in selling, to let or concur in letting and to
accept or concur in accepting surrenders of leases of any part of the property.
There is no express authorisation to serve rent review notices or to increase
the rent in any other way. Under (d) he is given power to make any arrangement
or compromise which he or the lender may think expedient and under (g) he is
given power to do all such other acts and things as may be considered
incidental or conducive to any of the matters or powers aforesaid which the
receiver lawfully may or can do as agent for the borrowers. It is expressly
provided that those powers are in addition to the statutory powers.
By the
document appointing him he was appointed to be ‘the receiver of the rents and
income of all the property comprised in the legal charges, with all the powers
conferred on a receiver by the said Act, and by the said legal charge’. Mr
Lawrence gave notification to Mr and Mrs Knight and Mr Sutton that he had been
appointed as receiver, but he indicated that he was appointed as receiver of
the property, not simply of the rents and profits.
I will
consider first whether Mr Lawrence was under any duty of care to Mr and Mrs
Knight. I have no doubt whatsoever that he was under such a duty. As I have
said, he was appointed the agent of the borrowers, Mr and Mrs Knight. That was
his status in acting as receiver. It would be clear to anybody that in carrying
out his duties, if they did include the duty or power to maintain the rent at
its true market level by triggering the rent reviews, the failure to do so would
adversely affect not only the value of the security to City of Westminster but
also the value of the property both in terms of future income and capital value
to the borrowers. In the case of investment properties of this kind, the rent
receivable is a basic factor in the value of the asset.
By whatever
standard one should now judge whether a duty of care arises, in my judgment
that standard is fully met in the present case. In terms of neighbourhood it is
plainly foreseeable that the owner of the property will be prejudiced if a rent
review is missed. If the more recent proximity test is the appropriate
yardstick to judge it by, the closeness of the relationship between principal
and agent is a classic case where such proximity exists. If one has to judge it
by reference to the existence of an established relationship giving rise to a
duty of care, that, too, is satisfied, since such duty of care has long been
established in relation to a situation of an agent.
In American
Express International Banking Corporation v Hurley [1985] 3 All ER
564 it was held that a company receiver owed a duty of care to the guarantor of
the company’s debt. In Standard Chartered Bank Ltd v Walker [1982]
1 WLR 1410 a receiver appointed to realise the assets of a company under a
debenture was held to owe a duty of care both to the borrower and to the
guarantor of the loan. Accordingly, the duty of care arising from the position
of a receiver is owed not only to his principal but also to those directly and
immediately affected by his actions.
So far as Mrs
Knight is concerned, the position is one stage further away. It is pointed out
that the failure to serve rent review notices had no direct application to the
Retford and Doncaster properties, which were the only properties in which Mr
and Mrs Knight had an interest. No question of rent review arose in relation to
those properties. Therefore, it is said that any duty which Mr Lawrence owed
could apply only to those properties where there was a requirement to serve
rent review notices. In my judgment, this is not a material distinction. In the
legal charge Mrs Knight was expressed to be a borrower and was subject to the
liability to pay the debts. Her properties, as well as Mr Knight’s and Mr
Sutton’s properties, were charged to the bank. Where there are joint debtors
owning different properties subject to
properties is manifestly capable of having an adverse impact on other
properties subject to the same charge, since any diminution in the value of one
of the properties will increase the liability on the others. In my judgment,
the duty of care was owed as much to Mrs Knight as to Mr Knight.
All that I
have said so far is on the assumption that Mr Lawrence has the necessary power
to serve the rent review notice. Plainly there could be no duty of care on him
to do a thing which he had no power to do. Mr Tyrell, for Mr Lawrence, submits
that there is no such power. He points out that in section 109 itself there is no
express power to increase the rents in any way, and the power, if any, would
have to be by implication. I do not find it necessary to express any view on
whether in the absence of additional powers conferred by the legal charge there
is or is not power in a receiver appointed under section 109 to serve a rent
review notice, because in the present case the powers of the receiver are
amplified in a major way.
I bear in mind
a factor which I think is an important one, namely that although under clause
12 the City of Westminster could have appointed Mr Lawrence to be the receiver
of the property, ie not simply of its income, and though Mr Lawrence held
himself out as having been so appointed, the actual appointment was restricted
to being a receiver of the rents and income of the property.
The question
is, given such limited appointment, are his powers extended by clause 12 to
enable him to do those things which are necessary to maintain the income and
the rents and profits of the property?
In my judgment they are. He is expressly given power to enter upon and
take possession of any property in respect of which he is appointed. That will
enable him to take possession of the rents and profits of the property. That
being so, quite apart from his power under (3)(d) to make any arrangement or
compromise which he may think expedient, he has power under (g) ‘to do all such
other acts and things as may be considered to be incidental or conducive to any
of the matters or powers aforesaid, and which the receiver lawfully may or can
do as agent for the borrowers’. It is hard to imagine, from the point of view
both of the lender and of the borrower, anything more necessary or conducive to
the receipt of the rents and profits of premises than the service of those
notices necessary to keep up the rents and profits to their maximum.
I therefore
hold that the receiver had power under the legal charge to serve the notices, a
view in which I am fortified by the fact that when Titmuss Sainer & Webb
came to serve the trigger notices out of time they, too, served them on his
behalf and not on anybody else’s behalf.
The next
question is whether there has been a failure to discharge that duty of care. Mr
Lawrence’s own evidence seemed to me to demonstrate that there had been such a
breach of duty. In my judgment, Mr Lawrence had a total misapprehension about
the functions of a receiver. He regarded himself as being there to do what he
was told by his appointor, the City of Westminster; provided he discharged what
they told him to do he had discharged his functions. He was, in his own eyes,
nothing but a rent collector.
That, to my
mind, is an unhappy misapprehension of the functions of a receiver. Though he
may be appointed by one party, his function is to look after the property of
which he is receiver for the benefit of all those interested in it. He is not,
even in commercial terms, the mere agent of the appointor; he is there to
safeguard the property for all who have interest in it. Simply to regard
himself as the collector of rents without any further function was to
misapprehend the nature of his appointment. The position was made
overwhelmingly clear by the expert evidence that I had from a very experienced
receiver, Mr Christopher Morris, in which he deposed to the fact that even under
section 109 (let alone a wider power) it is one of the first functions of a
receiver in a case like this to get solicitors or others to review the position
of the rent review clauses and to take such steps as are necessary to ensure
that the reviews take place. I have no doubt that there was in this case a
failure to come up to the standard of care required of the receiver.
I find as a
fact that if the notices had been served in due time, that is to say shortly
after Mr Lawrence became the receiver, by the date of the auction on December
11 1984 the rents would have been agreed.
I next come to
the issue of contributory negligence. It is said that Mr Knight was at fault
because he did not, during the period when he could have served trigger
notices, do so. Moreover, Mr Tyrell further drew attention to a matter which
arose at an earlier stage. Under earlier charges securing borrowing between Mr
Knight and Mr Sutton on the one hand and the City of Westminster on the other,
Mr Lawrence had been appointed as receiver on two earlier occasions. One of
those occasions was from February 18 to May 13 1983. There are two letters in
the correspondence before me showing that on February 28 1983 and on March 2
1983 there was an exchange of letters between Parker & Co, agents and
surveyors acting on behalf of Mr Knight, and the tenant of one of the Retford
properties, confirming their agreement to an increase in rent under the rent
review provisions. It is said that that shows that in the earlier receivership
Mr Knight was regarding it as still the function of his agent to deal with rent
reviews under the leases. Moreover, it is said that Mr Knight should have
alerted the receiver to the need to serve the trigger notices.
I cannot find
any contributory negligence in this case. There could have been no obligation
in common prudence to serve the rent review notices at the first occasion that
they could be served. When the receiver was appointed in December 1983 there
was still approximately three months left in which review notices could have
been served. It was not a question of a last-minute failure to serve a notice.
As to the
position in the earlier receivership and the fact that Mr Roger Parker [ARICS]
of Parker & Co was writing during the period of that receivership, in my
judgment that is in no sense decisive, since the letters in question were
written very shortly after Mr Lawrence’s appointment as receiver, and it is not
clear at what stage the agreement which that letter confirms was reached.
Finally, as to
the failure to alert the receiver to his function, it is, in my judgment, the
common understanding that, when you are told (as were the borrowers in this
case) that a receiver has been appointed, the receiver has taken over the
management of that property and it is not for the true owner to intervene at
that stage. It does not seem to me that it can be said that a failure at that
stage for the person who has been displaced by the receiver to take steps to
alert the receiver can amount to contributory negligence.
I therefore
find that Mr Lawrence is liable for breach of duty. The question then arises of
what damages are payable.
This has
proved to be a very complicated problem which has absorbed a large proportion
of the time of this over-prolonged hearing.
There was a
preliminary point taken by Mr Tyrell to the effect that there was no evidence
that the failure to serve the notices triggering the rent review clauses had
led to any failure to agree rents subsequently. There was no evidence of any
tenant refusing to agree an increased rent or seeking to negotiate a lower rent
because of late service of the notices. That is correct. But the damage in this
case flows not from the failure to agree the higher rent in due course but from
the failure at the time of the sale to have agreed the rents. These properties
were put up for auction on the basis that their review dates had been missed
and, therefore, would-be purchasers were faced with a property which at the
time of the auction did not have an agreed rent and, on the basis of the
announcement, would not have a higher rent until 1989.
There is a
letter from Mr Spyer of December 12 1984 reporting the result of the first
auction in which he expressly says that the sale prices or bids would have been
depressed by the fact that the reviews had been missed, and it is noteworthy
that all the properties in relation to which there was no doubt as to the rent
reviews did sell at that first auction at the agreed reserve prices.
I therefore
find that there is a direct causal link between the failure to give the notices
in due time and any diminution there may be in the prices obtained on the sale.
The
plaintiffs’ claim has been variously formulated. Basically what is said is
this. If the rents had been increased, all the properties would have sold at
the first auction and at prices higher than those eventually realised. As a
result, there would have been a surplus of the proceeds of sale over and above
the sum necessary to satisfy the City of Westminster’s claim. It was alleged
that, if all had been in order, the properties would have sold for some
£334,750, whereas the debt due to the City of Westminster was in the region
then of £220,000. It is said that the surplus would have accrued to the
plaintiffs, not to Mr Sutton, on the following grounds. Since the Retford and
Doncaster properties — which I will call the second properties — were not
partnership properties but belonged to Mr and Mrs Knight separately, as between
Mr and Mrs Knight on the one hand and Mr Sutton on the other, Mr and Mrs Knight
would be entitled to be exonerated from the debt to the extent that the other
partnership
discharging the debt to City of Westminster. Therefore the first tranche of any
surplus which might have been realised if the properties had sold at their
proper price would have gone to recouping to Mr and Mrs Knight, as the owners
of the second properties, the debt which had been discharged out of them
amounting to £55,050.
Then, it is
the plaintiffs’ case, any surplus above that figure would, under the terms of
the partnership between Mr Sutton and Mr Knight, be applicable in paying the
partnership debts. The first properties were partnership property. Since there
was no such surplus the debts were not so paid. Mr Knight alleges that he has
paid the debts of the partnership amounting to some £57,000. Therefore, he
claims, he has suffered the loss of that amount through the failure to have
available the increased proceeds of sale which could have been used to pay the
debts.
Finally, the
plaintiffs say that any ultimate surplus would be divisible 50/50 between Mr
Knight and Mr Sutton’s trustee in bankruptcy: on that ground his claim in
negligence is limited to 50% of the ultimate surplus.
The starting
point is to try to ascertain what would have been the sale price of the
properties if on December 11 1984 the rent reviews had properly taken place.
That involves two stages. First, to find out at what the reviewed rents would
properly have been agreed. Second, to find out, taking into account the higher
rent payable as a result of such review, what increased price would have been
obtainable for each of the properties.
To that end I
have had a mass of expert evidence, some before me, some in the correspondence.
For the plaintiffs, Mr John Royle [ARICS] gave evidence that earlier in 1983 he
had conducted a detailed valuation for mortgage purposes of all these
properties. In the process of that he had seen the properties close to the relevant
time and had made his valuations at that time. He struck me as being a careful
witness. However, he did not have the benefit, when he made that valuation in
early 1983, of the experience which the other valuers have had of the prices
actually realised at the sale in December 1984. Moreover, I formed the
impression that he was not always fully familiar with the local conditions of
each of the tyre depots. For example, in relation to Skelmersdale he produced
an extremely high rent, quite out of line with the estimates put forward by
other valuers. I think it may well be that he was not aware in that instance —
and possibly in others — of the detailed local conditions applicable.
The other
expert called by the plaintiffs was Mr Eckersley, who in the far past had acted
for Mr Knight in the acquisition of these properties. He had been brought back
into the matter late in 1984. In the meantime, Mr Parker, to whom I have
referred, had been doing the surveying and agency work on behalf of Mr Knight.
Mr Eckersley again struck me as being a careful witness, but he suffered from
two disadvantages. He had not recently seen the premises and he worked entirely
on the basis of estimates of rent put forward by Mr Parker in a letter written
in late 1984. Mr Parker himself was not called and I have no basis on which to
judge the rightness of Mr Parker’s estimate of what rents could be achieved.
The second
disadvantage in Mr Eckersley’s approach was that in finding the multiplier he
applied to the uplifted rent (ie the years’ purchase) he fixed it by reference
to the years’ purchase reflected in those reserved prices agreed between
himself and Mr Spyer before the first auction, producing an average years’
purchase of 8.95. This is substantially above the years’ purchase rate adopted
by other valuers and, in my judgment, it is a defective basis for taking the
years’ purchase. Unknown to Mr Eckersley, in the circumstances I have mentioned
Mr Spyer was under some pressure to agree high reserves with a view to ensuring
that the City of Westminster was not subjected to later litigation. I do not
find an agreement between valuers under those circumstances as in any sense
necessarily reflective of what was the open market value.
I find a much
more reliable guideline to be the years’ purchase obtained on those properties
which did sell at the first auction, when there was no trouble in relation to
rent reviews, that is to say the Retford, Doncaster and Preston properties. The
average years’ purchase on those properties varied between 7.14 and 8, giving
an average of 7.4. That seems to me closer to a realistic and contemporaneous
assessment of what was the kind of years’ purchase that a person buying a tyre
depot for investment purposes was prepared to pay.
The
defendant’s expert evidence consisted of Mr Norman Green [FRICS], who gave
evidence as to the values of all the properties save the Skipton property. He
struck me again as being a careful witness. My doubts about him are limited to
this: I am not sure how far he was taking account of the specialist nature of
tyre depots. The evidence, which I accept, is that for some reason tyre depots
appear to be quite a popular type of investment property, not necessarily
directly referable to the value of similar warehouses.
All the three
witnesses I have mentioned I found to be reliable. But valuation is not an
exact science; everybody knows that there is a range within which both rents
and prices can be fixed. I formed the view, which is not an uncommon one in
these cases, that those valuers called on behalf of the plaintiffs were giving
me figures towards the top end of the range and those called for the defendant
were giving me figures towards the bottom end of the range. I think I have to
take that into account in reaching any view.
There remains
a further valuer, Mr John Paget [FRICS], called on behalf of the defendant to
value the Skipton property. I am afraid I did not find his evidence wholly
satisfactory. He had entered into the forensic battle with considerable gusto.
He seemed to me to be going outside the realms of the bottom and top ends of
the range. His attitude was totally dogmatic; even when it was demonstrated to
him that he had approached the valuation under a misapprehension as to which
part of the premises was occupied by Motorway Tyres & Accessories Ltd, he
was quite unable to accept that he was wrong. I attach considerably less weight
to his views than I do to those of the other surveyors.
I now turn to
the individual properties. First, Skelmersdale. This was a specialist tyre
depot in a new town. The more important factors applicable to it were that at
that date — though I believe not now — Skelmersdale was not a favoured area for
industrial development; the new town corporation was itself constructing
further warehouses which were on the market and unlet. Mr Purle, for the
plaintiffs, adamantly objected to my taking evidence of comparables from Mr
Green. He referred me to certain authority which says that though he can give
his expert view he cannot tell me what actually happened on comparables. I find
that authority surprising, but I ignore specific facts which Mr Green gave me.
The fact remains that I can certainly entertain his view that there was in
Skelmersdale at the time a surplus of warehouse-type accommodation.
Mr Green said
that the rent would have been agreed at £5,200, giving rise to a capital value
of £34,500. Mr Royle, in my judgment, went way over the top and did not take
account of the local conditions in Skelmersdale in reaching a figure of £7,675
for rent and a capital value of £58,500. Mr Parker, in his letter, put a figure
on the rent of £6,020, on the basis of which Mr Eckersley, applying seven
years’ purchase, reached a capital price of £42,000.
Doing my best
to put those factors together, it seems to me right to take an annual rent
which would have been agreed at £6,000 on a seven years’ purchase, giving rise
to a price which would have been realised of £42,000.
Next, as to
the Fleetwood property, the evidence of Mr Green was that the rent was a full
one at £6,000 per annum before any review. He pointed out, as appears to have
been the case, that when, after the first auction, steps were taken to agree an
increased price surveyors on both sides agreed that no increase was
appropriate. The property actually sold for £41,000 on that rent at the second
auction. Mr Royle suggested that the appropriate rent was £6,975, giving at
eight years’ purchase a capital value of £51,750.
In my
judgment, the fact that no increase was, in fact, agreed when the parties got
around to discussing it is a major endorsement of Mr Green’s view. I do not
think the failure to trigger that rent review clause gave rise to any loss in
rent and, accordingly, did not give rise to any diminution in the capital value
realised. I therefore put its value at the sale price actually achieved of
£41,000.
As to
Alverstone, there is not a major difference between the plaintiffs’ valuation
and the defendant’s. The plaintiffs claim that its value is £23,650; the
defendant £22,730. There being such a little difference, and the factors being
so minor, it seems to me appropriate to take a figure of £23,000 as being its
capital value.
As to Preston,
that sold at auction. There was no problem about the rent review clause, and,
therefore, its value is £25,000.
Up to now I
have been dealing with comparatively simple cases where the properties in
question have been tyre depots on their own.
I now come to
Skipton, which is much more complex. As I have indicated shortly, Skipton was a
composite property. Unhappily, it is the one over which there is the widest
difference of view. The
defendant’s case is that it would have been £67,500, a remarkable figure,
considering that it actually sold for £72,000.
There were
three parts to the Skipton property. There was a purpose-built, modern
warehouse, used as a tyre depot, tenanted by Motorway Tyres & Accessories
Ltd, a subsidiary of a public limited company and, therefore, a good covenant.
Next door to
that purpose-built warehouse was a two-storey building, the ground floor of
which was initially occupied by Motorway Tyres & Accessories Ltd under its
lease. The upper floor was occupied by ABC Engineering Ltd, not what, in
surveying terms, is called a first-class covenant.
The third part
was a property not favourably described by any of the surveyors, an old
Victorian warehouse in a considerable state of dereliction occupied, in three
separate parts, by Carpet Consignment Ltd, Ellesmere Press Ltd and Retail
Bakers. The rent reviews were missed in relation to that part of the premises
occupied by Motorway Tyres and that part occupied by Retail Bakers. The fire
that I have mentioned was in the part occupied by Retail Bakers.
The evidence
is that when you get multiple occupancy of a mixed kind like this it is
inclined to depress values. In this case is it not possible to say of all the
premises that they are the subject-matter of a good tenant’s covenant.
The rent as
fixed by Mr Paget I reject. In fact, the figure which he advised would have
been the reviewed rent was actually less than that being received at the time
of the second auction, even though no rent review had been agreed in relation
to Retail Bakers’ part of the premises at the time of the second auction.
I even more
affirmatively reject his application of 4.4 years’ purchase to the premises. I
accept his evidence that given the mixed nature of the property, and having
regard to the fire, it attracts a much lower years’ purchase than do other
single-entity tyre depots. But to apply a 4.4 years’ purchase — which he did by
reference to the years’ purchase actually obtained at the second auction —
seems to me to overlook the fact that at the second auction there was still no
rent agreed in relation to the Retail Bakers’ part of the premises.
Mr Royle put a
rent on all the parts of it together at £16,875, and Mr Parker £16,375. It
seems to me that, given that by the time of the auction it was apparently
attracting a rent of £16,350, these figures are not out of line, and I would
therefore put a rent of £16,500 per annum on the Skipton premises.
Turning now to
its capital value, as I say, I do not accept Mr Paget’s multiplier of 4.4. Mr
Eckersley, who achieved a value of £136,920, was applying a years’ purchase of
8.4. In my judgment, that is much too high. As I have said, the actual prices
achieved at the December 1984 auction averaged about 7.4. The Skipton premises
are less attractive as an investment than were the other ones because of the
multiple occupancy and because of the fire.
Mr Royle I
found impressive on this aspect of the case. He had gone through a very careful
valuation of the rents, dividing up the Skipton premises into two parts; unit
A, being the part leased to Motorway Tyres and I & B Electrical, and the
rest of the properties, which he regarded as unit B. He paid attention to the
fact that it was a poorer section of the building with poorer covenants, and in
relation to unit B he took a yield on existing rents of 20% and 25% on revised
rents. That is a proper reflection of their lesser value. In relation to unit
A, he adopted a yield of between 10 and 12%. Having gone through that
operation, he produced for unit A a total capital value of £70,704, and for
unit B £37,908, being a figure of £108,000, but he then took account of the
other adverse factors, including, as I understand it, the fact that one was
buying a single composite unit where one had to take the bad with the good, and
rounded the figure down to £100,000. That seems to me by far the most reliable
evidence that I have of the value of Skipton, and I therefore adopt it.
That gives a
total value to the first properties of £231,000. In addition, there were the
second properties, which realised £55,050, giving rise to a value which would,
in my judgment, have been realised at the sale on December 11 1984 if all the
properties had been the subject-matter of proper rent reviews by that date.
They would
have been subject to the liability to pay auctioneers’ and solicitors’ costs.
My mathematics is notoriously unreliable. I make that at 3.25%, plus VAT
£10,689, leaving net proceeds of sale of £275,361, say £275,300.
The actual sum
realised for all the properties was £240,550. Therefore, in round figures, if
sold with rents properly reviewed, the properties would have achieved £35,000
more than they did.
But that is
not the measure of loss recoverable by the plaintiffs. The damages have to be
assessed on the basis that they are to be put back into the position they would
have been in had the sale taken place on that basis, that is to say if there
had been a total realisation of £275,300. It is at this stage that the real
complications are capable of arising.
Out of that
surplus there would have had to be paid not only the debt of City of
Westminster but also a sum for premiums unpaid on policies. I have not to date
mentioned this further wrinkle. There was a second charge executed on May 13
1983, being a charge by Mr Knight alone on a life policy taken out by him. The
evidence shows that there were arrears on payments payable under that policy as
at the date of completion for the December 1984 auction, namely January 16
1985, amounting to £14,816.04. In addition to those unpaid premiums, there was
the second mortgage to Williams & Glyn’s amounting to £22,928.41 as at
January 16 1985. There is a dispute as to how, in computing damages, I should
have regard to those two factors.
First, the
unpaid premiums. Mr Purle says that they should not be deducted. He puts his
argument in this way, that under the mortgage of the policy there is a covenant
that ‘the policy holder will, during the continuance of the security,
punctually pay all premiums’. That is clause 3(4). Clause 3(5) provides that if
he does not do so, it ‘should be lawful for the lender’, that is the City of
Westminster, ‘to pay the same and to recover the same from the policy holder’.
Clause 3(6) provides that ‘any sums paid or expended by the lender in effecting
a new policy or in respect of premiums are to be added to the principal monies’
and I quote ‘for the time being on this security’. So, says Mr Purle, unless
there is evidence that City of Westminster, in fact, applied money in paying
the premiums on the policy, they would have no right to recover them from Mr Knight.
In my
judgment, that is to overlook the terms of the mortgage itself, the principal
charge, which describes the property as ‘Being charged with the payment in
accordance with the covenants herein contained of all principal monies,
interest or other monies hereby covenanted to be paid by the borrowers’. Clause
5 of the principal mortgage contains a covenant ‘to produce the payment to the
lender of the premiums due under the policy of assurance referred to in the
schedule to a collateral mortgage of even date herewith’, ie the policy
mortgage. Therefore, there is a covenant by all the borrowers under the
principal charge to procure the payment of the premiums due under the policy of
assurance. In my judgment, that includes those premiums within the moneys
charged on the properties by the principal mortgage. I am unable to accept Mr
Purle’s distinction between moneys covenanted to be paid and moneys which the
borrowers under the principal charge procure to have paid. Plainly, it seems to
me, the purpose of the interaction between the two policies was to secure the
payment of the premiums under the collateral mortgage. Therefore, in my
judgment, the unpaid premium policies would have been deductible from any
surplus recovered and cannot feature in the damages recoverable by Mr and Mrs
Knight.
If there had
been any evidence as to what would have been the surrender value of the policy
that would have been secured if the premiums had been paid, that might have
been a recoverable head of damage, but there was no such evidence.
It is common
ground, on the basis that the unpaid premiums would have been recovered, that
the sum which City of Westminster would have deducted from the net proceeds of
sale on January 16 1985 would have amounted to £235.69, leaving a surplus,
after discharging all liabilities to City of Westminster, of £39,631. But that
is not the end of the story.
If there had
been a surplus of that amount in hand on January 16 1985, it would have had to
be paid over to Williams & Glyn’s as second mortgagee. The amount
outstanding under the mortgage was £22,928, leaving a net surplus of £16,703.
Mr Purle says that in computing the damages payable I should not deduct from
the amount of the damages the sum which would have had to be paid to Williams
& Glyn’s on January 16 1985. There is evidence before me — and a witness
was called who was delicately examined by both sides — to the effect that for
internal purposes only Williams & Glyn’s had, in fact, written off that
debt.
Mr Purle says
it would be quite wrong in those circumstances to deduct the amount of the debt
since, though it is written off internally, the fact remains that Williams
& Glyn’s may be able and keen to recover that debt now from Mr Knight if he
is put in funds.
There is some
support for that — though I noted that nobody asked
letter sent by Williams & Glyn’s to Mr Lawrence’s solicitors this month,
just before the trial started, which ends: ‘We trust you will keep us fully advised
of the outcome of the proceedings’, which sounds as though they have not
abandoned all interest in Mr Knight.
The position
seems to me extremely complex, since the quantum of the loss suffered by Mr and
Mrs Knight must depend on whether they are still liable to Williams &
Glyn’s for that amount; not only liable, but likely to have to find it.
A similar
point, though arising in a slightly different way, is the net balance,
£12,103.50, written off by City of Westminster. That is written off in their
internal accounts. There is no evidence that they will not now turn against Mr
Knight and seek to recover it. None of that £12,103 would have been due if the
properties had sold on December 11 1984 and the City of Westminster, on the
basis of the computation I have already made, had been paid off fully by
January 16 1985. Therefore, that £12,000 odd, if demanded, would be an
additional head of damage.
Now, very
understandably, both sides have invited me to try to reach a conclusion as to
whether those debts will be demanded by Williams & Glyn’s and City of
Westminster respectively. I have every sympathy with the desire to produce
finality in this case, but there really are limits to what a judge can find as
a fact. I am quite unable to form a conclusion as to what will happen in
relation to a matter which is entirely within the volition of a party who is
not before me. It is a novel position to me.
I find it
quite impossible to find the necessary facts to make a concluded finding at
this point. The position seems to me to be this. If the properties had realised
their full value, and the City of Westminster had been paid off on January 16
1985, the sums due to Williams & Glyn’s would have been deducted. As a
result, there could have been no further liability on Mr Knight either to the
City of Westminster or to Williams & Glyn’s. But Mr Knight would never have
had this sum of money in hand as cash. So, the position is that the sums would
have been paid off, the Williams & Glyn’s debt would have been paid off,
and Mr Knight would have been free from liability. To allow the deduction of
the Williams & Glyn’s debt as a once-and-for-all deduction, but not to give
Mr and Mrs Knight damages which will represent the sum they have to pay to
Williams & Glyn’s, if Williams & Glyn’s now demand payment, would not
be to put them back into the position they would have been apart from the
negligence of Mr Lawrence.
What I propose
to do is to direct an inquiry as to damages, including in particular an inquiry
as to whether any, and if so what, sum is due and owing by the plaintiffs to
City of Westminster or Williams & Glyn’s and whether such sum is presently
being demanded.
In the
meantime, I propose to make an order under Ord 29, r 11 for interim payment in
respect of damages, since I am entitled, in a case where there is a judgment
against a respondent for damages to be assessed, to make an order for interim
payment of the damages.
I am quite
satisfied, and will, if required, make a final declaration, that in any event
the plaintiffs are entitled to the surplus proceeds of sale, namely £39,631,
less the sum which would have been payable to Williams & Glyn’s, namely
£22,928; the balance, the net surplus, being £16,703.
I will add to
that an approximation of the lost rental income between the date on which the
rent should have been agreed and the date of sale, which I will put at £1,500,
making a rounded figure of a minimum sum of damages of
£18,200.
I will also
declare that if as a result of the inquiry it proves that Williams & Glyn’s
or City of Westminster are, in fact, demanding payment of any sum, and are
entitled so to demand, the final assessment of damages will include the
additional sum so demanded.
How, then, are
we to deal with the £16,703? It is
argued that the plaintiffs have not shown that they are entitled to the whole
of that sum because Mr Sutton was also an owner of the premises. The position
seems to me to be clear. Although as between City of Westminster on the one
hand and Mr and Mrs Knight and Mr Sutton on the other, all three of them were
liable for the debt, as between Mr and Mrs Knight on the one hand and Mr Sutton
on the other the properties primarily liable for the payment of the debt are
the partnership properties for the benefit of which the moneys were borrowed.
The second properties (the properties belonging to Mr and Mrs Knight) were
brought in as additional security and they are almost in a position comparable
to that enjoyed by a surety. It would seem to me to follow as a matter of
ordinary principle that, as between the three borrowers, the debt should be
primarily payable out of the first properties, that is to say the partnership
properties, in exoneration of the second properties. That, as I say, seems to
be a matter of general equitable principle, whether it be called marshalling or
the equity of exoneration. The case of Pittortou Re, ex parte Trustee of the
Property of the Bankrupt [1985] 1 WLR 58 seems to me just one example of
the general principle in application.
Therefore, if
the surplus had been realised Mr and Mrs Knight would have been entitled to
insist that the debt to the City of Westminster, and to Williams & Glyn’s,
should be paid primarily out of the first properties, that is to say any
surplus would have come to them as owners of the second properties up to a
figure of £55,050.
Therefore, it
is shown that in their individual claims for negligence they have suffered the
loss up to any figure of surplus up to £55,050. Accordingly, the figure of
£18,200 which I have declared is the quantum of the damage does belong to them
exclusively and is recoverable by them to the exclusion of Mr Sutton.
Mr Tyrell, for
Mr Lawrence, objects that I cannot decide that point in the absence of Mr
Sutton because under Ord 15, r4(2) it is provided that ‘where the plaintiff in
any action claims any relief to which any other person is entitled jointly with
him, all persons so entitled must, subject to the provisions of any Act, and
unless the court gives leave to the contrary, be parties to the action’.
In my judgment,
that does not apply to the present case. I do not think the claim for breach of
duty is a joint claim. Each of the persons, Mr Knight, Mrs Knight and Mr
Sutton, has a separate claim, though the quantification of their claims
involves the rights of third parties.
However, I am
deeply sympathetic to Mr Tyrell’s submission that, however clear the position
seems to me in law, in the absence of Mr Sutton as a party I cannot finally
determine the matter as against him.
There is,
therefore, the theoretical possibility that the trustee in bankruptcy of Mr
Sutton, having witnessed Mr Knight’s success in this action, might himself
start separate proceedings alleging the same breach of duty against Mr Lawrence
and then contend that my decision as to the person to whom the damages are
payable is erroneous. That would, obviously, be most undesirable and would be a
result that I would be reluctant to reach in the extreme.
What I propose
to do to meet that position is to direct that my order be not drawn up for 28
days, that Mr Lawrence’s solicitors, or the plaintiffs’ solicitors, communicate
with the trustee in bankruptcy telling him that he has 28 days in which to
apply to me if he wishes to contend that what I have decided is wrong, in which
case I will entertain the application.
Finally, there
was considerable argument as to what the position would be if the surplus had
exceeded £55,050, that is to say the amount required to exonerate the second
properties. As, in my judgment, that position can never arise, it is unnecessary
for me to determine the point. I record, in case — contrary to my hopes — this
case goes on appeal, that the evidence given by Mr Knight as to the amount of
the partnership debts paid by him was plainly not satisfactory. I stopped
counsel cross-examining him on it because I felt that this case, which has
already, through nobody’s fault, lasted far longer than the sum at stake
demands, would never have come to an end if, in the presence of the court, we
had sought to take the partnership account in open court through
cross-examination. If the point had been relevant I would have directed an
inquiry as to the amount of the partnership debts.
I therefore
determine finally that the minimum damages suffered by the plaintiffs amount to
£18,200 and I make an order for interim payment of that sum. I also declare
that if, on inquiry, it is determined that Williams & Glyn’s or City of
Westminster are demanding further payments, the amount of such payment is
payable by way of extra damages.
