Negligence — Surveyors — Mortgage loan report — Valuation on 90-day sale basis by mortgagee in possession — Whether presumption that discount applies to sale on such basis
On 30 April 1999 the second
respondent surveyor, on the instructions of the appellant bank, made a
valuation of commercial premises for mortgage loan purposes. The report gave
the open market value of the freehold as £665,000 on a 90-day sale basis with
the bank as mortgagee in possession. Based on the valuation, the bank made a
loan of £532,000. The mortgagor fell into arrears and the bank took possession;
it expected to sell the property for £325,000. The bank claimed damages for
negligence against the respondents. In the court below, the judge concluded
that the valuation was not negligent; he found that the actual open market
value was £644,000 and that the appropriate margin of error was 10%. The
valuation was therefore within the ceiling. The bank appealed, contending that
the judge was wrong in not allowing any discount from the open market value and
the value in accordance with the retainer of a valuation on a 90-day sale basis
with the bank as mortgagee in possession.
court below, taken as result of the views of the experts, was that whether or
not a discount to reflect a 90-day sale by a mortgagee in possession was to be
allowed depended upon the market conditions at the time. Although there were
primary facts about the state of the sale of various properties on the estate
in which the property was situated at the relevant time, the evidence that was
before the court included the opinion evidence of experts. The trial judge was
entitled to prefer the evidence on behalf of the respondent surveyors. He had
not erred and must have had in mind the state of sales on the estate. The judge
was entitled to accept opinion evidence that it was perfectly reasonable for
the second respondent to have made no discount to allow for a 90-day sale by a
mortgagee in possession. There is no irrebuttable presumption that a 90-day
sale value will be less than that of the open market value.
The following cases are referred to in this report.
Joyce v Yeomans
[1981] 1 WLR 549; [1981] 2 All ER 21, CA
Watt v Thomas
[1947] AC 484; [1947] 1 All ER 582; (1947) 63 TLR 314
This was an appeal by the
claimant, UCB Corporate Services Ltd, against a decision of Judge Green QC,
sitting as a High Court judge, in proceedings for negligence against the
defendants, Halifax (SW) Ltd and Keith Andrew Ralphs.
David Phillips QC (instructed by Speechly Bircham) appeared for the
appellant; Edwin Johnson (instructed by Williams Davies Meltzer) represented
the respondents.
Giving the first judgment at the invitation of Roch LJ, WARD LJ said: This is an appeal by
the disappointed claimant from the order of Judge Green QC, sitting as a deputy
judge of the High Court, when, on 15 July 1998, he ordered that judgment be
entered for the defendants on a claim for damages brought by UCB Bank (the
bank) against Halifax (SW) Ltd for an allegedly negligent valuation of a
property for mortgage purposes.
The appellant bank lends money on a mortgage of commercial
property. The respondent surveyors value property for that purpose. The
retainer is expressed in these terms:
To provide our opinion as to the open market value of the
unencumbered freehold interest in the above mentioned properties with the
benefit of full vacant possession being available. Our valuation to be on a 90
day sale basis with UCB Bank Plc as mortgagee in possession.
On 6 March 1990 a company (which, I think, is now in liquidation)
applied to the bank for a loan of £550,000 to be secured by a first mortgage
over property known as units 11 and 12, Ashway Centre, Elm Crescent, Kingston
upon Thames, Surrey. The application for that mortgage stated that the property
had an estimated value of £675,000, that the purchase price was £666,000 and,
as I have indicated, the borrowing was £550,000. The bank instructed the
respondents (whom I shall call the surveyors). A Mr Ralphs, who is, in fact,
the second respondent, carried out the survey and made the valuation. He viewed
the property. He made due inquiries in the locality. He conducted all the
checks and balances that are ordinarily required. On 30 April 1990 he made a
valuation in which he set out various aspects of what he had done. First, he
recited his instructions and set out the terms of the retainer as I have
already stated it.
Then he set out (but I need not recite) the situation of the
property, its description and condition, its construction, the accommodation,
the services, the local authority position with planning, tenure and fire
insurance. He came finally to valuation, which he expressed in these terms:
We are of the opinion that the open market value of the
unencumbered freehold interests in the above mentioned properties, with the
benefit of full vacant possession being available, would amount to:
£665,000 (SIX HUNDRED AND SIXTY FIVE THOUSAND POUNDS)
In arriving at our valuation figure above we have had regard to
the marketability and demand for this type of property in this location, which
we consider to be reasonable at the present time, in particular due to
Kingston’s increasing popularity as a business location due to environmental
and communication advantages.
Our valuation figure above is on a 90 day sale basis with UCB Bank
Plc as mortgagees in possession.
He made quite detailed notes of the investigation he had conducted,
and there is a good record of his thinking. The judge recited them, and I
repeat part of the material observations that he recorded. They included
matters such as:
Located close to centre of town and close to polytechnic — with recent incorporation should
boost demand from that source. Demand in general should be and is good
due to geographical factors (the river, etc) and Kingston Borough Council’s
restrictive policy as Local Planning Authority, towards office/B1 development.
There are currently only four other developments of this kind.
As there are few developments, there is little hard comparable
evidence.
He then dealt with matters affecting his valuation and noted his
conclusion in these terms:
Asking price is £145 per square foot. There is a limited supply of
this type of space in this location. It is centrally located with potentially
good demand. Units are selling (two sold — two under offer) although demand
appears to have peaked. Local agents seem to think that a well-located building
will sell well.
Bearing in mind the limited supply of this type of
building, I see no reason to derogate from the asking price on a 90 day sale
basis, ie open market transaction best evidence available and supported by
developments elsewhere. I am satisfied with £665,000.
The evidence, which was largely agreed, showed this state of
affairs on that little development. The developer, Molans, was apparently
seeking a price of £140 per sq ft across the board for this new commercial
centre. There were 12 units built by it, and the properties in question (being
11 and 12) were well situated at the entrance to the centre. They were the
largest properties there. They were adjacent, but capable of being easily
converted into a single unit. At the time of the valuation, unit 9 had been
sold in September 1989 at a price close to the asking price. Unit 7 had been
sold in December 1989, again at or about the asking price, and, by the time
that the valuation was sought, the mortgagor had ambitiously (which may explain
the subsequent bankruptcy of the venture) exchanged contracts to purchase the
property, even though it appeared not to have had the finance available to
complete it.
In addition, therefore, to those four sales (as I shall describe
them), it was known at the time of the valuation that two other properties were
under offer, again all at the £140 per sq ft asking price, and we know with the
benefit of hindsight that unit 10 was completed a good deal later, in August
1990. The other property that was then under offer appears to have fallen
through, and no more is known about it than that.
Based upon the valuation it had received, the bank lent 80%,
amounting to a loan of £532,000. The detail is immaterial, but the fact is that
the mortgagor fell into arrears and at some time the bank took possession. The
bank, perhaps not noted for the speed with which it commences litigation,
managed to serve its writ the day before the limitation period expired, which
would have been in 1996. I note that, at the time of judgment, Judge Green was
recording that the bank expected shortly to sell the property for £325,000. It
therefore sought to make up at least part of its loss by bringing this action
against its surveyors, alleging their negligence in conducting the task they
were assigned.
The trial before the judge was a trial of liability only, it having
been indicated to him that if he found the defendants liable, damages in the
region of £100,000 might well be agreed. The approach he was invited to follow,
and did follow (and in this court it has been agreed was right to follow), was
to approach the question of valuation in four stages, and ask these questions:
(i) What was the actual open market valuation as at April 1990 on
the basis of the information that a surveyor, using all proper skill and care,
should have obtained?
(ii) What is the discount (if any) from the open market valuation
that should be made to comply with the 90-day clause?
(iii) Having arrived at the actual open market value as above,
what is the margin of error that should be permitted before the defendant could
be found negligent?
(iv) On the foregoing basis, was the valuation negligent?
His conclusion was that the valuation was not negligent. He arrived
at that conclusion by finding (and there is no challenge to that finding) that
the actual open market value was £644,000; that the margin of error was 10% and
so, adding 10% to £644,000, the ceiling was £708,400, which was well above the
valuation actually made of £665,000. Hence the claim failed. The challenge to
his judgment is his finding in answer to the second question that there was to
be no discount from the open market value and the value in accordance with the
retainer of a valuation on a 90-day sale basis with UCB Bank plc as mortgagee
in possession.
Mr David Phillips QC, for whose arguments I am grateful, put his
case in this way. It was, he acknowledged, an appeal against a finding of fact.
He said the judge was wrong to have found that a 90-day sale by a mortgagee in
possession valuation could be, or was, the same as an open market valuation. I
am bound to say that it struck me from the moment I read these papers, and even
now, as surprising (if not, indeed, even bizarre) that there should not
be a difference between open market value and 90-day by mortgagee in possession
value. But Mr Edwin Johnson, in submissions equally eloquently couched, submits
to me (and all will appreciate that this is a very free translation of his
courteous submission) that I do not sit here as a man in the street, still less
as an expert valuer. I am here to apply the law, and not what I might like to
think is common sense.
So, suitably chastised, I shall try to do just that. I am therefore
to start with the retainer. What does it mean? Left to myself, I would have
thought, naively and wrongly, that a valuation on a 90-day sale basis, with the
bank as mortgagee in possession, involved two elements that would distinguish
that valuation from an open market value. We have a definition of the open
market value taken from the institution’s guidance, and which, for this
purpose, I am perfectly happy to adopt:
‘Open Market Value’ means the best price at which an interest in
the property might reasonably be expected to be sold at the date of the
valuation, assuming:
(a) a willing seller;
(b) a reasonable period in which to negotiate the sale taking into
account the nature of the property and the state of the market;
(c) that values will remain static during the period;
(d) that the property will be freely exposed to the open market;
and
(e) that no account will be taken of any additional bid by a
purchaser with a special interest.
The guidance also draws attention to what they call a ‘forced sale
value’, which is defined to be:
the ‘Open Market Value’ as defined above with the proviso that the
vendor has imposed a time limit for completion which cannot be regarded as a
‘reasonable period’ as referred to [above].
I would therefore have expected that the valuation with which we
are concerned, which may in fact be a kind of forced sale value, but one as
defined in the retainer, justified two discounts: first, for the 90-day sale
restriction that is being imposed, but also for the fact that the willing
seller in this case is not an ordinary willing seller but a particular one,
namely a mortgagee in possession, and that the price at which he is willing to
sell is not the best price that might reasonably be expected to be obtained in
the open market, but merely the reasonable price that it is his duty as
mortgagee in possession to obtain. In my naive
the innocent like me with ideas that this is a property being sold cheaply by
the mortgagee and that I am going to get a whacking great discount for it, if
only I could afford to buy it to supplement my pension, all of that mattered
something. But that is the error of my way. It is quite plain, in this case,
that the valuers have all approached the case on the basis that the only
element that may lead to a discount is the restriction in valuation that the
sale has to be within 90 days.
So the judge, perfectly properly looking at the case on that
limited basis, interpreted the retainer in this way. He construed it in
accordance with Mr Phillips’ submission to him that what was necessary was a
price that the valuer could be reasonably sure that the property would, not
could, be sold within 90 days; it being common ground that the 90 days was the
period that ran from putting the property on the market and ending with an
exchange of contracts. That there was therefore an element of urgency and
certainty to get the price was accepted by the judge, and he considered that
that aspect should be allowed for as lying somewhere on the spectrum, which is:
significantly less than a warranty that it will sell at the
valuation and significantly more than a statement that, on the balance of
probabilities, it will sell at the valuation.
Although I articulated my surprise at the limited construction
placed upon the clause, Mr Phillips very realistically and properly accepts
that he was bound by the evidence that his experts (in common with the
defendants’ experts) led, that the fact that it was a mortgagee in possession
selling was not a matter that was relevant in considering the definition of the
duty, though it may have an effect, as his expert indeed said to the judge,
that:
A sale by a mortgagee in possession tends to blight a property.
The common ground in the court below, taken as a result of the
views of the experts, was that whether or not a discount was to be allowed
depended upon the market conditions pertaining at the time. So there is not any
presumption of the valuation on a 90-day sale by mortgagee in possession being
lower than open market value. It can be; it may usually be. But the answer
always depends upon the actual market conditions that prevail.
In their respective statements, which stood as their
evidence-in-chief, the claimant’s surveyor put the case in this way:
This was a development of new small industrial units, located in a
strong inner suburban town, close to Central London. It is the sort of location
which is likely to be in good demand in normal market conditions. Indeed, the
Centre is currently fully occupied and there is only one unit available for
re-letting. No other comparable modern units are available for letting or sale
in the immediate vicinity at the present time.
In April 1990 Ashway Centre had been available for sale and
occupation since at least September 1989 — a period of over six months. Despite
this, only five of the 12 units constructed had been purchased or were subject
to offers (including Units 11 and 12). This was less than half of the
development. I consider that this demonstrated a very slow rate of take-up for
such a development particularly compared with the previous 24 months, which had
seen a very strong property market.
The defendants’ surveyor expressed his conclusions in his report in
these terms:
This valuation takes into account the stipulation that the
valuation should be on a 90 day sale basis. Bearing in mind the market
conditions at that date together with the recent sales that had occurred means
that I do not believe I would have considered it necessary to make any further
discount from the comparable evidence shown by the earlier sales of Units 7 and
9…
This was a new development and at the time of the valuation there
were other units vacant and available. In my view it would not have been
appropriate to have suggested a discount in value for this reason. Furthermore,
Units 11 and 12 comprised a single detached building (albeit comprising 2
units) located at the front of the estate comprising perhaps the most
attractive and prominent part of the development. In my view these were more
attractive than the other vacant units comprising part of a terrace.
The trial lasted days and days. A great deal of evidence was given
by valuers in which the judge played a lively part and the judge summarised
that evidence in this way. He referred to Mr Shores, the claimant’s expert, who
was adamant that 10% had to be deducted from the open market valuation to
comply with the retainer. He was firm in that view because, as he put it, half
of the estate remained to be sold at the relevant date. There was the blight to
which I have referred, and his opinion was essentially this:
When that is coupled with the tight period for 90 days, that
indicates to the market that this is a forced sale and, with new property
around, it is unlikely to sell at full valuation.
Given the circumstances of the market and of that estate, I do not
believe it would have been prudent for a valuer to have made such an
assumption. [That its value was £145 per square foot.] For that reason, I do
not believe that a competent valuer would have made that assumption.
Mr Honeywill, the defendants’ surveyor, took the opposite view. He
believed that a valuer experienced in dealing with smaller business units would
have known that as a strong demand from owner occupiers. He was quite firmly of
the view, which the judge recorded in these terms:
I believe that there was a lull in the market in the period before
and after Christmas. The valuer could expect a post-Christmas fresh impetus to
marketing.
He also was of the view that the centre was the best estate of its
type in the area, that it was achieving the best price of what was found in the
area, and that these were in fact the best units on the estate, both by reason
of their size and their being a detached unit taken together, prominently
placed at the entrance to the estate. He was asked by the judge why a valuer
should not be cautious and deduct 10%. The answer was:
If you are satisfied that it is not necessary, you do not do it.
His view was:
There was general demand from owner occupiers and I believe it
would have been reasonable for the valuer to be optimistic when half were sold
or under offer.
The judge was clearly more impressed with Mr Honeywill than Mr
Shores. There were a number of reasons for him to express that preference. Mr
Honeywill had supported his opinion, which, of course, involved (when
cross-examined for days and days, as these experts were) a hindsight view of
the collapse of the property market, residential and business; the effects no
doubt of that ‘Black Monday’ and the withdrawal from the European Monetary
Union; the rising interest rates; the depression that followed, all of that
directed to trying to establish what the poor valuer going about his business
in April 1990 would have been able to forecast.
Mr Honeywill had a great deal of support for his arguments; Mr
Shores had less. Mr Honeywill knew the area very well, having grown up in
Kingston and was familiar with its exact locality, whereas Mr Shores had no
closer familiarity with the market than a single sale in Leatherhead. Mr Shores
was brought into the case rather late, had adopted a valuation given by an
earlier valuation and then increased it after a meeting with Mr Honeywill. So
there was good reason for the judge to accept Mr Honeywill’s opinion as more
reliable. That is how the judge effectively decided this case.
He held:
I accept Mr Honeywill’s views that, as at April 1990, the demand
for small business units, particularly if they were as attractive as these and
in a good position in Kingston, could be expected to hold up. I therefore
accept his view that it was a perfectly reasonable decision for Mr Ralphs to
make no discount for the 90-day clause. There is no doubt that he considered
the clause; I derive that clearly from his notes. There was nothing in it for
him deliberately to fail to make a discount. It is not a situation where any over-value
would obtain a sale, or anything of that sort. He had no possible motive for
overstating the price.
In my judgment his decision was reasonable and appropriate on the
evidence which was and should have been available to him. He was justified in
reasoning that six units had been sold or were under offer in some six or seven
months since completion of the development. In view of the demand for these
attractive units in an attractive development, it was appropriate to make no
discount for a 90 day sale.
Mr Phillips (for whose case I have such obvious sympathy) directed
his attack on the judgment on three legs. He submitted that the retainer in
effect created some presumption from which the court should be slow to find as
a fact that the valuations were equal. But he was driven, of course, to accept
on the evidence common to the experts that it was all dependent upon the market
at the time. So his substantial attack was that the judge’s acceptance of the
evidence of Mr Honeywill was plainly wrong because the external admitted
factors drove one inexorably to the contrary conclusion. He submitted that
those factors, in addition to the presumption arising from the retainer, were
the circumstances actually applying on the ground in the estate at the relevant
time. Two properties had been sold before Christmas; two were sold to the
borrower in this case after Christmas; two were on offer and only one was
completed. So his attack was that the facts disprove the optimism expressed by
Mr Honeywill. If there was a lull before and after Christmas, then one would
have expected the lull to have ended by about the end of January and have
expected, if there were a 90-day restriction, that between the end of January
and the end of April, which was the date of the report, in that 90-day period,
all of the remaining 10 properties or most of the properties would have been
sold, when the evidence was only that two had been sold and two were under
offer. The evidence did not justify the optimism. At best, only six out of 12
had been sold. Consequently, the glass was either half empty or half full,
depending on one’s point of view. This view of the valuers, advising their
clients in November 1988, at the very first stage of the down turn in the
residential property market, after the October budget, was that:
We must exercise even more caution than previously in being
satisfied that our valuation figure adequately reflects the security offered by
the property.
Caution is the antithesis of optimism and so the conclusion should
have been, not as Mr Honeywill felt, that one could reasonably expect this
property to be sold in 90 days, when in fact half of the properties remained
still to be sold.
Mr Johnson submits that the case has to be looked at much more
conventionally. This is an appeal against a finding of fact. The principles
upon which this court is to interfere are well settled. He refers us to Watt
v Thomas [1947] AC 484 at p486, where Viscount Simon said:
If there is no evidence to support a particular conclusion (and
this is really a question of law), the appellate court will not hesitate so to
decide. But if the evidence as a whole can reasonably be regarded as justifying
the conclusion arrived at at the trial, and especially if that conclusion has
been arrived at on conflicting testimony by a tribunal which saw and heard the
witnesses, the appellate court will bear in mind that it has not enjoyed this
opportunity and that the view of the trial judge as to where credibility lies
is entitled to great weight.
That applies, as to ordinary conflicts of fact, also to the
evidence of an expert, as this court held in Joyce v Yeomans
[1981] 1 WLR 549. Brandon LJ observed at p556H that the advantage the judge has
in seeing and hearing witnesses also applies when judging experts, and that
there are:
nevertheless significant advantages which an appellate court ought
not to ignore.
We were not referred to the Benmax case, which entitles this
court to draw inferences from primary facts.
The interesting question for me has been whether the primary facts
from which this court can draw inferences as efficiently as the trial judge are
limited to the actual state on this estate in April 1990. Should I take it upon
myself to decide whether it was reasonable to be optimistic in the
circumstances where the glass was either half full or half empty depending on
one’s view? I have been jolly tempted to do just that. But I am eventually
persuaded, albeit reluctantly, that the evidence that was before the court
included the opinion evidence of experts. Their opinions were there to be
accepted or rejected by the judge. It was clearly within his permitted remit to
accept Mr Honeywill’s views, and it is certainly not outside the generous ambit
within which one may reasonably disagree to say that he was wrong in accepting
his conclusions. The evidence that he accepted was the opinion evidence of the
view that, as at April 1990, the demand for small business units, particularly
if they were as attractive as these and in a good position in Kingston, could
be expected to hold up. I see the force of Mr Phillips’ submission that there
was possible room for the judge to have confused the general buoyancy of the
market in Kingston as a town or as a locality when his view ought to have been
narrowly focused upon what was happening on this particular industrial estate.
But I am persuaded by Mr Johnson that that point was urged fully before the
judge and that he had it well in mind to consider whether two sales before
Christmas, two sales after Christmas and two under offer was good enough to
justify the conclusion.
Furthermore, the judge accepted Mr Honeywill’s view that it was a
perfectly reasonable decision for Mr Ralphs, the surveyor, to make no discount.
Experts are called to give expert evidence of their opinion. That is why they
are there. The judge has to accept it or reject it. Here he accepted it. I very
much doubt whether I would have done so, but that matters not at all. The
question is whether he had evidence before him that justified his conclusion. I
am afraid that he did.
Accordingly, this appeal should be dismissed.
Agreeing, GAGE J said:
I agree. In my judgment, the appellant’s case, when stripped to the bare
essential, comes down to the submission that common sense dictates that any
valuer valuing a property on the basis of a 90-day sale as a mortgagee in
possession must value at a discount to the open market value. As Mr Phillips QC
puts it, it is almost an irrebuttable presumption that the 90-day sale value
will be less than that of the open market value. That is an attractive
argument. But the difficulty with it is that, as Mr Phillips fairly accepts,
there can be circumstances when the market is so buoyant that one can conceive
that the 90-day sale value will be the same as the open market value. Once that
concession is made, the question of what is the correct valuation is a matter
of fact for the judge to decide on a consideration of all the evidence,
including the expert evidence called before him. In this case, the judge, in
his judgment, having recited all the evidence of the respective experts,
accepted the defendants’ expert’s evidence and rejected the claimant’s expert
evidence. That was a conclusion to which, in my judgment, he was entitled to
come. Having done so, he concluded that it was reasonable for Mr Ralphs to make
no discount for the 90-day clause.
I remind myself that it is only on rare occasions that an appellate
court will interfere with the trial judge’s findings of fact, even when dealing
with expert evidence. Powerful as Mr Phillips’ submissions are, I find myself
unable to say that the judge’s acceptance of the defendants’ expert evidence
was wrong.
For these reasons and the reasons expressed by my lord, I too would
dismiss this appeal.
Also agreeing, ROCH LJ
said: The issue in this case was whether, in valuing these properties in
April 1990, the valuer, Mr Ralphs, having determined the open market value of
the properties, should have applied a discount to that valuation because his
instructions were that the valuation of the open market value of the
unencumbered freehold interest in units 11 and 12 at the Ashway Centre,
Kingston, should be ‘on a 90-day sale basis with UCB Bank Plc as mortgagees in
possession’. If a discount of the order suggested by the appellant’s valuer, Mr
Shores, namely 10%, should have been applied, Mr Ralphs’ valuation was too
high, and too high by a margin that went outside the margin of differences to
be expected of reasonably competent valuers. If such a discount was not called
for in the circumstances that existed in April 1990, then his valuation,
although high, fell within the permissible margin of differences between
reasonable valuations by competent valuers.
The question for the judge was whether Mr Ralphs’ valuation was one
that a competent valuer using proper skill and care could properly
have reached. More precisely, the question in this case was: was it established
on the balance of probabilities that a 10% deduction from the open market value
should have been made?
The judge accepted that Mr Ralphs had considered whether he should
apply such a discount, and had decided that the circumstances did not call for
such a deduction to be made from the open market value. The judge heard
conflicting expert evidence on this issue; Mr Shores for the appellant and Mr
Honeywill for the respondents. Mr Shores’ evidence was that a discount of 10%
should have been applied by Mr Ralphs, and Mr Honeywill’s evidence was that no
discount was called for in the circumstances that existed in April 1990.
In this court, a point was raised by the court that was not taken
before the judge below, and does not find a place in the appellant’s notice of
appeal or in the appellant’s skeleton argument. It is that there is a
difference between the open market value where the sale is by a willing vendor
who will seek the best price available and the open market value where the sale
is by a mortgagee in possession, whose only obligation is to sell for a
reasonable price rather than for the best price obtainable, and that this
factor, quite apart from the 90-day period in which the sale has to be
achieved, must mean that the open market price where the sale is by a mortgagee
in possession will be lower than the open market price where the vendor is the
owner of the property.
In my judgment, this point could not have been taken by the
appellant at this stage. Had the point been taken below, the valuation
witnesses could have given evidence concerning valuation practice. Both experts
gave evidence that the second stage in the valuation process was to consider,
as the judge put it:
What is the discount (if any) from the open market valuation that
should be made to comply with the 90-day clause?
Neither expert gave evidence that a competent valuer would have
applied a second discount for a second factor, namely that the vendor was the
mortgagee in possession. The judge accepted that the methodology agreed by the
experts was the proper methodology for Mr Ralphs to follow in making the
valuation he had been instructed by the appellant to make. I can see no basis
on which this court could have come to the conclusion that there was a further
step that Mr Ralphs should have taken, but did not take. I mention this point
because, if the point were to be raised in future, it should not be thought
that the judgments in this case are decisive one way or the other.
The appellant’s instructions to the respondents were:
To provide your opinion as to the open market value of the unencumbered
freehold interests in the above mentioned properties with the benefit of full
vacant possession being available. Your valuation to be on a 90 day sale basis
with UCB Bank Plc as mortgagees in possession.
Again, the valuation experts were agreed that in interpreting those
instructions, Mr Ralphs was entitled to look at the RICS’ Guidance Notes on the
valuation of assets, and, in particular, Guidance Note GN 22, which had been
revised in January 1989. Open market value is defined in that note in this way:
‘Open Market Value’ means the best price at which an interest in
the property might reasonably be expected to be sold at the date of the
valuation assuming:
(a) a willing seller;
(b) a reasonable period in which to negotiate the sale taking into
account the nature of the property and the state of the market;
(c) that values will remain static during that period;
(d) that the property will be freely exposed to the open market;
and
(e) that no account will be taken of any additional bid by a
purchaser with a special interest.
Those are the assumptions that a valuer is to make when arriving at
an open market value. It is arguable that the only assumption that the
instructions given to the respondents alter is the second. The reasonable
period becomes 90 days. Such an argument may well derive added force from the
definition of ‘forced sale value’ in the same guidance note.
Returning to the core of this appeal. The judge accepted the
evidence of Mr Honeywill. Mr Phillips submits, on behalf of the appellant, that
the primary facts found by the judge simply did not support the evidence of Mr
Honeywill that the circumstances were such that no deduction for the 90-day
sale by a mortgagee in possession qualification ought to have been made.
In my judgment, the evidence of Mr Honeywill related to a matter
that was peculiarly within the knowledge and expertise of an expert valuer and
outside the knowledge and experience of judges, and certainly outside the
knowledge and experience of this member of this court. Judge Green had the
advantage of seeing and hearing the expert witnesses. He rejected the evidence
of the appellant’s expert where it conflicted with that of the respondents’
expert. The judge was satisfied that he could safely accept and act on the
evidence of Mr Honeywill, that the demand for commercial properties of this
type in the Kingston area was strong, and that the estate on which these units
were was a particularly attractive location. Moreover, of the units on this
estate, these units were the most desirable.
The judge accepted Mr Honeywill’s assessment that the movement of
units on this estate, from the time the development had been completed in the
autumn of 1989 and the date of the valuation in late April 1990, entitled Mr
Ralphs as a competent valuer to conclude that no discount was called for in
this case and make his valuation accordingly. Whether the circumstances that
existed at the end of April 1990 justified a competent valuer reaching that
conclusion, when exercising the skill and care to be expected of him, was very
much a matter of valuation expertise and practice. The judge on that issue
required the assistance of expert evidence. The judge, having heard and seen
the witnesses, accepted the view advanced by Mr Honeywill. The judge did not
find that the appellants had established that all competent valuers, or indeed
any competent valuer, would, in the circumstances, have made the discount Mr
Shores thought should have been made.
In Watt v Thomas, at p487, Lord Thankerton stated the
role of an appellate court on reviewing questions of fact tried before a court
of first instance in three propositions, with which Lord Simonds agreed:
I. Where a question of fact has been tried by a judge without a
jury, and there is no question of misdirection of himself by the judge, an
appellate court which is disposed to come to a different conclusion on the
printed evidence, should not do so unless it is satisfied that any advantage
enjoyed by the trial judge by reason of having seen and heard the witnesses,
could not be sufficient to explain or justify the trial judge’s conclusions;
II. The appellate court may take the view that without having seen or heard the
witnesses, it is not in a position to come to any satisfactory conclusion on
the printed evidence; III. The appellate court, either because the reasons
given by the trial judge are not satisfactory, or because it unmistakably so
appears from the evidence, may be satisfied that he has not taken proper
advantage of his having seen and heard the witnesses and the matter will then
become at large for the appellate court.
Despite the attractive submissions of Mr Phillips, I can see no
basis on which it could be said that the reasons given by the trial judge were
not satisfactory, or that it unmistakably appeared from the evidence that the
judge had not taken proper advantage of having seen and heard the witnesses in
this case.
In short, I can see no basis on which we in this court could say
that the judge was wrong in reaching the conclusion he did. I agree that the
appeal should be dismissed.
Appeal dismissed.