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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Michael & Ors v Miller & Anor  EWCA Civ 282 (22 March 2004)
Cite as:  EWCA Civ 282
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT
BRISTOL DISTRICT REGISTRY
His Honour Judge Weeks QC sitting as a Judge
of the High Court
Bristol District Registry BS 150213
London, WC2A 2LL
B e f o r e :
LORD JUSTICE JONATHAN PARKER
LORD JUSTICE SCOTT BAKER
| Roger Michael & Ors
|- and -
|Douglas Henry Miller & Anor
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Nigel Clayton instructed by BPE Solicitors) for the Respondents
Crown Copyright ©
Lord Justice Jonathan Parker :
THE FACTUAL BACKGROUND
"VALUATION AND ASKING PRICE
A bank valuation for the Brellim Estate today would probably come out in the region of £1.5M whereas a marketing exercise such as the one we have in mind should produce a figure around the £1.6M mark and with a fair wind, £1.75M. Our advice would be to come to the market at offers in excess of £1.6M and allow the market to take its course.
METHOD OF SALE
As this is a forced sale which must have a finite result our advice would be to go for a relatively long campaign (to 1st February 1998) on the basis that we might be able to sell by Private Treaty beforehand. It should be borne in mind that the property would sell far better in the Spring with leaf on the trees but it is assumed that the place should be sold as soon as possible in order to recoup monies outstanding.
We would advise coming to the market in two lots as per the last marketing campaign [a reference to the sale in 1993]. We can always sell as [a] whole should that be required."
It would be our aim to present Brellim – as usual – to the market in the widest possible sense, thereby utilising all the various tools at our disposal. We would recommend:
We have excellent photographs in our archives but we may need to take further photographs. The costs are shown on the Estimate of Marketing Costs.
You are aware of the importance of advertising in a marketing campaign. ….
…. In any repossession and mortgagor sale there is much to discuss between the parties and I suspect that some form of compromise will be reached in due course but my advice must be to instruct agents and press on as soon as you gain possession.
There will be a debate about the lavender crop – which I have avoided at the present time – which will probably end up as a battle between lawyers in the usual way.
I have arranged for Mr Butler of Butler Sherborn to look round Brellim on Tuesday as a second agent giving his opinion as to value as instructed. …."
"In the current market we would recommend you think in terms of selling the whole property in the region of £1.5M to £1.6M. In marketing, due to the physical separation of the two farms, we would recommend offering the property for sale as a whole or in two lots."
"The precise figures will be reviewed and agreed with you prior to the commencement of the marketing. Obviously, the sale price depends on the amount of interest that is shown, but with proper marketing and careful negotiation we would be disappointed if we did not achieve a figure in line with the guide price."
"…. our clients are prepared to undertake the necessary acts of husbandry on a contractual basis without any rights in respect of the property to ensure that the value of the assets are maximised. Our clients are also prepared to engage in the sale of plants on your clients' behalf and liaise with your clients' agents and/or accountants in order to account for the full proceeds of sale from any disposals and in respect of an agreed strategy for such sale.
Your clients are already on notice that our clients would hold your clients responsible for any diminution in the value occurring through the absence of the requisite husbandry and strategy in relation to the disposal of the plants. …."
"We must not allow those interested through the Strutt & Parker campaign to [waver]. I have to say that I am more than irritated by the fact that they put in hand a campaign at a time when there was absolutely no chance of attracting a potential purchaser prior the mortgagees taking possession. My plan is:
1. To put up sale boards to make sure everybody is clear who is selling what.
2. To place an advertisement in this week's Farmers Weekly (lineage only) indicating that all those who have shown interested [sic] in the past should now contact ourselves.
Once I have had a chance to find out how the land lies with the likes of Mr Egan (an American who bid me on the telephone today £1.5M for the whole) or Mrs Duncan, and how Strutt and Parker are to react, we can then take a view as to whether we take fancy photographs and produce some particulars or, indeed, take further advertising in the glossy magazine[s]."
"Could you let me know the position with regard to crops? Whose are they, can the lavender be ploughed in, when can a potential purchaser have vacant possession of the land?"
"Apparently, there will be no market for lavender in this bulk. It can either be grubbed up and burnt or ploughed under."
"Further telephone conversation with Nick Hextall. He has now got the American [i.e. Mr Egan] to offer £1.6M. He wanted to know that would cause no problem. I warned that the defendants [i.e. the appellants] would argue that the sale was at an insufficient price. I recommended that he gets in contact with Phillips."
"Please proceed with items re sale boards, but I would prefer placing a new advertisement in Farmers Weekly rather than correct the earlier position.
Mr Egan and Mrs Duncan could be contenders for the Estate, but because of the vexed nature of the sale we will have to liaise with Mr Kearsley on how to finally progress matters. Above all, we must be seen to have extended every opportunity to make the best money from the sale."
"Given the blight created by the last four weeks marketing operation, the general history behind the property and the very proper nervousness that any potential purchaser might have in acquiring [it] as a consequence of that history, I believe that the figure of £1.6M is a true market value and one which is defendable if challenged.
My advice and recommendations must therefore by to accept Mr Egan's offer and instruct solicitors forthwith and I await your instructions."
"I will call you later today, following a discussion with David Kearsley, on the matter. It may well be that another professional opinion will be needed to corroborate your £1.6M acceptance recommendation. However, it certainly looks okay to me, and after eighteen months of problems I am certainly ready to go."
"In that connection we have spoken to …. the solicitors acting for Mrs Duncan, who we understand are already in touch with you confirming their clients' continued interest in purchasing Lot 1 for £1.15M, which sale previously agreed, subject to contract. …. We also understand that Mr Phillips remains in a position to proceed to purchase Lot 2 and that the combination of the monies receivable from Mrs Duncan and Mr Phillips will be more than sufficient to redeem the indebtedness to your clients. …. Please confirm that having regard to the above points your clients will seek to advance the disposal to Mrs Duncan and Mr Phillips without delay unless your clients are able to achieve a better price through alternative opportunities."
"In any event, there is no purchaser ready, willing and able to proceed with Lot 1. We have spoken to Mrs Duncan's solicitors. Her offer to purchase was dependent upon lifting the agricultural restrictions and securing planning consent for an equestrian centre. There was never any question of her exchanging and completing within the time scales indicated in your letters."
3. Egan has heard that there is a dummy purchaser coming forward at a price of £1.7M. Egan will match any offer put forward.
4. Hextall is having the lavender valued by an expert.
6. Hextall is putting up sign boards and placing an advert in the same periodical as Strutt & Parker, so that any leads that Strutt & Parker had will be transferred.
"All in all he bore out my view that there was very little value in the lavender crop."
"Spoke to Martin Elliott Partnership. They have shown an interest in Lot 2 … They indicated that Strutt & Parker had indicated that they had [had] absolutely no interest whatsoever in Lot 2, although they had a good offer for Lot 1. I presume that offer was Mrs Duncan at £1.15M."
"Nick Hextall telephoned. He has had long conversations now with Phillips, who is confirming that he will offer £450,000 for Summerhill on the basis that there was an offer of £1.15M for James Barn Farm. I told him that we would have to look at these offers to show that we were getting the best price. He has told Phillips to release details of an offer Strutt & Parker are alleged to have received for Summerhill at £650,000. He has had the lavender valued. The expert will do a report saying it is worth £100 per acre in the ground, but that it will cost that much to crop it."
"…. Spoke to Mrs Duncan's agent …. who suggested that by 10th June they would know whether the offer of £1.15M was unconditional. …. Spoke to Carter-Lewis today and advised that the offer 450 [sic] was not enough and that there might be something we could do at £500,000. He is to come back to us. …. Spoke to Mr Egan, advised him of the situation and received instructions from him to go to an overall bid of £1.65M. …. Spoke to Doug Miller, who agreed to accept that offer immediately and was surprised that a contract had not been sent out by [Brethertons]."
"Egan still on line at £1.65M. Very keen to do quick deal. In hands of lawyers. I will push it from our end. …. Twyston Davis has bid £500,000 for Lot 2, which, with Lot 1 at £1.15M, still only equals Egan. The £1.15m is now unconditional."
"We have an offer from Egan which we have accepted. It is the best offer on the table at the moment and better than anything that Strutt & Parker had in place."
"Our clients' agents are satisfied that they have considered all genuine inquiries and offers. The best available offer presently on the table is for £1.65M by way of a cash purchase. Whilst our clients' agents have advised that this offer is the highest on the market at the present time, they are continuing to invite offers."
"I would be most grateful if you could let us have your valuation and expert opinion on the lavender and other herbal crops at James Barn Farm and Summerhill. In particular:
1. valuation of this year's crop.
2. value of plants after harvest.
"The value of the plantation at Summerhill: As a matter of accounting practice we do not capitalise the lavender in our fields. Once a field is more than two years old the lavender reaches a size which means that it is impossible, on a large scale, to lift and realise. Therefore, it is an expense which should be written off. The lavender bushes at Summerhill are too large to move, and have no inherent value."
"Hextall then told me that there was an offer expected of £1.75M. I told him that that could not be ignored and that if necessary Egan must be asked to match it. He could not proceed at the lower price, as he was not acting simply for the vendor in normal circumstances."
"We are advised that the offer of £1.65 million is the best available. Despite an exhaustive marketing campaign, no higher offers have [been] received. Accordingly, you may accept this letter as notice that we intend to proceed, if possible, with an exchange of contracts at a sale price of £1.65 million. We are prepared to give you 48 hours notice should, for any reason, we be instructed to exchange contracts for a lesser sum."
"We note that the proposal to sell the estate for £1.65 million does not include the plants. We also note that a valuation is being sought from a recognised lavender expert. We should be grateful if you would confirm that you will let us know when a decision has been taken by your clients as to how to deal with the plants in order to maximise their value."
"Our clients are disappointed that your clients have decided not to involve Strutt & Parker. Our clients do not accept that £1.65 million is the best price for the estate. The advice of Strutt & Parker was, as you are aware, to separate the estate into two lots. The estate had an overall guide price of £1.75 million with an individual price for lot 1 of £1.1 million. The best offer received for lot 1 during the very short marketing period was £1.15 million which, if lot 2 was to achieve its guide price, would give an overall value of £1.8 million. …. Further, we understand from Mrs Duncan's solicitors that her offer of £1.15 million remains available and is now no longer conditional upon planning issues."
THE EXPERT EVIDENCE
THE JUDGE'S JUDGMENT
"Mr Whalley, the defendants' horticultural consultant, regards both these proposals as 'unrealistic and pie in the sky'. There was an expert surveyor on each side; neither of them supported Mr Greetham's proposals for marketing, nor did any of the other surveyors called to give evidence. I have no hesitation in preferring Mr Whalley's evidence that the most appropriate course at the time in this area of England was to attempt to market the land as one unit in a conventional manner. Accordingly the defendants did not act …. unreasonably in this respect."
"Mr Clayton [counsel for the defendants/respondents] also submitted, and I accept, that the facts are to be looked at broadly and a mortgagee is not to be adjudged in default unless he is plainly on the wrong side of the line (see Salmon LJ in Cuckmere Brick at p.969); that best price and proper price mean the market value at the time; that the fact that a different agent would have advised differently is not enough, per Jacob J in [Routestone Ltd v. Minories Finance  1 EGLR 123] at p.126; and that one must be cautious of expert evidence given with the benefit of hindsight."
"What is proper advertisement will depend on the circumstances of the case. The present case is unusual in that there had been an extensive advertising campaign undertaken immediately before the mortgagee took possession."
"I have already found that it was sensible to market the estate as a conventional agricultural unit. It follows that the proper way to dispose of the plants, if they had any significant value, was to sell them separately to the purchaser, if he was interested, or to exclude them from the contract and either delay completion or negotiate a holdover so that the plants could be lifted and sold elsewhere. I therefore propose to deal separately with the land and buildings on the one hand and the plants on the other …."
"I have hesitated as to whether I should make a finding as to the market price first and then decide whether it was negligent not to achieve that price, or whether to decide whether reasonable steps were taken to obtain the market price in the abstract. It may not matter at the end of the day, but I propose to take the former course."
"I should add that in my judgment this property was exceptionally difficult to value because of the shortage of comparables and its unusual features, apart from the plants. The surveyors who gave evidence agreed that there is an acceptable bracket for valuations, which is not an exact science. In my judgment the acceptable bracket in the present case ranges from £1.6M too £1.9M, and I would not regard a valuation at either end of that scale as being negligent."
"The substance of Mr Jourdan's criticism of his conduct is that: 1. he failed to market the property at the outset and advised acceptance of the bid on 2nd June; 2. he advised acceptance of the bid of £1.65M on 9th June; and, 3. he failed to market the property properly thereafter. In my judgment, Mr Hextall was in a difficult position where he was instructed to sell the property after a five to six weeks campaign from another agent. In my judgment it was not negligent to decide to continue the previous campaign and try to capitalise on the interest shown to Strutt & Parker.
Mr Taylor would have acted differently if his firm had handled the sale. However I do not think that the decision to continue to offering in two lots, as Strutt & Parker had done, or the decision to do minimal re-advertising or the decision to recommend a bid of £1.6M (supported by [Butler and Sherborn], for what is was worth) were decisions which no competent surveyor could have made.
A fortiori, the decision to recommend acceptance of the £1.65M was not negligent. Mr Hextall did advertise in Farmers Weekly; he did have sale boards put up; he did send out some 70 sets of particulars in June, July and August, and he did show interested people around until contracts were exchanged. He obtained via Mr Phillips information as to the interest achieved by Strutt & Parker. Other agents might well have done more, but [Mr Liddiard] says, and I agree, that the overall marketing of the property was sufficient to expose the property to a wide cross-section of applicants. The fact that the property did not achieve what I regard as the market price is not attributable to any act or omission on Mr Hextall's part which I would regard as negligent."
"He [i.e. Mr Lucas] was not significantly cross-examined, a course which Mr Clayton was entitled to take on the pleadings as they stood."
"On the limited evidence before me, I do not think that I can reach any firm conclusion as to the exact value of the lavender in September 1998, and if I had to do so I would fall into the same trap as Mr Justice Plowman in Cuckmere Brick, who was criticised for assessing damages on inadequate evidence. I am, however, satisfied on the evidence before me that the lavender did have some commercial value and if a marketing campaign had been instituted in the Summer of 1998 significantly more than the [appellants] themselves realised could have been obtained."
"Mr Miller and Mr Hextall, knowing no better, relied on that opinion and took very little effective action thereafter to realise the lavender. Given that completion did not take place until 28 October  and could have been delayed until 4 December  (at the cost of some loss of interest), the defendants could have and should have, in my judgment, taken steps to market the lavender on the basis that lifting would begin in September when either the harvest had been taken or the plants had ceased to flower. I will direct an inquiry as to what sum could have been realised by that course."
THE ISSUES ON THIS APPEAL
1. the judge granted the appellants permission to appeal on the question of the significance of his bracket of 'non-negligent' valuations ("the bracket issue");
2. Dyson LJ granted the appellants permission to appeal against the judge's finding that the respondents had not breached their duty as mortgagees in the manner in which they marketed the Estate ("the marketing issue"); and
3. the judge granted the respondents permission to cross-appeal as to the scope of the inquiry which the judge ordered in relation to the lavender plants ("the inquiry issue").
THE ARGUMENTS ON THIS APPEAL
The bracket issue
The marketing issue
The inquiry issue
The bracket issue
"What is proper advertisement will depend on the circumstances of the case."
"I …. conclude, both on principle and authority, that a mortgagee in exercising his power of sale does owe a duty to take reasonable precautions to obtain the true market value of the mortgaged property at the date on which he decides to sell it. No doubt in deciding whether he has fallen short of that duty the facts must be looked at broadly, and he will not be adjudged to be in default unless he is plainly on the wrong side of the line." (Emphasis supplied)
"[i]f a mortgagee exercises power of sale in good faith and for the purpose of protecting his security, he is not liable to the mortgagor even though he might have obtained a higher price …." (Emphasis supplied)
"Before I come to the facts of the individual cases, I must notice an argument advanced by the defendants concerning the calculation of damages. They say that the damage falling within the scope of the duty should not be the loss which flows from the valuation having been in excess of the true value but should be limited to the excess over the highest valuation which would not have been negligent. This seems to me to confuse the standard of care with the question of the damage which falls within the scope of the duty. The valuer is not liable unless he is negligent. In deciding whether or not he has been negligent, the court must bear in mind that valuation is seldom an exact science and that within a band of figures valuers may differ without one of them being negligent. But once the valuer has been found to have been negligent, the loss for which he is responsible is that which has been caused by the valuation being wrong. For this purpose the court must form a view as to what a correct valuation would have been. This means the figure which it considers most likely that a reasonable valuer, using the information available at the relevant date, would have put forward as the amount which the property was most likely to fetch if sold upon the open market. While it is true that there would have been a range of figures which the reasonable valuer might have put forward, the figure most likely to have been put forward would have been the mean figure of that range. There is no basis for calculating damages upon the basis that it would have been a figure at one or other extreme of the range. Either of these would have been less likely than the mean …."
The marketing issue
The inquiry issue
Lord Justice Scott Baker:
Lord Justice Auld:
Directions for the Inquiry
14. There is to be an Inquiry to consider the following points:-
(1) Whether and upon what basis the Defendants had the power to sever the plants and sell them separately from the property. In particular:(a) whether there was a power at law; alternatively(b) whether there was a power in the mortgage deed; alternatively(c) whether in the particular circumstances of the case and upon what basis, the Defendants would reasonably have obtained power from the Claimants and/or the Agricultural Receivers and/or the buyer, Egan.(2) If the Defendants had the power to sever the plants and sell them separately from the property, whether and upon what basis the Defendants were under a duty to market the plants themselves and arrange for them to be lifted and sold separately. In particular, whether, as a matter of law, the duty to take reasonable steps to obtain the best price reasonably obtainable for the mortgaged property could include marketing the lavender and other herbal plants at James Barn Farm and Summerhill Farm from 1st June 1998 with a view to them being lifted and taken away by prospective purchasers between the beginning of September 1998 and 4 December 1998 (" the Marketing Exercise"). If it could, whether in the particular circumstances of this case it was reasonable to expect the Defendants to embark upon the Marketing Exercise having regard to such things as;(a) whether there was an available market to lift and take the plants;(b) whether the Defendants could reasonably have been expected to take expert advice at the time which would have led them to ascertain the existence of the market and which would in all the circumstances have recommended that they carried out Marketing Exercise;(c) if so, whether the prospects of making a profit were reasonably certain and realistic as to justify them carrying out the Marketing Exercise.(3) If the Defendants had the power to sever the plants separately from the property and were under a duty to carry out Marketing Exercise, there be an Inquiry as to what net sum could have been realised by the Marketing Exercise
15. All consequential and further directions in the Inquiry be adjourned to His Honour Judge Weeks QC upon the joint application of the parties the first available date after 21st June 2004
16. The costs of the claim and counterclaim (being the costs down to and including 23rd May 2003) be adjourned to be dealt with following the Inquiry
17. There be detailed assessments of the Claiments' costs of the claim and counterclaim (Being costs down to and including 23rd May 2003) for the purposes of public funding
18. The costs of the Inquiry be costs in the Inquiry
- The Appellants do pay the Respondents' costs of the appeal and cross-appeal to be determined pursuant to section 11 Access to Justice At 1999 and in accordance with section 23 Costs Practice Direction CPR PD 44.
- There be detailed assessment of the Appellants' costs of the appeal and cross-appeal for the purposes of public funding
- The Respondents be at liberty to set-off the costs which the Appellants have been ordered to pay against any costs or damages which they may be ordered to pay the Appellants.
(Order does not form part of the approved judgment)