Michael & Ors v Miller & Anor, Court of Appeal - Civil Division, March 22, 2004, [2004] EWCA Civ 282

Resolution Date:March 22, 2004
Issuing Organization:Civil Division
Actores:Michael & Ors v Miller & Anor
 
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Case No: A3 2003 1290

Neutral Citation Number: [2004] EWCA Civ 282

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM HIGH COURT

CHANCERY DIVISION

BRISTOL DISTRICT REGISTRY

His Honour Judge Weeks QC sitting as a Judge

of the High Court

Bristol District Registry BS 150213

Royal Courts of Justice

Strand,

London, WC2A 2LL

Monday 22nd March 2004

Before :

LORD JUSTICE AULD

LORD JUSTICE JONATHAN PARKER

and

LORD JUSTICE SCOTT BAKER

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Between :

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(Transcript of the Handed Down Judgment of

Smith Bernal Wordwave Limited, 190 Fleet Street

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Stephen Jourdan (instructed by Burges Salmon) for the Appellants

Nigel Clayton instructed by BPE Solicitors) for the Respondents

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Judgment

Lord Justice Jonathan Parker :

INTRODUCTION

  1. Before the court are an appeal and a cross-appeal against an order made by His Honour Judge Weeks QC sitting as a judge of the Chancery Division in the Bristol District Registry on 23 May 2003 in an action brought by Mr Roger Michael, Ms Julia Heywood and Mr David Bates (the appellants) against Mr Douglas Miller and his wife Mrs Doris Miller (the respondents and cross-appellants).

  2. In the action the appellants, as mortgagors of an agricultural property known as Brellim House Estate, near Naunton in Gloucestershire (``the Estate''), claim relief against the respondents on the footing that the respondents, in selling the Estate as mortgagees, breached their duty to the appellants to take reasonable care to obtain the best price reasonably obtainable. At the time of the sale part of the Estate had been planted by the appellants with a large quantity of lavender and other herbal plants. The respondents sold the Estate by private treaty for £1.625M. There was no separate sale of the plants: in effect, they were treated by the respondents as valueless. The estate agent and valuer who acted for the respondents on the sale was Mr Nicholas Hextall of John D. Wood & Co.

  3. The appellants allege that, but for the alleged breaches of duty, the Estate would have achieved a price in the region of £3M, including a substantial sum for the lavender plants.

  4. Following a two-week trial, the judge found that the market value of the Estate (excluding the plants) at the date of the sale was £1.75M, but that an acceptable bracket for valuations ranged from £1.6M to £1.9M. He went on to find that although Mr Hextall, who had valued the Estate at £1.6M, had not acted negligently, the respondents had nevertheless breached their duty as mortgagees in two respects. First, he found that they had breached their duty as mortgagees in agreeing (without reference to Mr Hextall) a last-minute reduction of £25,000 in the purchase price (reducing it from £1.65M to £1.625M). Secondly, he found that the respondents ``could and should'' have marketed the lavender plants separately from the land, and that Mr Henry Head, an expert in the production and marketing of lavender oil, was negligent in advising them that the lavender plants were worthless.

  5. By his Order the judge directed that a sum of £25,000 be credited to the mortgage account in respect of the first breach; and he ordered an inquiry as to what further sum should be so credited in respect of the second breach. He directed that issues as to costs be adjourned to be dealt with following the inquiry or any appeal by either party.

  6. The judge granted the appellants permission to appeal on the issue as to the significance of the bracket of `non-negligent' valuations. He also granted the appellants and the respondents permission to appeal against his decision to order an inquiry as to damages in relation to the lavender plants. He refused permission for the appellants to appeal against his finding that Mr Hextall had not acted negligently in relation to the sale of the Estate. The appellants applied to the Court of Appeal for such permission. I refused permission on the papers, but permission was granted by Dyson LJ at an oral hearing.

  7. By their appeal, the appellants contend that, having found that the market value of the land was £1.75M (i.e. £125,000 more than the eventual purchase price), the judge should have directed that the whole of the shortfall should be credited to the mortgage account. They further contend that Mr Hextall acted negligently in (among other things) failing properly to expose the Estate to the market.

  8. By their cross-appeal, the respondents contend that the judge erred in ordering an inquiry as to damages caused by the respondents' failure to lift and sell the lavender plants separately from the land, since issues as to the duties (if any) of the respondents as mortgagees in that respect had not been raised on the pleadings nor were they adequately investigated before the judge. The respondents accordingly seek a variation of the judge's order so as to widen the scope of the inquiry to include issues of liability in respect of the lavender plants. By a Respondent's Notice on the cross-appeal, the appellants seek to uphold the order for an inquiry on the ground that the issues of liability in respect of the lavender plants were adequately pleaded and/or raised before the judge.

    THE FACTUAL BACKGROUND

  9. The Estate consists of two farms, James Barn Farm and Summerhill Farm. The two farms are separated by a road. The Estate comprises in total some 242 acres of arable land and includes equestrian facilities. The farmhouse on James Barn Farm has at all material times been subject to an agricultural occupancy restriction. The appellants bought the Estate from the respondents on 6 December 1993 for £1.4M. A 10 per cent deposit (£140,000) was paid, but the balance of the purchase price (£1.26M) was left outstanding secured by a Legal Charge on the whole of the Estate. The Charge provided that the loan would not be called in for three years (that is to say until 6 December 1996) provided that interest was paid promptly in the meantime.

  10. The appellants' plan was to let the equestrian facilities and most of the arable land, and to cultivate the remainder of the land by planting lavender and other herbs. Unfortunately, for various reasons which are not material for present purposes the venture proved a commercial failure, and the appellants were not in a position to repay the loan on 6 December 1996.

  11. In March 1997 Mr Miller (the first-named respondent) asked Mr Hextall to advise as to the current market value of the Estate. Mr Hextall had acted for the respondents on the sale of the Estate to the appellants in 1993. By letter dated 19 March 1997 Mr Hextall provided a `desk top' valuation of £1.638M.

  12. In May 1997 the respondents commenced proceedings for possession. After a number of adjournments a possession order was made by consent on 22 August 1997, providing for possession to be given on 27 November 1997 if the appellants were still in arrears on that date. The respondents instructed Mr Hextall to act for them on the sale of the Estate.

  13. In June 1997 Bruton Knowles provided the appellants with an estimate of the sale value of the growing crops, including the lavender and other plants. On the assumption that there would be ``a managed sale with plants lifted and prepared for the seasonal market'', Bruton Knowles estimated the market value of the plants to be around £320,000.

  14. In September 1997 Mr Michael (the first-named appellant) asked Savills to value the Estate for loan purposes. After inspecting the Estate informally, Savills advised that if the Estate were to be placed on the market that Autumn (that is to say Autumn 1997) they would recommend a guide price for the whole Estate in the region of £1.85M, with a possibility of a price in excess of £2M being obtained if the agricultural occupancy restriction on the farmhouse at James Barn Farm were lifted. However, in their formal valuation dated 15 September 1997 they valued the Estate at £1.675M.

  15. On 21 November 1997 Mr Hextall, having inspected the Estate, reported to the respondents. His report included the following:

    ``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.

    LOTTING

    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.''

    ....

    MARKETING CAMPAIGN

    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:

  16. Photography

    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.

  17. Advertising

    You are aware of the importance of advertising in a marketing campaign. ....

    CONCLUSION

    .... 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...

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