Attorney General v HMB Holdings Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Lord Hughes |
| Judgment Date | 26 February 2014 |
| Neutral Citation | [2014] UKPC 5 |
| Date | 26 February 2014 |
| Docket Number | Appeal No 0017 of 2013 |
| Court | Privy Council |
[2014] UKPC 5
Lord Neuberger
Lord Mance
Lord Kerr
Lord Hughes
Lord Toulson
Appeal No 0017 of 2013
Privy Council
From the Court of Appeal of Antigua and Barbuda
Appellant
Peter Knox QC
(Instructed by Charles Russell LLP)
Respondent
Timothy Corner QC
Lisa Busch
(Instructed by Howard Kennedy FSI LLP)
Heard on 27 and 28 January 2014
The respondent company HMB Holdings Ltd ("HMB") owned some 108 acres by the sea at Half Moon Bay in Antigua. The site included extensive beach frontage on what was described by the Government as a particularly beautiful bay. A hurricane destroyed HMB's hotel on the site in 1995. After some years had passed with no redevelopment, the Government compulsorily purchased the site. There was unsuccessful litigation to challenge its right to do so which brought the case as far as the Board in 2007, but the Government took possession on 23 July 2007, which was the date as of which the site had to be valued for the purposes of compensation. A three-person Board of Assessment comprising a judge and the nominees of each side made an award of US$ 23,820,999 on 5 January 2010. HMB appealed that decision to the Court of Appeal which, on 5 December 2011, allowed its appeal and substituted an award of $45,499,102.09. This is an appeal by the Government against the determination of the Court of Appeal.
Before the Board of Assessment the critical issue debated was the correct method of valuation. It was agreed that the basis was the price which a willing seller would obtain from a buyer in the market. But whereas the Government contended for a standard sales comparison method, HMB advanced a residual land value method, based upon a prediction of what completed hotels, villas and other property, once built on the land, could be expected to fetch, less the costs of development and the developers' profit. Leaving aside one valuation on which nobody in the end relied, the Government relied on two surveyors' valuations, from PCS Property Services ('PCS') and Deloittes, which were on the former basis. These put the value of the site at just over $23m and at $22.7m respectively. HMB relied on a valuation by Mr Kent Kerr of the firm CB Richard Ellis of Miami which, on the residual land value basis, arrived at a figure of $60m. HMB's nominee member of the Board supported this residual land value basis, but the other two determined that the sales comparison method was the correct one. In due course the Court of Appeal upheld the decision that the correct basis for valuation was the sales comparison method, and HMB no longer argues otherwise. No more need be said about the now abandoned residual land value method, except to note the very significant consequence that debate about it before the Board, and to a lesser extent before the Court of Appeal, appears to have meant that there was extremely limited evidence and argument about what the correct figure ought to be if the sales comparison method was adopted.
This matters because, whilst rejecting HMB's primary case for the residual land value method and working on a sales comparison method, the Court of Appeal accepted its secondary submission that the only true comparable offered was a nearby property called Emerald Cove, and on that basis lifted the compensation figure from $23.8m to $45.5m. The principal issue on this appeal has been whether there was any proper evidential basis for the Court of Appeal to do so.
The evidence before the Board consisted, first, of the three written reports by the three surveyors. Both PCS and Deloittes, addressing the sales comparison method of valuation, listed various possible comparable properties. The PCS report said in general terms that the sales comparison method involved "direct comparison of sales and listings of similar properties and adjustments for variances". It then stated that "We have valued the land based on the following comparable transactions of large parcels of land in Antigua over the relevant time period." It listed some seven other properties, all in Antigua. It gave, in each case, some summary particulars by way of description (for example: "waterfront, heavily mangroved" or "beachfront, mostly inland"). It gave the size of each. It stated a date and value; for some it said no more and it may be that those were completed sales, or understood to be such; for others it said either "listed" (which seems to have been taken to mean 'asking price') or "appraisal". The prices per acre varied from $44,000-odd to a little over $588,000. PCS did not set out any calculations or adjustments by means of which its advice on the value of Half Moon Bay had been derived from these comparables or other material, but simply stated that value at $215,000 per acre. From the value based on that per acre figure, PCS deducted $200,000 for the costs of demolition of the hurricane-damaged buildings, thus arriving at its valuation of $23,056,550. Neither of the two authors of this PCS report was called by the Government, and HMB, whilst not objecting to the admission of the report, did not call for either to attend for cross examination to explain what process they had adopted.
One of the seven properties in the PCS list was Emerald Cove which appeared with the legend: "150 acres, Waterfront and beachfront, close proximity to subject" and, critically, "March 2004 Appraised value". That appraised value was stated at $46m, or $306,667 per acre. In a short paragraph underneath its list of comparables, PCS noted that "Emerald Cove can be considered one of the best comparables given its close proximity to the subject site, and excellent beachfront." It was clearly after factoring in Emerald Cove and that description of it that PCS arrived at its conclusion that a fair valuation of Half Moon Bay was $215,000 per acre. It had thus demonstrably not simply adopted the reported per acre figure for Emerald Cove, which was nearly half as much again.
Neither of the other two valuers' reports mentioned Emerald Cove. Mr Kerr, for HMB, did not address the application of a sales comparison method at all, either in his report or in his witness statement. He made limited reference to comparable sales-out of completed developments, in support of his residual land value method, but he said nothing at all about any comparable property sold or valued in an undeveloped state and on the conventional sales comparison method. When he came to give evidence, he was asked in chief why his completed unit sales comparables had not been in Antigua and he replied that he did not consider any Antiguan site comparable. In answering that question, he included Emerald Cove, in passing, amongst those he regarded as non-comparable for his purposes. He said no more about it. As to the rival sales comparison method, he confined himself to asserting that the Deloittes comparables were, in his view, also unsuitable for use in that exercise, and he offered the unexpanded opinion that some of the Deloittes adjustments "appeared overstated", whilst others were accurate, but he did not say which was which. He thus offered no evidence about what the result might be if the sales comparison method were to be used. His evidence was entirely pinned to his advocacy of the residual land value method and it contained nothing at all which could help with the alternative method of valuation if that primary contention failed.
The Deloittes report was written by Mr Watson, who was called to give evidence in support of it. He had identified seven comparable sites, all in Antigua, only one of which was in the PCS list. Most of them were very much smaller than the subject site, four of them ten acres or smaller. The only one which was of similar size to Half Moon was a property called Pearns Point, which was the one listed in common with PCS, and was 130 acres. Mr Watson's report said that he concentrated on completed sales, registered if possible, apparently because the price paid was then reliably known. Unlike PCS, he set out his methodology for adjusting the values of the other sites in order to arrive at a value for Half Moon Bay. This involved either lifting or discounting the sales prices by stated percentages for plus or minus factors. After this, his report said that he had cross-checked the results against his general experience of the Antigua market. In this exercise, which he tabulated, he left out Pearns Point and one other property, which he had listed as merely reported sales. Whether he factored them into the equation in some less arithmetical way is not clear. He made no reference at all to Emerald Cove. When he was called to give evidence no one asked him to consider it and he did not mention it.
Of the three members of the Board, only the chairman, Harris J, took Emerald Cove into account in reaching his assessment. Mrs Kentish, the nominee of HMB, who accepted the residual land value method, referred to Emerald Cove and to some of the other comparables which appeared in the surveyors' reports, but did so only by way of discussing what she held were the limitations of the sales comparison reports. Mr Michael, nominated by the Government, did not refer to any comparable and accepted the Deloittes valuation (on the sales comparison method) subject to a small reduction, so to arrive at an award of $21,025,000. The Chairman, however, having first rejected the residual land value method as wildly speculative, moved on to consider what the right figure was if one adopted the sales comparison method. He reviewed the two reports of PCS and Deloittes, including the mention of Emerald Cove in the former. He concluded that he should not disregard the comparables advanced by PCS and, in part because that report had described Emerald Cove as "the most useful comparable" (not exactly what...
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