Cuckmere Brick Company Ltd v Mutual Finance Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE SALMON,LORD JUSTICE CROSS,LORD JUSTICE CAIRNS
Judgment Date25 Feb 1971
Judgment citation (vLex)[1971] EWCA Civ J0225-4

[1971] EWCA Civ J0225-4

In The Supreme Court of Judicature

The Court of Appeal

(Civil Division)

(From: Mr. Justice Plowman)

Before:

Lord Justice Salmon

Lord Justice Cross and

Lord Justice Cairns

Between:
Cuckmere Brick Company Limited and Leslie Arthur Fawke
Plaintiffs
and
Mutual Finance Limited (By Original Action)
Defendants
And Between:
Mutual Finance Limited
Plaintiffs
and
Cuckmere Brick Company Limited Leslie Arthur Fawke and Arthur Reginald Johnson (By Counterclaim)
Defendants

Mr. J. E. VINELOTT, Q. C. and Mr. T. C. L. DEWHURST (instructed by Messrs. Dickinson, Miller & Turnbull) appeared on behalf of the Appellants (Defendants in original action).

Mr. A. C. SPARROW, Q. C. and Mr. E. A. SEELEY (instructed by Mr. Leslie A. Fawke) appeared on behalf of the Respondents (Plaintiffs in original action).

LORD JUSTICE SALMON
1

Mr. Leslie Arthur Fawke is a solicitor practising in London. He also carries on fairly extensive property development activities through a series of private companies controlled by him. The plaintiff company is one such company which Mr. Fawke used in connection with the acquisition in 1961 of a plot of land adjacent to the Tonbridge Road on the outskirts of Maidstone. This site comprised 2.65 acres. On the 22nd June, 1961, planning permission was obtained for developing this site by the erection of 100 flats maisonettes each with a garage. This permission was conditional upon detailed plans being submitted and approved within three years. On the 1st August, 1961, detailed plans for this development were approved and, on the 4th September, 1961, the local Planning Authority gave unconditional permission for the development to proceed in accordance with the approved plans.

2

The defendants carry on a very substantial banking business with assets in the region of £70,000,000. One of their activities since 1954 has been the supply of bridging finance for property development. Mr. Fawke and his companies were customers of the defendants from whom they obtained finance for their development projects. By a mortgage of the 26th July, 1961, and a supplemental mortgage of the 12th December, 1962, the defendants lent the plaintiff company in all £50,000 on the security of the Maidstone site. This was thought to afford the defendants a good margin of. security since the value of the land with planning permission for 100 flats was considered to be substantially in excess of £50,000. Mr. Fawke was a party to the mortgage as surety for the due performance by the plaintiff company of its obligations and was also deemed qua the defendants to be a principal debtor for all themoneys and interest outstanding under the mortgage. The terms of the mortgage are fully set out by the learned judge and I need not repeat them in detail. Suffice it to say that the defendants undertook, on certain conditions, to make further advances up to 75 per cent, of the cost of the work to be carried out on the land providing that such further advances did not, in all, exceed £50,000. The plaintiff company covenanted punctually to repay the amounts advanced and certain fees and other expenses at a stipulated rate of interest on the usual quarter-days, to complete the works satisfactorily within two years subject to any extension of time and not, without the consent of the defendants, to carry out any development on the site other than that to which I have referred; finally the plaintiff company by way of lega-mortgage charged the land and everything built on it with payment of all moneys due to the defendants under the mortgage.

3

At the end of 1964, in addition to the Maidstone site, Nr. Fawke and his companies were engaged in developing or attempting to develop seven other sites in respect of which they had obtained finance from the defendants. Owing to some mistake by his architect, Mr. Fawke ran into difficulties in respect of a site at Cliftonville. As a result, part of the money which he had intended to use for the Maidstone development had to be diverted to the development at Cliftonville. This left Mr. Fawke short of capital for the Maidstone project.

4

Although it is far more profitable to use land suitable for flat development by building flats rather than houses, the building of flats requires considerably more capital than does the building of houses. Nr. Fawke therefore decided to develop the Maidstone site for houses and in 1965 obtained detailed planning permission to erect 35 houses. As I understand it, 33 of themwere to be built on the plot charged under the mortgage and two on a small piece of adjoining land. This left room on the original plot for the subsequent erection of a block of flats. Being substantially in the defendants' debt, Nr. Fawke, perhaps not surprisingly, did not give his temporary financial embarrassment as the excuse for his change of plan. He said in his letter of the 17th December, 1964, that it would be "more profitable" and "simpler" to build houses rather than flats on the Maidstone site. The defendants agreed to the proposed change of plan.

5

By September, 1966, no building had begun on the site and the defendants gave notice calling in the mortgage money. Since it was not repaid, the power of sale became exercisable and the defendants went into possession of the site in December, 1966. They sold it at public auction on the 22nd June, 1967, for £44,000. Mr. Fawke and the plaintiff company brought this action claiming that, but for the defendants' default and failure to take reasonable precautions in relation to the sale, the site would have fetched far more than £44,000 and they asked for an account to be taken on the basis that the defendants should be debited with the price which they could and should have obtained for the site.

6

The defendants denied any default or negligence on their part and counterclaimed some £14,200, being the balance of all moneys due under the mortgage with interest after crediting the plaintiffs with the proceeds of the sale. The learned judge found for the plaintiffs on the claim and counterclaim. He ordered that an account be taken on the basis that the defendants should be debited not with £44,000 (the price realised by the sale of the site) but with £65,000 the price which he concluded could and should have been obtained for it but for the defendants' default or failure to take reasonable precautions in relation to the sale. Thedefendants had asked the judge, in the event of his finding negligence against them, to assess the proper figure with which they should he debited in respect of the sale on the evidence called at the trial rather than leave that figure to be assessed on the taking of the account. From this judgment the defendants now appeal.

7

Mr. Vinelott, who has argued this appeal with conspicuous ability and persuasiveness, bases his submissions on two grounds. He argues firstly that the learned judge's findings of fact are against the weight of the evidence and secondly that the learned judge erred in law by misunderstanding the obligations resting on a mortgagee exercising his power of sale.

8

On the first point, Mr. Vinelott contends that the evidence does not establish any fault of any kind, not even an error of judgment, on the part of the defendants or their agents; alternatively that if there was any error of judgment it did not amount to a default or a failure to take reasonable precautions in connection with the sale and in any event caused the plaintiffs no financial loss.

9

In January, 1967, the defendants put this site into the hands of Geering & Colyer for sale by auction. Geering & Colyer are an old-established firm of estate agents, auctioneers, surveyors and valuers carrying on an extensive practice from eight offices in Kent and Sussex, including an office in Maidstone which had been opened in 1963. The sale was originally fixed for the 16th March, 1967, but it was postponed, I think as a result of Mr. Fawke's intervention, until the following June. Undoubtedly Mr. Fawke was anxious to obtain yet another postponement and if possible an abandonment of the sale. Preparations, however, went forward for the sale to take place on the 22nd June. Advertisements appearedin the national and local Press, posters were published and particulars of sale sent to land-developers all over the country advertising the sale of this building site comprising 2.65 acres with planning consent for the erection of 33 detached houses. The cover and the first seven pages of the particulars of sale prominently featured this planning consent. The last three pages of the particulars set out merely the Conditions of Sale, the Memorandum and a plan of the site. Nowhere in any of the literature in connection with the sale was any mention made of the existence of the planning consent for 100 flats. The evidence shows that land which may be thought by developers to be suitable for flat-development is much more valuable with planning permission for flats than it would be with planning permission only for houses. The site in question, if developed for flats, would have provided 300 habitable rooms but if developed for houses only 132 habitable rooms. None of this was seriously challenged by the defendants.

10

Whether a site may be attractive for flat-development is, of course, a matter of opinion. In some cases this may be a difficult and nicely balanced question. If, however, it is or ought to be obvious that a site may well be attractive to flat-developers and it has planning permission for flats it would clearly be most imprudent to advertise the site for sale without mentioning this planning permission.

11

The valuation of a plot of land depends upon the knowledge, experience, expertise and ability of the valuer. Valuation is not an exact science. Equally careful and competent valuers may differ within fairly wide limits about the value of any piece of land.

12

In the present case the plaintiffs...

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