Great Dunmow Estates Ltd v Crest Nicholson Operations Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Patten,Lord Justice Moylan,Lord Justice Singh |
| Judgment Date | 17 October 2019 |
| Neutral Citation | [2019] EWCA Civ 1683 |
| Date | 17 October 2019 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2018/1888 |
[2019] EWCA Civ 1683
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE LIST CHANCERY DIVISION
HH Judge Kramer
Claim Number HC-2017-001934
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Patten
Lord Justice Moylan
and
Lord Justice Singh
Case No: A3/2018/1888
Jonathan Seitler QC and Tom Roscoe (instructed by Gateley PLC) for the Appellants
Guy Fetherstonhaugh QC and Toby Boncey (instructed by Mills & Reeve LLP) for the First Respondent
Hearing date: 24 July 2019
Approved Judgment
This is an appeal by Crest Nicholson Operations Limited and Crest Nicholson Plc (together “Crest Nicholson”) against certain declarations made by HH Judge Kramer (sitting as a deputy judge of the Chancery Division) following a hearing on 11 June 2018.
Crest Nicholson and the first respondent, Great Dunmow Estates Limited (“GDEL”), are parties to a contract for the sale of land at Smith's Farm, Great Dunmow, Essex which is owned by GDEL. The contract with Crest Nicholson was entered into on 22 December 2011 and was made conditional on four matters (set out in clause 5.1), namely:
(i) the grant of a satisfactory planning permission;
(ii) the occurrence of what is defined as the Challenge Expiry Date in relation to that planning permission which in this case means a date 3 months and 5 days after the grant of the planning permission;
(iii) the removal of certain registered restrictions from the title; and
(iv) the agreement or determination of the price calculated in accordance with clause 6 of the contract.
It is common ground that the first three conditions have been fulfilled. A satisfactory planning permission was granted on 4 November 2014 making the Challenge Expiry Date 11 February 2015. Under the terms of the permission development had to be commenced before the expiration of two years from the date of the agreement.
The dispute between the parties is about the purchase price and how it should be ascertained. Clause 6.1 of the contract contains detailed provisions which require the parties to use reasonable endeavours to agree various matters relevant to the valuation of the property to be sold. For reasons which I will come to, the detail does not matter but they include the Base Revenue Per Square Foot (as defined) for each house to be constructed (clause 6.1.6) and the Main Infrastructure Costs (clause 6.1.7). The contract contains provision for the determination of any of these clause 6.1 matters which cannot be resolved by agreement.
Clause 6.2 provides as follows:
“6.2 Following the Challenge Expiry Date and the agreement or determination of the items referred to in clause 6.1 the Parties shall appoint a Valuer to ascertain the Assumed Value of the Property and in so doing the Valuer shall comply with the valuation standards published in the Red Book and shall act as an independent external valuer and the valuation shall be:
6.2.1 on the basis of Market Value (as defined in Practice Statement 3.2 of the Red Book) and using the residual method and any other methods that are appropriate
6.2.2 with the valuation date being the Challenge Expiry Date or (if later) the date of valuation
6.2.3 on the basis that
6.2.3.1 the Property is serviced …
6.2.3.2 the Property has the benefit and burden of the Satisfactory Planning Permissions …”.
Under clause 6.4 the price payable for the property is to be the higher of the Assumed Value as determined by the valuer in accordance with clause 6.2 and a Minimum Price of £1m per net developable residential acre less “Total Costs”.
The parties were unable to agree the Base Revenue Per Square Foot (clause 6.1.6) or the Main Infrastructure Costs (clause 6.1.7) and so on 10 May 2016 the second respondent, Mr Stephen Downham, who is a chartered surveyor, was appointed in accordance with clause 26 of the contract to determine these matters and also the Assumed Value of the property under clause 6.2. The parties had by then instructed their own valuers but agreed that Mr Downham should be able to obtain his own advice from an expert on the issue about the Main Infrastructure Costs.
On 19 August 2016 Mr Downham issued directions to the parties including that their valuers should produce a statement of agreed facts by 22 August 2016 in respect of the development site. The valuers were to agree as many facts as possible including the comparables that the parties wished to rely on. They were also to set out any matters that they had been unable to agree. They were to deliver their representations by 14 September 2016.
The parties' valuers produced a document entitled “Statement of Agreed Facts” on 23 August 2016. It recites that it “has been prepared to assist Mr Stephen Downham in arriving at his determination” and that it has been prepared and agreed by the parties' two valuers. In accordance with Mr Downham's directions, it contains a summary in conventional form of the matters on which the two valuers were agreed and identifies the principal areas of disagreement between them. On the front page of the document the parties have included the words “Without Prejudice”.
Although clause 6.2 of the contract (as quoted above) sets out the basis on which Mr Downham is to calculate the Assumed Value of the property, it does not in terms specify a valuation date. But the parties' own experts did address this issue in the Statement of Agreed Facts. They said:
“Under clause 6.2 of the 22 December 2011 Agreement (“The Agreement”), the Assumed Value of the Property is to be arrived at on the basis of (Red Book) Market Value (as defined at Clause 6.2.1 of the Agreement) but subject to a number of special assumptions at clause 6.2.3.
There is no fixed Valuation Date hence, in the event that the Assumed Value of the Property falls to be determined by an Expert, the Valuation Date then becomes the date that the Expert issues the determination.”
Accordingly the two valuers produced their own reports in September 2016 setting out their valuations of the property as at the date of their reports. The valuations which they produced were very different in amount. Mr John Turner (for Crest Nicholson) considered that the Assumed Value was just under £29.5m. Mr Michael Shaw (for GDEL) said that it was over £43m. In a further report of 14 October 2016 Mr Turner revised his valuation to £20.59m on the basis that the planning permission was about to expire.
One of the issues affecting valuation was the assumption which the valuers had to make in relation to the planning permission and whether the valuers had simply to assume that a satisfactory planning permission remained in force or could have regard to the reality which was that (as at the date of the valuation) it was about to expire. Advice on this and other related issues was tendered to the parties by Mr Fetherstonhaugh QC and Mr Seitler QC and this led Mr Downham to seek his own legal advice. Both parties were agreeable to this on the basis that they would have the opportunity through their own counsel of making submissions to the legal assessor instructed by Mr Downham.
Although this process was intended to provide a means of resolving the legal differences between the parties about the valuation assumptions, it has in fact led to the litigation with which we are concerned on this appeal. Mr Timothy Morshead QC was instructed in December 2016. By then the planning permission had in fact been implemented so that the issue as to whether the valuer could take into account its imminent expiry had disappeared. But Mr Downham considered that other issues about the terms of the hypothetical sale remained and that he would be assisted by advice from Mr Morshead on these issues. Mr Morshead was therefore instructed on the basis that the planning permission issue had been resolved and that it was agreed that the valuation date should be the date of Mr Downham's actual determination of the Assumed Value.
Mr Morshead produced his opinion on 20 January 2017. Despite the terms of his instructions, he explained in his opinion why he considered that the correct valuation date was not the date of Mr Downham's valuation but rather the Challenge Expiry Date. Having seen his advice, Crest Nicholson then moved from their position set out in the Statement of Agreed Facts and said that they agreed with Mr Morshead. GDEL maintained that the date of valuation had been agreed and that Crest Nicholson were bound by it.
Faced with this dispute Mr Downham invited the parties to make submissions as to the status and effect of the Statement of Agreed Facts and whether their then agreed position could be overridden as a result of Mr Morshead's opinion. The end result (after further correspondence with their solicitors) was that on 15 May 2017 Mr Downham sent an e-mail to the parties stating that after taking further advice from Mr Morshead he had concluded that on the true construction of the contract the correct valuation date was the Challenge Expiry Date; that the Statement of Agreed Facts was merely a record of the views of the parties' own valuers about the valuation date; and that it did not operate contractually so as to bind the parties to a different valuation date. He would therefore proceed to determine the Assumed Value of the property as at the Challenge Expiry Date.
On 5 July 2017 GDEL issued their Part 8 claim form seeking the setting aside of Mr Downham's determination of the correct valuation date and a declaration either that on the true construction of the contract the correct valuation date is...
To continue reading
Request your trial
-
Dorothy Marian Horsford v Peter William Davis Horsford
...a valuer should decide an issue, they are bound by that agreement: see Great Dunmow Estates v Crest Nicholson [2018] EWHC 1460 (Ch), [2019] EWCA Civ 1683 (in which the judge's decision was only reversed because the statement of agreed facts in that case did not comply with a specific contr......
-
Flowgroup Plc ((in Liquidation)) v Co-Operative Energy Ltd
...one of law, it would fall outside the mandate. 29 Mr Cohen also relied upon Great Dunmow Estates Ltd v Crest Nicholson Operations Ltd [2019] EWCA Civ 1683 but I do not derive any further assistance from this case. This was a case in which the mandate for the expert (a surveyor) was narrow.......
-
Smalley v Williamson
...(including cl 33) was not a matter for EY’s absolute discretion. 30 31 32 Great Dunmow Estates Ltd v Crest Nicholson Operations Ltd [2019] EWCA Civ 1683 at Mercury Communications Ltd v Director General of Telecommunications, above n 27 at 1140. Premier Telecommunications Group Ltd v Webb [2......
-
Real Estate Bulletin - March 2020
...Ltd. Contractual interpretation - leave it to the court In Great Dunmow Estates Limited v Crest Nicholson Operations Ltd & Ors [2019] EWCA Civ 1683, the Court of Appeal held that (1) matters 'agreed' by parties during the process of expert determination did not have contractual effect w......
-
Contractual Interpretation Leave It To The Court
...Great Dunmow Estates Limited v Crest Nicholson Operations Ltd & Ors [2019] EWCA Civ 1683, the Court of Appeal held that (1) matters 'agreed' by parties during the process of expert determination did not have contractual effect where the main contract contained an anti-informal variation......