Hope Capital Ltd v Alexander Reece Thomson LLP
| Jurisdiction | England & Wales |
| Judge | Mr Justice Constable |
| Judgment Date | 27 September 2023 |
| Neutral Citation | [2023] EWHC 2389 (KB) |
| Court | King's Bench Division |
| Docket Number | Case No: QB-2021-003619 |
[2023] EWHC 2389 (KB)
Mr Justice Constable
Case No: QB-2021-003619
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Andrew Nicol (instructed by Penningtons Manches Cooper LLP) for the Claimants
Tom Asquith (instructed by Kennedys LLP) for the Defendant
Hearing dates: 12, 13, 14, 17, 18, 19, and 24 July
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 16:30 on Wednesday 27 th September 2023.
A. Introduction
Cedar House is a Grade II listed property, prominently situated in a plot of some 0.667 acres on the edge of the large village of Cobham in Surrey. The original brick and timber building was constructed in the 15 th Century, with later additions in the 18 th and 20 th Centuries. It was valued at £4,000,000 within a report dated 14 February 2018 (‘the Valuation’) by Mr Jeremy Mussett then of the Defendant, Alexander Reece Thomson LLP (‘ART’) as security for a bridging loan. The loan was in the sum of £2,215,440 (£2,448,000 including interest and fees which would accrue during the term of the loan, i.e. gross), and was provided to St Anselm Heritage Properties Limited (‘St Anselm’), by the Claimants (together, ‘Hope’) in circumstances described more fully below. St Anselm was a property company owned and controlled by Mr Evangelos Pieri, which had the benefit of a long lease on Cedar House from the National Trust, the freehold owner. St Anselm defaulted on the loan and receivers took possession of Cedar House on 12 November 2018. A number of issues arose, the most significant of which was the service by the National Trust of a (second) s146 Notice on 18 November 2018 requiring remedial work to the property in respect of breaches of the lease by St Anselm caused by irresponsible renovations. Cedar House was eventually sold on 2 October 2020 for £1,400,001.
Hope brings a claim against ART alleging that the Valuation was negligent, and that no transaction would have taken place if the valuation had reflected the true value of Cedar House. This, it says, was £2,150,000. It claims that its total loss caused by entering into the transaction was £2,527,749 (to 2 October 2020, plus interest). This is made up of the loss in capital (£875,401.40, including net costs of extraction), the loss of contractual interest on the loan (£1,293,149.68), and a claim for loss of profits which, it says, would have been realised by use of the lost capital in the intervening years in other successful bridging loans (£359,197.20). Hope accepts, on the basis of the principles laid down in South Australia Asset Management Corp v York Montague Ltd [1997] AC 191 (‘ SAAMCO’) that its recoverable loss is capped by reference to the difference in value between the Valuation (£4,000,000) and what it says is the non-negligent 180 days valuation for Cedar House (£1,950,000). This is a total actionable loss of £2,050,000 plus its claimed Weighted Average Rate of 17.64% p/a of interest claimed from 28 March 2018 to date, which it claims equates to £3,982,933.21. Its alternative case based upon a Cost of Funds rate averaging 8.10% p/a is £2,937,571.37.
In its Closing Submissions, ART accepted it had acted in breach of duty for the first time. Whilst it contends that the true value was £3,175,000, it accepts that this fell outside a bracket within which a reasonably competent value should have fallen. It denies causation and loss, and alleges contributory negligence. Its primary case, reliant upon the analysis in the recent Privy Council case of Charles B Lawrence & Associates v Intercommercial Bank [2021] UKPC 30; [2022] P.N.L.R. 7, is that loss should be calculated as the difference between the value of the property (ignoring issues which were not within the valuer's scope of duty such as, in the present case, the impact of the National Trust's second s146 notice and the delay in selling the property) and the loan, less a discount for contributory negligence, plus statutory interest.
B. The Application to Amend
On the fourth day of trial, Hope applied to amend its Particulars of Claim pursuant to CPR Part 17.1(2)(b). The Amended Particulars of Claim:
(1) At paragraph 7, added that ‘ …The Valuation Report stated 'We confirm we have had no previous involvement with the Property and therefore have no conflict of interest in accepting this instruction’.
(2) At paragraph 9, added a further particular of (as set out at the start of paragraph 9) breach of the implied term and/or negligence and/or breach of duty that ‘ Further and/or in the further alternative the Defendant carelessly stated (in a manner that no other competent and skilful valuer in its position would have done) that the Valuation Report was an independent report when (as revealed by the emails dated 13 June 2017 and sent by Mr Mussett for and on behalf of the Defendant to Chris Bickle of Savills) Mr Mussett was advising the Borrower and/or its director, Mr Pieri, in relation to the Property.’
(3) At paragraph 10, added that ‘ Had the Claimants been aware that (contrary to the statement contained in the Valuation Report and set out above) that the Valuation Report and Mr Mussett were not independent, the Claimants would not have relief on the Valuation Report at all, but would have commissioned a truly independent valuation report and relied on it in considering whether or not to make the Loan. In these circumstances they would have been provided with a competent and skilful alternative valuation report’.
No other amendments were sought.
In light of the fact that negligence was, by the end of trial, admitted, on its face the relevance of the amendment appeared to fall away. However, it was pressed by the Claimants on the basis, as contended in its Written Closing that,
‘ the ‘independence’ provision in the retainer did remove the current case from the run of cases and did specifically widen the ambit of responsibility of the Defendant. Further, the breach of this particular requirement (unless the Claimants are alleged to have actionably failed to seek such an independent valuation themselves) does not permit any allegations of contributory negligence to arise in its wake.’
Neither of these averments formed part of the sought amendments, or were advanced in an Amended Reply.
The part of the emails of 13 June 2017 referred to in the amendment to paragraph 9 above stated:
‘ I am assisting Evangelos with a counter proposal for TCC in an advisory capacity’.
It is said by Mr Nicol, on behalf of Hope, that this document should have been disclosed by the Defendant, although he does not seek to go behind the explanation by the Defendant's solicitors that (as stated on its disclosure statement in September 2022) some of Mr Mussett's emails, which had been searched during the disclosure exercise, had been irrecoverable. However, the emails which had been disclosed previously included an exchange between Mr Mussett and Mr Pieri in which included the following:
This exchange had also been referred to in the expert report of the Defendant's valuation expert, Mr Rusholme. He said: ‘ I have been provided with an email sent by the owner of the Property (the borrower) to Mr Mussett of the Defendant firm requestion that he ‘immediately sells’ the Property.’ Whilst ‘immediately sells’ is not, in fact, a direct quotation, it is a fair paraphrase of ‘ Could you sell cedar house now’ and/or ‘ if you have any buyers that would be great’.
Within the original disclosure there was also a series of exchanges on 16 th June 2017 and 5 th July 2017 between Mr Bickle of Savills and Mr Pieri, into which both Mr Mussett and Mr Mackernan were copied dealing with a negotiation of a lease for Cedar House with The Cotswold Company (‘TCC’). It is clear from the email chains that it was into this overall exchange that Mr Mussett was inserted, at the request of Mr Pieri, on 13 June 2017 which led to Mr Mussett emailing Mr Bickle and introducing himself as assisting Mr Pieri in an advisory capacity in the email upon which Mr Nicol relies. Finally, there is a further exchange between Mr Mussett and Mr Bickle in the original disclosure on 3 November 2017, the day after Mr Mussett's inspection of Cedar House carried out initially for his valuation of the Property for Clarity Financial Ltd, and referred to as the date of inspection in the Valuation. Mr Mussett asks, ‘ What price are you quoting for the long leasehold interest’; to which Mr Bickle replied, ‘ £3.25m’.
In an unusual feature of the case, the email of 13 June 2017 was in fact discovered because it was in the possession of Savills, for whom the Claimants' valuation expert Mr Mackernan works (and who was, as the email exchange above, copied into the discussions contemporaneously). The Defendant's solicitors had been repeatedly seeking disclosure of the material Savills held relating to Cedar House from around November 2022 onwards.
I allowed examination/cross-examination of Mr Sealey, the principal shareholder of Hope, on the topic de bene esse on the basis that I would hear submissions and determine the question of amendment as part of the parties' Closing Submissions.
In examination (by way of re-examination), Mr Sealey – who had not yet seen the ‘new’ email of 13 June 2017 – gave evidence that he believed that Mr Pieri had had prior involvement in Cedar House, and that if he had known this at the time, it would have made a big difference to him because a conflict of interest would have existed. As such, Mr Sealey said that he would not have allowed ART to carry out the valuation.
In cross-examination, Mr Sealey confirmed that he...
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Hope Capital Ltd v Alexander Reece Thomson LLP
...judgment dealing with costs related issues which arise between the parties following the Judgment handed down on 27 September 2023 [2023] EWHC 2389 (KB) (the ‘Main Judgment’), together with the Claimants application for Permission to Appeal. In the Main Judgment, the Court concluded that, ......