Prathitha Hewavisenti v Kosala Wickramsinghe
| Jurisdiction | England & Wales |
| Judge | Master Raeburn |
| Judgment Date | 23 July 2021 |
| Neutral Citation | [2021] EWHC 2045 (Ch) |
| Docket Number | Case No: PT-2020-000800 |
| Court | Chancery Division |
[2021] EWHC 2045 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY TRUSTS AND PROBATE LIST (ChD)
Remotely at:
The Royal Courts of Justice
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
DEPUTY Master Raeburn
Case No: PT-2020-000800
Piers Feltham (instructed by Simons Muirhead Burton LLP) for the Claimants
Stephen Bishop (instructed by BDB Pitmans LLP) for the Defendants
Hearing date: 24 and 25 March 2021
APPROVED JUDGMENT
Introduction
This is a claim under CPR Part 8 issued on 14 October 2020 to enforce the terms of a settlement agreement between the parties governing the winding up of their joint property venture. The Claimants seek orders for transfer and sale of four properties and an account for associated rents and profits.
The Claimants are a married couple who entered into a joint buy-to-let property venture with the Defendants, another married couple, pursuant to which the parties acquired a number of residential properties between 2002 and 2005 for letting purposes.
The parties' relationship broke down (the parties do not agree as to when this occurred) resulting in a dispute between them as to whether certain properties should be included within the terms of the joint venture or not, the manner in which the joint venture was to be wound up and whether there had been an appropriate account made by the Defendants for sums representing the rents and profits of certain of the joint venture properties.
The properties forming the basis of the parties' dispute are 114 Wood End Gardens, Northolt, Middlesex UB5 4QN (“ Wood End”), 20 Linden Avenue, Wembley, Middlesex HA9 8BD (“ Linden”), 7 Beechcroft Gardens, Wembley, Middlesex HA9 8EP (“ Beechcroft”), and Flats 1, 5 and 11–15, 36 Penywern Road, London SW5 9SU (“ the Penywern Flats”) (together “ the Properties”).
The Settlement Agreement
Following mediation, the parties entered into a written settlement agreement dated 6 February 2017 (“ the Settlement Agreement”) with a view to winding up the joint venture.
The Settlement Agreement made the following declarations of trust:
i) The beneficial interest in the leaseholds of the Penywern Flats and 1/3 of the freehold of 36 Penywern Road held on trust for the parties in the shares 70% for the Defendants jointly and 30% for the Claimants jointly;
ii) The beneficial interest in Linden, Wood End and Beechcroft held on trust for the parties in the shares 50% for the Defendants jointly and 50% for the Claimants jointly.
The parties also agreed a mechanism for valuation and pre-emption or sale of certain of the Properties at clause 3 of the Settlement Agreement:
“(1) A valuer agreed between the parties or appointed by the President of the RICS on joint request of the parties by 13 February 2017 shall be jointly instructed by 20 February 2017 to value 114 Wood End Gardens, Northolt (valued as 3 separate flats with a common freehold), 20 Linden Avenue (valued as 2 separate flats with a common freehold), and 7 Beechcroft Gardens;
(2) Once each valuation is received each side shall have 14 days to offer to buy the other of its share of any of the houses at 50% of that price, with the party holding the legal title to a house in his or her name having the prior right.
(3) If the right of pre-emption is not exercised in that period in respect of any house it shall immediately be placed on the open market for sale at the price advised by the valuer and thereafter shall be marketed and priced in accordance with the advice of agreed and jointly instructed estate agents.”
In relation to the Penywern Flats, the parties agreed upon a method of sale in clause 4:
“The leasehold interests in Flats 1, 5, 11, 12, 13, 14 and 15, 36 Penywern Road London SW7 9SU and the 1/3 share of the freehold of 36 Penywern Road, London SW7 9SU (together the Penywern Flats) shall by 20 February 2017 be placed on the open market for sale and thereafter marketed and priced in accordance with the advice of agreed and jointly instructed estate agents until sale and upon sale the proceeds of sale shall be paid into an account of jointly instructed conveyancing solicitors for payment and division in accordance with this agreement.”
In addition to the agreed method of sale outlined above, the parties both agreed to be subject to certain additional obligations with respect to the sale of the Penywern Flats, pursuant to clause 5 of the Settlement Agreement under a heading entitled “BEST ENDEAVOURS TO SELL AND PROFITS AFTER 6 MONTHS”, which stated as follows:
“The parties shall use their best endeavours to procure the sale of Penywern Flats as soon as possible in accordance with the marketing advice of the estate agents and if the Penywern Flats or any of them shall remain unsold after 6 August 2017 Party B [the Defendants] shall account to Party A [the Claimants] for 30% of any net income from the Penywern Flats after that date.”
The parties also agreed at clause 6 certain terms of payment as part of the settlement (“ the Payment Terms”) as follows:
“Party B [the Defendants] shall, in settlement of Party A's [the Claimants'] claim to payment of the balance due of net profits received from the Properties up until 23 May 2017, and from 3 Shepherds Court, Horsenden Lane, Greenford, Middlesex UB6 7QJ at any time, and any cross-claim by Party B [the Defendants] against Party A [the Claimants] in respect thereof, pay Party A [the Claimants], from Party B's [the Defendants'] 70% share of the net proceeds of sale of the Penywern Flats, as and when those proceeds are realised, and at the latest in full upon completion of sale of all the Penywern Flats, the sum of £160,000.”
The Factual Background
Linden
On 16 August 2017, pursuant clause 3(1) of the Settlement Agreement, an expert valuer, Mr. M.S. Martin FRICS FCIArb was appointed by RICS to value certain of the Properties, including Linden.
The parties' joint letter of instruction to Mr. Martin provided that: (i) he was to act as an expert valuer; (ii) his determination of the values of the relevant Properties was to be made in writing and included a statement that the parties agreed that his determination would be final and binding on them; (iii) he was to determine the market value of each Property on the assumption of a sale between a willing seller and a willing buyer with completion of the sale to take place within 3 months; (iv) in carrying out his determination he would prepare a building survey report.
On 6 November 2017, Mr. Martin emailed the parties' solicitors to say that he would value Linden as one house which was laid out as two flats because planning permission had not been obtained for division of the house into two flats and in his view, any such application was unlikely to be granted.
Mr. Martin produced his valuation on the Properties (other than the Penywern Flats) on or around 29 January 2018 (“ the January Valuation”) which valued Linden at £440,000. Having received the valuation of Linden, the Claimants' sought, in accordance with section 3(3) of the Settlement Agreement to exercise their right to buy the Defendants' share of Linden and sent notice to the Defendants on 6 February 2018. However, on 14 February 2018 the Defendants, through their solicitors contested Mr. Martin's approach to the valuation of Linden on the basis that it should have been valued as two flats.
On 5 June 2018, the Defendants' solicitors sent Mr. Martin by email, a number of express “clarifications” to the joint instructions which Mr. Martin was to observe when conducting his revised valuation. These “clarifications” represented the inclusion of three additional questions to be addressed in the valuation report, namely: (i) whether work done in 2003 is outside the relevant enforcement period; (ii) what the impact certain information provided on 28 March and the answer to (i) above had on Mr. Martin's conclusions as to the basis on which Linden should be valued; and (iii) Mr. Martin's estimation of Linden's value as two flats. Those additional clarifications to the joint instructions were not challenged by the Claimants.
On 29 October 2018 Mr. Martin circulated a revised valuation to the parties, this time valuing Linden as two flats, at £480,000 (“ the October Valuation”). The Claimants again exercised their right to purchase the Defendants' share of Linden at that higher valuation by way of notice on 2 November 2018.
The Defendants have since refused to transfer their share in Linden. They say there are a number of flaws in Mr. Martin's valuation reports, which were outlined in a letter sent by the Defendants' solicitors to the Claimants' solicitors dated 18 April 2019. In that letter, the Defendants assert that Linden should be properly valued at £642,000.
Wood End and Beechcroft
Mr. Martin valued Wood End and Beechcroft at £415,000 and £355,300 respectively, in the January Valuation.
On 8 March 2018, the Claimants gave notice to the Defendants seeking to purchase their share of Wood End. However, this was rejected by the Defendants on the basis that it was outside of the 14 day period prescribed by section 3(2) of the Settlement Agreement.
In their letter of 18 April 2019 and letter of claim dated 11 March 2020 the Claimants demand that Wood End and Beechcroft be placed on the open market for sale pursuant to clause 3(3) of the Agreement. The Defendants have not acceded to that demand...
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