Ronald Evan Wilson V. Dunbar Bank Plc
| Jurisdiction | Scotland |
| Judge | Lord Reed,Lord Kingarth,Lord Marnoch |
| Neutral Citation | [2008] CSIH 27 |
| Docket Number | A13/00 |
| Published date | 26 March 2008 |
| Court | Court of Session |
| Date | 26 March 2008 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Kingarth Lord Reed Lord Marnoch | [2008] CSIH 27 A13/00 OPINION OF THE COURT delivered by LORD REED in the cause RONALD EVAN WILSON Pursuer and Respondent; against DUNBAR BANK PLC Defenders and Reclaimers: _______ |
Act: Haddow, Q.C, Davidson; Drummond Miller W.S. (Pursuer and Respondent)
Alt: Sandison; DLA Piper Rudnick Gray Cary Scotland LLP (Defenders and Reclaimers)
26 March 2008
Introduction
[1] During 1995 the pursuer completed a residential development in Edinburgh, comprising six flats. He had carried out the development with the assistance of borrowings from the defenders, which were secured over the development. As the pursuer was unable to repay the borrowings, the defenders called up their security, and took possession of the subjects in September 1996. The subjects were subsequently sold. In the present action, the pursuer seeks damages from the defenders on the basis that they failed to sell the subjects for the best price that could reasonably have been obtained, contrary to their duty in delict and under section 25 of the Conveyancing and Feudal Reform (Scotland) Act 1970.
[2] That contention was upheld by the temporary judge. He found that the development had been sold as a whole to an investor, without any meaningful attempt to sell the individual flats on the residential market, where a higher price could have been expected to be achieved. He quantified damages on the basis that the subjects should have been sold by 31 December 1996 for a total sum of about £255,000 (which would have enabled a net balance to be paid to the pursuer after satisfaction of his debt then due to the defenders), rather than (as was in fact the case) being sold in October 1997 for £195,000 (all of which was applied in satisfaction of the debt then due to the defenders). After taking account of the pursuer's borrowings at the relevant dates, and the additional expense which would have resulted from a sale at a higher price than was in fact achieved, the resultant award of damages was £66,400. The judge also granted decree for interest on that sum at the rate of 8 per cent per annum for the period from 31 December 1996 to the date of decree. The interest so awarded amounted to £50,600. The judge in addition specified that interest should run on the aggregate of the damages and the interest to the date of decree (a total sum of £117,000) at the rate of 8 per cent per annum from the date of decree until payment.
[3] In the present appeal, no issue is taken with the judge's conclusion that the defenders failed to perform the duties in question. It is however maintained that he erred in his assessment of damages and in his treatment of interest.
Damages
[4] A number of arguments were advanced in criticism of the judge's approach to the assessment of damages. First, it was submitted that he had erred in deciding that proof of loss could be found in the evidence of a valuation expert, Mr Watt, who had provided a report to the defenders in September 1996, advising them on the value and marketing of the flats. Counsel drew attention to the language used by the judge at paragraphs 178-179 of his Opinion:
"[178] In my opinion the evidence given by Mr Watt as to what might have been achieved had adequate marketing to the residential market taken place, provides a sound basis for the quantification of the pursuer's loss.
[179] Furthermore, in assessing the pursuer's loss as a result of the defenders breach of duty, I consider that an appropriate yardstick is the acceptable evidence on what the flats ... could have realised in the residential market if adequate marketing had been put in place."
While the language used by the judge in that passage ("might" and "could") permits the argument to be advanced, it is clear from other parts of his Opinion that he understood the need for loss to be established on a balance of probabilities. At paragraph 176, for example, he said:
"The critical questions are whether there is sufficient proof of the existence of an available market, which as a result of breach of duty on the part of the creditors, has not been approached, and which, if approached, would have been likely to have produced a better price than was in fact achieved".
[5] Secondly, it was submitted that the judge had fallen into error in assessing damages on the basis of the price achievable in an available market, when there was no evidence that there was some person in the market who would have paid more than was actually paid. Counsel referred in that regard to the Opinion of Lord President Hope in Dick v Clydesdale Bank plc 1991 SC 365. That case concerned the sale of agricultural land on the open market. The sale was criticised by the pursuer on the basis that the land had been sold without regard to what he described as its "hope" value for development. The pursuer's averments were held to be irrelevant, the Lord President stating (at page 371):
"The pursuer's averments about the hope value indicate that the amount of the discount from the net developable value of the subjects, which is substantial, all depends upon how high the purchaser considers the hope to be. This in turn raises the question whether there was in fact anyone in the market at that time who was willing to pay more than the agricultural value of the land to reflect this. It is this question which the pursuer's averments completely fail to address....It is clear that, because of the planning history of the land and the lack of positive indications in favour of permission for development at the time of the sale, it would have been a wholly unreasonable restriction on the defenders' right to sell the subjects for them to be required to have insisted on a price which reflected a hope value for development before they accepted any offer received by them after advertisement. In my opinion the creditor is not to be subjected to the risk of challenge simply on the theory that the subjects may have had a greater value than was realised by the sale. What matters is the reality of the market place in which the subjects are exposed at the time when he decided to sell. So long as he takes all reasonable steps to attract competition in that market it can be expected to find its own level and establish what the property is worth. The creditor is to be criticised for not taking further steps to attract an appropriate purchaser only if there is evidence to show that had these steps been taken a better bargain would have been achieved. So it would only be if the pursuer is in a position to prove that there was somebody in the market at the time who could be reached by advertisement in the manner described by him, and who was willing to pay an enhanced value to reflect the hope of development, that his case against the defenders can get off the ground. His failure to aver that any such person existed, and that a price at the enhanced value was in fact capable of being obtained in the market at the relevant time, is fatal to the relevancy of his case."
[6] Although counsel for the defenders relied on these observations, they appear to us to have no application to the circumstances of the present case. The problem in the case of Dick was that the pursuer had failed to identify an available market which, if approached by way of appropriate marketing, would have been likely to produce a better price than was in fact achieved. In the context of agricultural land said to have "hope value", the identification of an available market required, in effect, the identification of a potential buyer. In the present case, on the other hand, the judge's conclusions that the flats were not marketed in the residential market, and that they should have been, were not criticised. As a result of the defenders' failure, the residential market was never tested, no potential individual purchasers were identified or made offers for the flats, and accordingly the market price was not established by the residential market. In those circumstances, the judge had no alternative but to proceed on the basis of expert valuation evidence as to the sum which could have been expected to be achieved if the flats had been properly marketed. It is implicit in such evidence that a market existed in which there were persons who could be expected to buy the flats at the prices estimated by the valuer. It was unnecessary, and would be unrealistic to expect, that the pursuer should prove that there were specific individuals who would have bought the flats in the residential market at particular prices.
[7] Thirdly, a number of criticisms were made of the judge's treatment of Mr Watt's evidence. Counsel observed in the first place that the judge's Opinion was issued 18 months after the conclusion of the proof, and 21 months after the relevant evidence had been heard. Counsel submitted that such a delay in rendering judgment tended to undermine confidence that the judicial process had operated effectively, and created a situation where an appellate court should scrutinise with particular care any finding of fact which was disputed on appeal. The critical findings in the present case were inferences drawn by the judge from the evidence of Mr Watt. An appellate court could evaluate the soundness of those inferences. The judge's findings were in counsel's submission not entitled to any special consideration, or were at least entitled to very little.
[8] Counsel's submission as to the consequences of delay in the issuing of an Opinion was based on the judgment of the Court of Appeal in Goose v Wilson Sandford & Co, 13 February 1998. In that case, the judge had made mistakes in his treatment of some parts of the evidence, and had failed to make any findings in respect of other material parts. He had also mislaid his notes of counsel's submissions. A ground of appeal was that the court should infer that the judge had forgotten parts of the...
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