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Parry v. Edwards Geldard [2001] EWHC Ch 427 (1st May, 2001)

Case No: CF 000658

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 1 May 2001

B e f o r e :

THE HONOURABLE MR JUSTICE JACOB

	Alan Parry	Claimant
	- and -
	Edwards Geldard (a firm)	Defendant

HEARING DATE : 22 MARCH & 5 APRIL 2001

Martin Rodger (instructed by Rubin Lewis O'Brien for the Claimant)
Patrick Lawrence (instructed by Beachcroft Wansbroughs for the Defendant)

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic

THE HON MR JUSTICE JACOB

Jacob J

1. This appeal and cross-appeal is from a decision of His Honour Judge Masterman given on 6^th October 2000. The claimant, Mr Alan Parry ("Alan"), claims damages for negligence from a firm of solicitors, Edwards Geldard. The Court of Appeal held that there was indeed negligence, leaving the assessment of damages to be determined by the learned Judge. He had to decide whether a number of heads of damage were recoverable.

2. The claim arises out of a pre-emption agreement of 31^st March 1989 made between Alan and his brother, Rhys. They were neighbouring farmers. The agreement provided that if Rhys wished to sell certain land, he first had to offer it to Alan. If they could not agree a price, the agreement provided for a valuation at an open market value free of all encumbrances by an independent valuer. Clause 4 of the agreement provided that, if he wished to proceed, Alan had to give written notice within one month of the valuation having been agreed or so determined. In February 1995 Rhys gave notice to Alan that he wished to sell. The brothers could not agree a price. In accordance with the agreement, a Mr Thomas was appointed as the agreed independent valuer. Both parties (through respective chartered surveyors) made representations to Mr Thomas about the value. He reached his valuation (in the sum of Ł90,000) on 18^th July, but Alan was not notified of that valuation until 4^th August. He asked Edwards Geldard how long he had to make his mind up. They told him one month from 4^th August. That advice was held by the Court of Appeal to be wrong and negligently so. The result was that when Alan gave notice of his intention to buy at the valuation reached by Mr Thomas he was too late. Hence, his action in negligence against Edwards Geldard.

3. When the assessment came before the Judge the claim was under four heads of damage:

The loss of "marriage value", i.e. the extra value the land would have when added to the land already owned by Alan – agreed at Ł36,500;

The legal costs incurred in unsuccessfully seeking to enforce the option on the advice of Edwards Geldard – agreed at Ł4,370.22p;

The loss of the value of milk quota which was attached to the land – agreed, if a legitimate head of damage, at Ł125,354;

The cost of extra farming expenses, assessed by the Judge at Ł24,250.

The dispute before the Judge, and before me on appeal, relates to items (c) (milk quota) and (d) (farming expenses). The other two heads are accepted and agreed.

The milk quota appeal

4. This is financially the most significant. Alan contends that, but for Edwards Geldard's negligence, he would have acquired not only the land but also the quota attached to it. The land with vacant possession was valued at Ł90,000. Alan says that he would also have acquired quota worth Ł115,000 – without having to pay for it. He says he was deprived of a very valuable asset.

5. To understand his claim it is necessary first to describe how the quota system works. It is unnecessary to do so in detail here: I would only be repeating the explanation provided by Morritt LJ in Harries v Barclays Bank [1997] 45 EG 145. Briefly, quota must be attached to a "holding". It cannot exist otherwise. Each producer's entire land constitutes his "holding". To qualify, a "holding" must at least amount to a tenancy of ten months. Any lesser interest in land will not do. The machinery for dealing in quota was described by Rattee J. The description cannot be bettered and was quoted by Morritt LJ in Harries:

"However, it is clear that a market has developed in quota as a valuable commodity apart from the holding to which it relates, in the following way. It has become common practice that, where farmer A has quota in respect of his holding but no longer wishes to carry on a dairy farming business and, therefore, wishes to dispose of his quota without the land, he will grant a short lease for, say, 11 months, of his holding to farmer B, who wishes to acquire farmer A's quota. It will be a term of the arrangement that the land let by farmer A to farmer B shall not be used for dairy production. On taking the lease farmer B will be registered as the holder of what was farmer A's quota in respect of the holding comprised in the lease. Farmer A's land and farmer B's land will thereafter during the continuance of the lease form one holding for the purposes of the quota regulations. As a result, when the lease in respect of farmer A's land terminates, an apportionment will have to be made of the quota enjoyed during the term of the lease in respect of the composite holding, and that apportionment will fall to be made according to the use made of the two parts of that composite holding. Since farmer A's land will not have been used during the lease for dairy farming, the whole of the quota will be apportioned to farmer B's land, which will have been used for dairy farming. Thus farmer A recovers his land, leaving farmer B with the quota previously enjoyed by farmer A in respect of that land. By such artificial means permanent transfers of quota are apparently frequently made. It follows that by this means a permanent transfer can be effected of quota without the land comprised in the holding to which that quota was originally attached, whereas no permanent transfer can be made of the land, leaving the quota in the original owner's enjoyment."

6. To make this work the transferee is required by the appropriate regulation (1994 SI No 672) to serve a notice of transfer on the Intervention Board. In other words there is a legal requirement upon the transferee to co-operate in the arrangement. In the normal case he gives such a notice and goes on to agree an apportionment of quota such that none is attributed to the leased land. The Regulations provide that in the absence of any such agreement there is to be a compulsory arbitration. The arbitrator must take into account the last 5 years' use of the land, not just the period of the tenancy. Of course in the ordinary case there is an agreement in advance as to the apportionment so there never is such an arbitration.

7. I can now turn back to the facts of this case. When the land was valued both sides made submissions to the valuer. Both parties told the independent valuer to value only the land. They made the common mistake that Rhys had already disposed of any quota on the land. I concentrate, however, on what Alan did. His surveyor, in a written submission, said "no quotas are attached to the land or (sic) being transferred with the land". Moreover the valuer gave evidence to the effect that Alan specifically so instructed him. Thus it was that the valuer left out of count any quota attached to the land.

8. In fact, contrary to the parties' common assumption and their separate representations to the valuer that there was no quota on the land, there was. There were a number of "quota tenants" whose short-term leases had not yet expired. There was more than an unspoken but wrongly shared assumption that no quota was involved – each party made a wrong representation to the valuer that that was so.

9. Now there can be no doubt that Alan did not think he would get any quota with the land. The learned Judge held that:

"Alan never believed he was acquiring the land with its quota. His evidence to me that he thought that he would be paying Ł90,000 for the land and getting the quota on top simply does not ring true when set against the other evidence that I have referred to. He knew the value of the quota and he never expected to get something for nothing, which is why this head of loss did not emerge until a late stage."

10. Mr Rodger, for Alan, submitted that Alan indeed would have got the quota for nothing. He says what would have happened if there had been no negligence and notice had been given in time, were the following events:

Notice of Alan's desire to proceed with the purchase would have been given to Rhys in time.

On the giving of notice Alan would have become entitled to acquire the option land for Ł90,000 on the terms provided for by clause 4 of this 1989 Agreement;

A Transfer would have been drawn up and executed by Rhys transferring the land to Alan for Ł90,000;

The Transfer would have been completed before the end of January 1996 so Alan would have discovered that the land was occupied by the tenants to whom Rhys had granted 10 month tenancies in February and March 1995 to enable the quota to be transferred;

Alan would have had a choice either to insist on immediate possession, (the tenancies not binding him since his option had been registered and the tenants had taken their interest subject to his rights) or to adopt the tenancies and allow them to run their course;

On the termination of the tenancies, whether immediately or on their contractual expiry dates, Alan would have been obliged to complete the forms required by Regulation 7(1), Dairy Produce Quotas Regulations 1994 and to submit them to the Intervention Board.

The apportionment of milk quota between the outgoing tenant's land and the option land would have been ascertained either by agreement between Alan and the tenants or by an arbitration in accordance with Regulation 10 and Schedule 2 of the DPQR;

If for any reason the completion of the Transfer of the land from Rhys in December 1995/January 1996 was delay Alan, as a person having an interest in the holding, would still be a necessary part to the apportionment of milk quota by agreement or arbitration.

11. I doubt whether this sequence of events would have occurred: for it is more likely that the fact that there was quota attached to the land and a number of quota tenants occupying via contractors would have emerged as result of lawyers' investigations before the transfer took place. Rhys would then probably have refused to complete. If he did, Alan would not have been entitled to insist upon specific performance of the contract. Equity would not allow him to take advantage of the misrepresentation he had made to the valuer unless he was willing to pay for the quota too. Mr Rodger accepted there would be a difficulty in obtaining the equitable remedy of specific performance. He submitted that the common law remedy of damages, however, would be obtainable. It is granted as of right once a breach of contract is proved. So, he submitted, Alan could claim the value of the lost quota even if he could not compel conveyance of the land. I do not agree. The only recoverable damages for failure to complete would be those damages reasonably foreseeable at the time the contract to purchase the land was made. Loss of quota was specifically not envisaged by either party. So it would not be a recoverable head of damage.

12. Mr Lawrence took five further points for the defendants. He called them primary causation, estoppel, valuation vitiated by mistake, quota protection clause and remoteness. I propose to deal with only three, which, along with the above point, are more than enough to dispose of the appeal.

Estoppel

13. The Judge held that an estoppel by convention applied. He relied upon what Lord Denning MR said in Amalgamated Property Co. v Texas Bank [[1982] 1QB 122

"When the parties to a transaction proceed on the basis of an underlying assumption, either of fact or of law, whether due to misrepresentation or mistake makes no difference, on which they have conducted the dealings between them, neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it the courts will give the other such remedy as the equity of the case demands."

14. Mr Rodger attacks that reasoning as inapplicable to this case. He says that at the time of the notional transfer of the land it would have formed part of each quota tenant's holding. If Alan had allowed such a tenancy to run its course, at its end the tenant concerned would have been the transferor and Alan the transferee. In the absence of an agreement as to apportionment of quota, Alan could have required an arbitration. Under the regulations the arbitrator had to take into account the land use for the last 5 years. Since the land had been used for most of that period for milk production, it would have retained most of its quota and that would have gone to Alan.

15. Alternatively, and more simply, Mr Rodger contends that upon transfer of the land Alan would have been in a position to oust the tenant forthwith. This is because the pre-emption agreement was registered as a land charge and the tenant would have taken his interest with notice of the pre-emption right. If the tenants were so ousted then the tenancy would have lasted for less than ten months. That would not be enough to transfer the milk quota at all and it would not be possible to do anything about it. In particular it would not be legal to make false statements to the Intervention Board about the use of the option land for milk production.

16. This reasoning breaks down in either case. Whether the transfer took place and Alan sought to oust the tenant immediately or, at the end of the tenancy, he insisted upon an arbitration between him and the tenant, the tenant would immediately look to Rhys for redress. There would be litigation between the tenant, Alan and Rhys. It would either be an action by the tenant against Rhys in which Alan would be joined as a Part 20 defendant, or an action by Alan against the tenant with Rhys joined as such a defendant. However it came about, in the litigation the tenant would say he had entered into an arrangement with Rhys whereby he was to get quota and, for that purpose had a ten-month tenancy. Rhys would, in my judgment, be entitled to an order restraining Alan from taking either of the courses suggested if he had not yet taken them, or if he already done so (e.g. ousted the tenant) be able to claim from Alan the value of the quota lost to the tenant so that he could repay the tenant. Alan could do so on the basis that it was fundamental to the arrangement between him and Alan that there was no quota to go to Alan. Any activity by Alan contrary to that common understanding would be actionable. It is said that this would amount to using an estoppel as a sword rather than a shield. I doubt whether that is right. Rhys would in substance be using the estoppel as a shield against the inevitable claim by the tenant provoked by Alan's action in breach of the common understanding. Moreover I do not think it is sensible to look at the matter in terms of swords and shields. Equity looks to substance not form. The substance is that Alan would be relying upon the result of his false representation to the valuer to get an uncovenanted benefit. Equity would intervene to prevent this.

Mistaken Valuation

17. Additionally, Mr Lawrence contends that the valuation could be set aside, whilst Mr Rodger submits not. Mr Rodger submits that the contract between Rhys and Alan was such that Alan was entitled to buy at the price settled by the valuer, however mistaken the valuer might be about the value. Once the valuer had settled a value, that valuation cannot be set aside because the parties had agreed that the price was to be whatever was settled. Mr Rodger relies upon what was said by Lord Denning MR in Campbell v Edwards [1976]1 WLR 303 at p.407:

"It is simply the law of contract. If two persons agree that the price of the property should be fixed by a valuer on whom they agree, and he gives that valuation honestly and in good faith, they are bound by it. Even if he has made a mistake they are still bound by it. If there were fraud or collusion, of course, it would be very different. Fraud or collision unravels everything."

The flaw in this is to my mind clear. Of course the parties are bound by the result found by the valuer, but only upon the assumption that he is given proper instructions as to what to value. It is absurd to think that if he is given wrong instructions by the common mistake of both parties that both parties are bound by the common mistake. Mr Rodger conceded (rightly) that if the valuer valued the wrong piece of land because he was given wrong instructions as to what land he was to value, the valuation could be set aside. This is because, as Lord Denning said "it is simply the law of contract". If there were a valuation of the wrong piece of land the valuation could be set aside as a valuation not of the land contracted to be valued.

18. Similarly in this case it was clearly implicit that neither party would give the valuer false information about the attributes of the land to be valued. They accepted the risk that he might make an error but not that he would be directed into error by one side or the other. Thus, if he made his own mistake, they would be bound by that (assuming it was a non speaking award). It is absurd to say that the parties contracted to be bound where either of them (still less both) gave the valuer false information Thus when Alan, in particular, directed the valuer to proceed on the basis that no quota was involved he was in breach of contract, whether innocently or not does not matter. He cannot rely upon his own breach to say that the valuation should stand. Unlike the Campbell case there is no question of the valuer making his own mistake, this is a case where the valuer made no mistake in doing that which he was asked to do. The parties were bound by the valuation so far as it went, namely of the land without quota but no more.

19. Further, it seems to me that the valuation should be regarded as a speaking award. Expressly it makes no mention of quota, but it does refer to the written representations made by the parties. One is entitled to regard these as incorporated by reference and, as soon as one does that, it is clear that quota has not been taken into account. Moreover even without cross-reference to the submissions the award does mention what the valuer considered, namely a dispute as to the area of the land being valued. A quota calculation is not included. So it is evident from the valuation that quota has not been taken into account.

In Campbell Lord Denning added this:

"It may be that if a valuer gives a speaking valuation – if he gives his reasons or his calculations – and you can show on the face of them that they are wrong it may be upset."

I think there is probably enough material here to say that the valuation can be upset on this ground too, though again I do not rest my opinion on this basis because the point was not argued.

20. I should also deal with Mr Rodger's submission that the error made by the valuer was merely an attribute of the land (i.e. that there was quota attached) and, therefore, that the case was of the same sort as that in Campbell and, another case, Morgan Sindall v Sawston Farms [1999] 1 EGLR 90. In Campbell the valuer himself was alleged to have reached the wrong result because he had got the wrong number for a surrender value. He had given a value. The claimant said it was wrong and that therefore he must have assessed the price in an incorrect manner. It is well understandable that the Court of Appeal said the parties were bound. In Morgan Sindall the valuer had wrongly assumed that a ransom strip had value because the purchasers needed a right of way over it. It turned out they did not. The error was an "attribute" of the land.

21. I accept that the presence or absence of quota was an attribute of the land here. But I do not think either case relied upon is authority for the proposition that where an valuer is induced to make an error as to an attribute by a false statement by a party as to that attribute, that party can rely upon the false valuation procured by his false statement. On the contrary I hold that a man who misrepresents facts to a valuer cannot rely upon the valuation obtained because of his misrepresentation.

22. Finally it is worth considering the policy reason for the rule laid down in Campbell, for it does not apply here. Sir David Cairns explained the policy in Baber v Kenwood [1978] 1 Lloyds Rep. 175. Briefly, the explanation runs as follows. For a long time the courts took the view that a valuation could be upset for mistake. But in the 1970's it was held by the House of Lords in two cases, Sutcliffe v Thackrah [1974] AC 727 and Arenson v Arenson [1977] AC 405, that a valuer could be sued for negligence. Thus an aggrieved party had an alternative remedy for the wrong valuation, a remedy against the valuer. So the case for upsetting the valuation itself faded whilst the case for saying the parties had chosen the valuer to do the job so they must abide by the result even if he made a mistake became more compelling. None of that policy applies to this case – there is no question of the valuer being negligent.

23. I therefore think that Rhys could have had the valuation set aside.

Foreseeability

24. The Judge did not rest his opinion on this point, but I do. Edwards Geldard say that it was not a foreseeable consequence of their negligence that Alan would lose quota or its value. In particular they say that it was not foreseeable that the valuation would exclude quota when quota was in fact attached to the land. Mr Rodger relies upon a piece of evidence given by Alan's expert witness. It went as follows:

"Q. Practitioners in this area, both solicitors and valuers and surveyors, know that there is a danger that the regulations might inconveniently override that position and cause quota to be transferred with the land to the new purchaser, even though he has not paid for it. That can happen?

Indeed."

25. Mr Rodger contends on the basis of that answer that it was foreseeable to the solicitors that there might be unpaid–for-quota on the land. The flaw in this is twofold. First the very passage relied upon indicates that the solicitors would know that a competent valuer would be aware of this possibility. It would follow that they would have expected him to guard against the possibility that quota was attached to the land. There was no reason to suppose that the valuer would not have done so and make his own blunder about quota and every expectation that he would not. Secondly, and even more fundamentally, there was no reason for Edwards Geldard to suppose that Alan, their client, had given the valuer misleading advice as to the quota position.

26. In my judgment it was not a reasonably foreseeable consequence of the solicitors' negligence that the value of quota had or might have been overlooked because of Alan's, or the parties', misrepresentation to the valuer that there was no quota. I am fortified in this view by the fact that even Alan did not at the time foresee that he would or might be getting quota – the quota head of loss was only introduced by amendment, several years after the event.

27. In the result I dismiss the appeal. In so doing I am conscious that I have not considered the point touched upon by the Judge concerning the provision of a quota protection clause in any transfer from Rhys to Alan. I do not find it necessary to do so. It has certain difficulties, namely whether or not such a clause might amount to an encumbrance on the land.

The Cross-Appeal

28. The Judge awarded Alan damages under two heads, loss of "marriage value" and a sum representing the capitalised extra costs incurred by Alan in being unable to work the option land and having, instead, to work some land about 7 miles away. The parties' expert valuers agreed the "marriage value" at Ł36,500. There was no dispute about the amount of extra "travelling" costs. The dispute is whether they are claimable at all. Mr Lawrence contends they are not a proper head of damage because they are subsumed in the "marriage value".

29. Before considering this point I should mention that Mr Rodger accepted one item of the "extra costs" advanced by Alan's valuer, was not properly claimable as such a cost. So the value of the "extra costs" head of damage was, in any event, Ł18,874 rather than the Ł24,250 awarded by the Judge.

30. I now turn to Mr Lawrence's submission. He says at least one component of the "marriage value" was attributable to the gain in efficiency achievable by adding the option land to Alan's existing land. Putting the point another way, the land had particular value to Alan (or a holder of Alan's farm) because it saved the costs of travelling 7 miles – hence a marriage value.

31. Mr Rodger attacked that submission. He did not do so by attacking its logic – indeed he accepted it. What he said was that the marriage value was not, on the evidence, attributable to savings in efficiency: it was attributable to a wholly different matter, namely that the "open market" value of the option land was depressed because it was landlocked. In riposte Mr Lawrence challenged that view of the evidence. He accepted that the removal of landlocking contributed to the marriage value. But, he submitted, looking at the expert valuer evidence as a whole, it is clear that efficiency savings were taken into account too: the marriage value was composed of two elements, efficiency savings and unlocking. So there was double counting of efficiency savings.

32. Accordingly, I must turn to the expert evidence to discover whether efficiency savings were taken into account in reaching the agreed marriage value. In his report Mr Hay, the defendants' expert, said that in assessing the marriage value he had taken into account "the efficiency of farming one unified unit" (paragraph 9.2). That statement was unchallenged. Mr Spencer, Alan's expert, accepted in cross-examination that in assessing the capital value of the option land to Alan (i.e. the "marriage value") it was necessary to have regard to the income that would be yielded to Alan. That income would necessarily be higher than the income earned by using land 7 miles away because of the transport costs. So it is apparent that Mr Spencer also took into account efficiency savings. Pausing there, it would seem that the experts agreed. It would follow that there was indeed double counting of transport savings.

33. Mr Rodger sought to evade this conclusion by reference to paragraph 8 of Mr Hay's report. What he did there was to look at comparables to find the value, per acre, of "open land", i.e. land without a landlock problem. He came to a figure of Ł2,000 per acre. That, applied to the 60-odd acres of the option land, gave a figure of Ł120,000. Comparing that with the valuation by the agreed valuer of Ł90,000 showed a difference of Ł30,000 – which is nearly all of the agreed marriage value of Ł36,500. So, submits Mr Rodger, the implication is that when Mr Hay was doing his actual sums he was in substance only taking into account the difference between open and landlocked land.

34. I reject that submission for several reasons. Firstly, and most obviously, it is contrary to what Mr Hay, in paragraph 9.2 said he did. Secondly, it is contrary to that portion of Mr Spencer's cross-examination to which I have referred. Thirdly, I think that in principle the valuers should have been taking both factors (release of landlock and efficiency savings) into account when reaching the marriage value. Mr Rodger's submission, depending as it does on an argument of arithmetical precision, is too clinical for an exercise which, as has often been said, is an "art not a science."

35. Finally, I should briefly mention the Judge's reason for accepting the travelling costs as an additional head, though Mr Rodger did not seek to defend that reason. The Judge thought it was a separate head by considering an example. It ran thus. Suppose Alan had only been the tenant of the farm adjoining the option land and that it was his landlord who had lost the opportunity of buying the option land. The Judge reasoned that it would be the landlord who lost the marriage value and Alan who suffered the additional costs – hence they were different heads. This is simplistic. Suppose the landlord had acquired the land. Alan would be willing to pay a good rent to save the costs of travel. Overall therefore the result of the transaction would be that the landlord could exploit the efficiency saving – which shows it forms part of the marriage value.

36. In the result the appeal fails and the cross-appeal succeeds. I will hear counsel as to the appropriate order.