England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		Date: 04/07/2012

Mr Justice Coulson:

1. INTRODUCTION

1. By an application dated 19 March 2012, the claimants' solicitors seek further directions from the court relating to expert evidence, as a result of the failure on the part of the defendants' expert valuer to attend a joint meeting pursuant to the order of the court and CPR 35.12. The defendants' cross-application, dated 20 April 2012, is that either the claimants' expert valuer be debarred from giving expert evidence, or he be obliged to provide copies of another (undisclosed) report which he has prepared on valuation matters. These somewhat unusual applications raise one potentially important issue under the CPR, and it was for that reason that, at the conclusion of the hearing, I reserved judgment. I should repeat now my gratitude to leading counsel for the measured way in which they dealt with these matters, which generated considerable heat (if rather less light) in the inter-solicitor correspondence.

2. THE PLEADED CLAIMS

2. The claimants claim damages against the defendants for nuisance and/or negligence and/or under the doctrine of Rylands v Fletcher, in consequence of the escape of heating oil from the defendants' oil tank into the claimants' property at Heddington, near Calne, in Wiltshire. In 2007, the claimants put their property on the market and received an offer, subject to contract, in the sum of £402,500. The offer was subsequently withdrawn, apparently on the basis that the contamination from the oil leakage had not been remedied. Thereafter, in a falling market, the property failed to sell. It is the defendants' case that the problem was fully remedied by August 2008.
3. The claimants' claim for damages in the Particulars of Claim is put in two different ways:

"6.1 The Claimants lost an actual sale of the Claimants' Land (rather than a prospective sale or the chance of a sale), in that:

6.1.1 In March 2007 the Claimants believed that any contamination of the Claimants' Land had been remedied and put the Claimants' Land on the market for sale;

6.1.2 In the spring of 2007 the residential property market was buoyant;

6.1.3 On or about 25 April 2007 the Claimants agreed (subject to contract) to sell the Claimants' Land to Mr and Mrs Victor Borok for £402,500;

6.1.4 By 1 July 2007 Mr and Mrs Borok would have exchanged contracts and would have completed the purchase of the Claimants' Land;

6.1.5 However, on or about 25 May 2007 Mr and Mrs Borok withdrew from the purchase on learning that the Claimants' Land was still contaminated and that it would take a further year for the contamination to be remedied;

6.1.6 The Claimants accordingly lost the benefit of receiving £402,500 for the Claimants' Land by 1 July 2007;

6.1.7 The Claimants further claim interest on £402,500 under the Senior Courts Act, section 35A, from 1 July 2007 until judgment in this action, at the rate of 8 per cent a year;

6.1.8 The Claimants recognise that they are not entitled both to damages on this basis and to retain the Claimants Land, and accordingly the Claimants undertake to transfer the Claimants Land to the Defendants on such terms as the Court may direct, if the Claimants are awarded the damages claimed under this subparagraph 6.1.

6.2 Alternatively the Claimants suffered diminution in the value of the Claimants' Land, and:

6.2.1 The best evidence of the value of the Claimants' Land uncontaminated is the sale price of £402,500 referred to in paragraph 6.1.3 above;

6.2.2 Because of the stigma of previous contamination (which the Claimants are now obliged to disclose to any prospective purchaser), the Claimants' Land now has no value, as evidenced by the fact that when the Claimants put it on the market again they received no offers;

6.2.3 The diminution in value is therefore £402,500;

6.2.4 The Claimants further claim interest on £402,500 under the Senior Courts Act, section 35A, from 1 July 2007 until judgment in this action, at the rate of 8 per cent a year;

6.2.5 If and to the extent that the Defendants contend that the Claimants' Land has some residual value, the risk of that contention being unfounded or exaggerated should in all the circumstances of the case and in justice be borne by the Defendants rather than by the Claimants, and accordingly the Claimants undertake to transfer the Claimants Land to the Defendants on such terms as the Court may direct, if the Claimants are awarded the damages claimed under this subparagraph 6.2."

4. The primary claim at paragraph 6.1 is therefore a claim for the loss of the sale in 2007. It is said that this was not the loss of a chance but the loss of an actual sale, and accordingly the sum of £402,500 is claimed in full. Mr Susman QC properly accepts that this is a novel claim but maintains that it is in accordance with first principles. The alternate claim, at paragraph 6.2 of the Particulars of Claim, appears to be based on the proposition that, but for the oil leak, the property was worth £402,500 and that, in consequence of the stigma now attached to the property because of the contamination, the property has no value. That is more akin to a traditional diminution in value claim. Mr Susman QC acknowledged that, to the extent that the court concluded that there was a residual value, the alternative claim would have to be measured by reference to the asking price of £402,500, less such residual value as the court identified.

3. THE EXPERT EVIDENCE

5. By an order dated 28 October 2011, Akenhead J allowed each party to call one expert environmental consultant and one expert valuer. Their reports were to be served by 10 February 2012. The experts were thereafter to meet and produce a joint statement of matters agreed and disagreed by 24 February 2012. Neither party chose to serve a report from an environmental consultant. Each side, however, served reports from expert valuers. On analysis, neither report is a model of clarity.
6. The report served on behalf of the claimants was prepared by Mr James Dutch, the head of professional services at Strakers, the estate agents acting for the claimants at the time of the unsuccessful sale. The report is extremely short (just a page and a half). The relevant sections read as follows:

"2. RECOMMENDED ASKING PRICE

Like all Estate Agents, Strakers, when acting on behalf of a Vendor recommend an 'asking price'. For this purpose it is necessary to make an assessment of the price that the property is likely to fetch between a willing Vendor and a willing Purchaser with no special interest in acquiring the particular property, and given time to market the property as effectively as is practicable. Estate Agents and surveyors call this assessment a 'Valuation', but it is no more than an estimate based on experience of the person making the assessment, aided by knowledge of the selling prices actually achieved on the sale of comparable properties in the locality. The test of the validity of the assessment is, of course, the price at which the property ultimately sells, if it does.

Within the Appendix we enclose a copy of our original valuation and recommendations/marketing advice addressed to Mr and Mrs Odedra, together with information from our archive of interested parties and viewings of the property that took place between 2 October 2008 to 30 November 2009.

3. OFFERS

You will see from the viewing history that NO offers were received during the marketing. I can also advise that I have spoken with Guy Straker, the Manager at our Devizes office who was dealing with the property, who has confirmed that the archive history is correct and that NO offers were received.

4. COMPABLE EVIDENCE

I enclose a number of comparable properties with information of figures achieved for the period August 2008 to February 2012."

7. At paragraph 6.2 of his skeleton argument, Mr Susman QC submitted that, on the basis of this report, Mr Dutch was saying that the asking price was the price at which the property was expected to sell (based upon experience and knowledge of comparables) and that, in addition, there was an "express conclusion or necessary implication that a property which cannot be sold has no value".
8. It should also be noted that, in a letter which Mr Dutch wrote to the claimants' solicitors on 13 July 2011, and for which privilege has not been claimed, he expressed the view that the property was saleable and identified a figure of £245,000. Other figures that he quoted, based on auction prices, ranged between £220,000 and £235,000. The views expressed in that letter may become important because, in the inter-solicitor correspondence, the claimants' solicitors say that in early 2012 they asked for, and have since received, another report prepared by Mr Dutch apparently considering the value of the property at various dates. That report has not been disclosed, and the claimants' solicitors have said that they do not intend to disclose it or rely on the report at the hearing. They maintain that the purpose of that report was to assist them in considering the report which they anticipated receiving from the defendants' expert valuer, Ms Loweth.
9. On behalf of the defendants, Ms Loweth has produced a report which contains her explanations for two valuation figures: the figure of £290,000 as at January 2012 on the specific assumption that there was no contamination, and the figure of £295,000 as at August 2008, again on the same assumption. In her report, Ms Loweth does not deal with the comparator, namely the figure against which those valuations are to be measured. However, in his skeleton argument, Mr Platt QC said that it was the defendants' case that the appropriate measure of loss was diminution in value, and that "such a diminution is to be measured by taking the prospective sale price in May 2007 and comparing it with the value as at the date of remediation, namely August 2008." He confirmed this position in his oral submissions. Accordingly, although it was not clear from Ms Loweth's report, the defendants' case is that, subject to other arguments, the diminution in value is to be assessed by comparing the sum of £402,500 (the asking price) with one or other of the valuation figures produced by Ms Loweth of either £295,000 or £290,000.

4. THE PARTIES' SUBMISSIONS

10. The claimants say that Mr Dutch's report is a proper expression of expert opinion, although Mr Susman QC conceded that some judges might take the matters summarised in paragraph 7 above to be obvious, such that it was unnecessary to prove such matters by evidence at all. The claimants deny that there was ever any agreed basis on which the experts would be instructed and deny that they are under any obligation to disclose the other report prepared by Mr Dutch which was, they say, "commissioned purely for the benefit of advice on a topic which, on the position which the claimants have adopted, is of no relevance (namely the precise valuations attributed by Ms Loweth to a property which could not be sold)". They maintain that, in those circumstances, the experts should have met without prejudice as ordered by the court and that the defendants and/or their expert are therefore in breach of the court order.
11. The defendants say that there was an agreement between the solicitors as to the basis on which the reports would be prepared and that it appears that Mr Dutch has prepared a report (for which privilege is claimed) on that agreed basis, dealing with valuation figures. They say that, in consequence, that report is disclosable in accordance with the CPR. By contrast, they say that the report which has been disclosed (paragraph 6 above) does not contain any expression of expert opinion. They say that the expert process is being manipulated by the claimants so as to allow them to maintain the 'no loss' argument, irrespective of the views of their own expert.

5. IS EXPERT EVIDENCE REQUIRED TO SUPPORT THE CLAIMANTS' PRIMARY CLAIM?

12. As noted above, the claimants' primary claim is set out in paragraph 6.1 of the Particulars of Claim (paragraph 3 above). In my view, the only expert evidence that might potentially have been required in relation to that claim was whether the asking price of £402,500 was appropriate or reasonable as at May 2007. Indeed, that was the main reason that Mr Susman QC gave in seeking to rely on the short report from Mr Dutch. However, that is no longer in dispute. The defendants do not argue that the £402,500 was and is anything other than the appropriate starting point for any consideration of loss. That is therefore not an issue between the parties.
13. In my view, now that the £402,500 has been agreed, no other expert evidence is required to support the claimants' primary claim. That claim (paragraph 6.1 of the Particulars of Claim) depends on the proposition that a property which cannot be sold has no value, which is a matter of law and/or argument; it is not a matter of expertise. Furthermore, even if it were, Mr Dutch does no more in his report than state the obvious, namely that "the test of the validity of the assessment [of the asking price] is, of course, the price at which the property ultimately sells, if it does." For the avoidance of doubt, and contrary to the claimants' submissions, I do not read his report as an express or implied statement of opinion that a property which cannot be sold has no value. He would need to say that expressly if it was his view: experts' reports should not be a matter of 'necessary implication'. However, that omission is not fatal to the primary claim, which is instead a matter of law and fact.
14. Accordingly, now that the parties have reached a belated agreement about the asking price of £402,500, I do not regard the claimants' primary case as requiring any further expert evidence at all. In my view, that claim is not assisted one way or the other by the short report from Mr Dutch.

6. IS EXPERT EVIDENCE REQUIRED FOR THE ALTERNATIVE WAY IN WHICH THE CLAIM IS PUT?

15. By contrast, I am in no doubt at all that expert evidence is required to support the alternative claim (paragraph 6.2 of the Particulars of Claim). The alternative claim only arises if the court rejects the argument that a property which cannot be sold has no value. In those circumstances, the court will want to know what the residual value of this property was. It is the claimants' pleaded case that (due to stigma and the like) the residual value is nil: see section 6.2 of the Particulars of Claim. That alternate claim therefore requires expert evidence. Mr Dutch has not addressed that alternative claim in his short report. He needs to say whether the property is worth nil (and if so, why) or, if there is a residual value (along the lines of his letter of 13 July 2011), what that is and how he has calculated it.
16. Ms Loweth's approach to the diminution in value issue is also somewhat elliptical. She merely provides two valuations for August 2008 and January 2012. It would now appear that she is saying that the diminution may be capable of being measured by subtracting one or other of those figures from the asking price of £402,500. But that only became apparent from Mr Platt QC's submissions; it is not referred to in her report.

7. SHOULD MR DUTCH'S OTHER REPORT BE DISCLOSED?

17. Mr Platt QC submitted that Mr Dutch's other report, which plainly exists, should be disclosed. He argued this by analogy with the decision of the Court of Appeal in Vasiliou v Hajigeorgiou [2005] 1 WLR 2195, where Dyson LJ (as he then was) emphasised that "if a party needs the permission of the court to rely on expert witness A in place of expert witness B, the court has the power to give permission on condition that A's report is disclosed to the other party or parties, and that such condition will usually be imposed." Possibly, I think that there is a typographical error, and that the reference should have been to the disclosure of B's report, which would have been the earlier report.
18. In addition, Mr Platt QC relied on the decision in Edwards-Tubb v JD Wetherspoon PLC [2011] 1 WLR 1373, in which a claimant obtained an expert's report (from a nominated expert) for the purposes of the pre-action protocol, and then instituted proceedings using a different expert. The Court of Appeal recognised that the report from the first expert was privileged but said that, once a party had embarked on the pre-action protocol procedure of co-operation in the selection of experts, there was no justification for not disclosing the report of such an expert, who had been put forward as suitable, had been accepted as such by the opposing party, and had prepared a report. At paragraph 11 of his judgment in that case, Hughes LJ said:

"The question of principle which this case raises is whether the power to impose a condition on the grant of permission to rely on expert B can properly be employed to require the disclosure of the privileged report of expert A, and if so when. If this is proper, what is being done is not directly to override the privilege, because the claimant can elect to stand upon his right to it. Rather, it is presenting the claimant with a price which must be paid for the leave of the court to rely on expert B: that price is waiver of privilege in relation to expert A...Accordingly the order sought will have the effect of curtailing the operation of privilege by making waiver the price of being able to continue in reliance on expert B. The suggested basis and justification for doing this is the need to prevent expert shopping, and where it is taking place, to put before the court at trial the whole of the available evidence on the question at issue, and not only parts."

19. Edwards-Tubb was a case under CPR 35.4 (power to restrict expert evidence). There is no authority dealing with the status of an undisclosed report prepared by an expert at the same time as a report which has been disclosed. I agree with Mr Platt QC that, because the two authorities to which I have referred emphasise the importance of openness under the CPR, and make plain that, in certain instances, that openness will trump questions of privilege, there may be cases in which an expert may have to disclose both reports as a condition of being permitted to give evidence at all. However, I also acknowledge that there may be cases where requiring an expert to disclose everything that he produces, regardless of privilege, could give rise to injustice. Taking the point to its logical extreme, it might mean that all expert's draft reports become disclosable, or all documents produced by the expert for the sole purpose of assisting counsel with topics for cross-examination. In my view, therefore, there could be no general rule that everything is disclosable, regardless of privilege.
20. In all the circumstances of this case, I am not going to require Mr Dutch to provide copies of his other report, pursuant to CPR 35.4. But that is principally because I consider that both experts have become slightly confused as to what they should be doing, and that it would be wrong (and potentially unjust) to require either of them to provide privileged reports which may be based on a misunderstanding of the issues. In any event, I doubt whether the point matters in view of my other rulings. In my view, if the claimants want to advance their alternative case, they will have to do so by reference to clear expert evidence as to valuation and diminution in value. That will require a further report from Mr Dutch. That will then allow the defendants to see precisely what Mr Dutch says as to valuation matters.

8. SHOULD THE EXPERTS MEET?

21. In my view, whatever the confusion that may have been created as to the scope of the experts' reports, Ms Loweth was wrong not to meet Mr Dutch without prejudice in accordance with the court order. Whilst I accept that the position in relation to the scope of the expert evidence was unsatisfactory, there was an element of confusion on both sides and I consider that such matters may well have been sorted out by the experts, had they met. It is hard to think of a situation in which one expert, having been ordered to meet his or her counterpart by the court, would be justified in refusing to do so. The failure to meet was compounded by the unnecessarily aggressive tone of the defendants' solicitors' correspondence.

9. CONCLUSIONS AND THE WAY FORWARD

22. Accordingly, the following things need to happen in this case. First, the parties' agreement, that the £402,500 is the starting point for any assessment of loss, should be recorded in writing. That could be in the Experts' Joint Statement prepared under CPR 35.12(3). Secondly, the claimants should review their primary and alternative cases on damages. If they wish to maintain both claims (and in my view there is no reason in principle why they should not) then they need to serve an expert's report dealing expressly with the alternate basis of claim, set out in paragraph 6.2 of the Particulars of Claim. I would propose that such a report be provided in 28 days. Thereafter, I would expect the experts to meet in the usual way.
23. I said to the parties that I would deal with all subsequent matters, including costs, in whichever way was most economic for the parties. I ought to say that, in the light of my analysis and conclusions, my preliminary view is that the costs of these applications should be costs in the case, because of the confusion that I have found on both sides, and the need for it to be resolved. However, I make plain that that preliminary view is always open to change.