English and Welsh Courts - Miscellaneous

IN THE LEEDS COUNTY COURT

		The Court House Oxford Row Leeds LS1 3BG
		30th June 2010

Judge Behrens :

1 Introduction

1. This is an unfortunate family dispute involving the Atkinson family. The Claimants married in 2007. Lynn Atkinson and seven of the Defendants are the sole beneficiaries under the trusts relating to a portfolio of commercial properties in Consett, County Durham. Lynn Atkinson is beneficially entitled to a one third interest in the portfolio. The First Seven Defendants are collectively the beneficial owner of the other two thirds interest in the portfolio.
2. The current trustees of the portfolio are the Second Claimant, Rodney Atkinson, the First Defendant, Edward Atkinson and the Eighth Defendant, Kathleen Atkinson. Until recently Rodney Atkinson was the beneficial owner of the one third share of the portfolio now owned by his wife. However he recently transferred his share to his wife for tax reasons. Edward Atkinson is 84 and suffering from dementia. He has not so far been replaced as a trustee. He has executed an Enduring Power of Attorney in favour of his two daughters – the Fifth and Sixth Defendants. At the commencement of the hearing before me I appointed the Fifth Defendant to act as Edward Atkinson's litigation friend. Kathleen Atkinson has no beneficial interest in the portfolio having gifted her (one sixth) share to her children – the Third and Fourth Defendant.
3. The properties have for many years been managed by agents. Until April 2008 the Managing Agent was Lamb and Edge in Newcastle. However in 2008 Lamb and Edge increased their charges and Swaisland Harris became the agents. It was the practice for only one trustee to communicate with the agent. Until about 2 years ago that trustee was Edward Atkinson. Following the onset of Edward Atkinson's dementia Rodney Atkinson took over the role. During the course of his evidence Rodney Atkinson told me that instructions to the agent were given after consultation with his co-trustees.
4. Relations between the Claimants and the Defendants have broken down. Some of the reasons for the breakdown were explored during the course of the hearing. There is now a complete lack of trust between them. In the result Lynn Atkinson wishes to realise her interest in the portfolio. The Defendants recognise that Lynn Atkinson is entitled to realise her interest but do not wish a sale of the whole portfolio. Lynn Atkinson agrees that it would not be sensible for there to be an outright sale of the whole portfolio. A number of possible solutions have been canvassed and there have been a number of offers and counter offers between the parties. Agreement has proved impossible and I have to resolve the best way forward.
5. In essence the choice is between partition and buying out Lynn Atkinson. In so far as there is an order for partition there are disputes as to which properties each side should receive. Lynn Atkinson does not wish to be bought out as she takes the view that the properties are worth rather more than the figure placed on them by the only expert who gave evidence before me.

2 The facts

2.1 The Atkinson family trusts.

6. The history starts with Edward Atkinson who acquired the portfolio in the 1920's. The portfolio passed to his 3 sons – John Eric and Edward either by gift in 1961 or on his death in 1970.
7. The three brothers continued as trustees until 1984 when John and Eric died. At that point Edward appointed Eric's son - Rodney (the Second Claimant) and John's daughter Kathleen (the Eighth Defendant) to act as trustees.
8. Eric's one third share passed to Rodney by way of a family arrangement and more recently to Lynn Atkinson.
9. John's one third share passed to his two children – Kathleen and Kenneth (the Second Defendant) in 1997 on the death of their mother. Kathleen has gifted her share to her niece and nephew – Clare and Graham (the Fourth and Third Defendants).
10. Edward Atkinson has retained one third of his one third share. The remaining two thirds has devolved equally between three of his children – Florence Cox, Helen Atkinson and Susan Stretton (the Fifth and Sixth Defendants).
11. The shares may thus be summarised thus:

Edward Atkinson	1/9
Susan Stretton	2/27
Florence Cox	2/27
Helen Atkinson	2/27
Kenneth Atkinson	1/6
Clare Atkinson	1/12
Graham Atkinson	1/12
Lynn Atkinson	1/3

2.2 The portfolio

12. As already noted the portfolio consists of commercial properties in the centre of Consett. It consists of 20/22 Middle Street, 1 – 10 Wesley Street, 11 – 14 Victoria Road and a retail warehouse 1/5 Mason Street.
13. They have been divided into 3 Blocks

1. Block A – comprising properties which formed part of a building known as Victoria Buildings that is to say 20/22 Middle Street, and 1- 4 Wesley Street.

2. Block B – comprising 5 – 10 Wesley Street and 11 – 14 Victoria Road. During the course of the litigation Block B was divided into Blocks B1 comprising 5 – 8 Wesley Street and B2 comprising 9 and 10 Wesley Street and 11 – 14 Victoria Road.

3. Block C – comprising the retail warehouse – 1/5 Mason Street.

14. There are photographs of the shop frontages in the expert's report. There is also a helpful plan (186A) showing the layout and location of the portfolio. A number of points can be made:

1. The Block B and Block C properties share the use of a yard for rear access. If there is to be a partition of the Block B properties there will accordingly remain some common use of the yard.

2. Block A is separated from Blocks B and C in that it is the other side of Lime Street.

3. 9 Wesley Street is of unusual shape as it is in 2 parts – the main part being to the south east of a narrow passageway from the yard with part (used as offices) to the south west of that passageway. There is however a wall marking the boundary between 8 Wesley Street and 9 Wesley Street so there is no problem in practice.

4. The ground floors of the Block A and Block B are let as shops. There is some scope for letting other areas of the buildings. None of the properties are occupied by any members of the Atkinson family.

2.3 Expert Evidence

15. Each side instructed experts. Lynn Atkinson instructed Stanton Mortimer; the Defendants instructed Steve Smith a partner in Ashley Smith Chartered Surveyors of Oakmere, Belmont Business Park, Durham.
16. As is clear from a letter sent by the Claimants on 4^th February 2010 the Stanton Mortimer valuations differed from those produced by Mr Smith. However at a comparatively late stage in the proceedings the Claimants decided not to rely on their expert but to cross-examine Mr Smith at the trial.
17. In the result there was before the court valuation reports from Mr Smith dated 1^st August 2009, 4^th March 2010 and 22^nd March 2010. The two March reports were produced as a result of questions posed to Mr Smith by one or other of the parties to the litigation. In addition Mr Smith attended the trial and gave evidence on the first day.

The First Report

Block A

18. In this report Mr Smith valued Block A at £285,000. He made a number of points. The rental income was £23,250. Access to the cellar is difficult and money may need to be spent on it. A significant amount of work is needed to the vacant second floor. Some short term repairs are necessary. Some of the lease will expire shortly. This is somewhat double edged. It may be possible to increase the rents. Alternatively if the tenants do not renew there may be a rent void.

Block B

19. Mr Smith valued Block B at £460,000. The rental income was £63,950. Most of the leases had less than 2 years to run. There were significant management costs involved.

Block C

20. Block C has one tenant who is holding over. He described the property as unusual with little frontage display and little footfall. He valued it at £57,500.
21. Mr Smith's overall valuation of the portfolio was £800,000. In his view there was only a marginal difference between the aggregate of the three values and the value of the portfolio if sold as a single lot.

The Second Report

22. In this report Mr Smith was asked to deal with the effect of a number of changes to the tenancies since August 2009 and to provide and comment on separate valuations for Blocks B1 and B2.
23. The changes to the tenancies were that 6 Wesley Street had become vacant, 7 Wesley Street had been let for a term of 3 years form August 2009 at a rent of £6,750 p.a and 14 Victoria Road was let until June 2017 at the same rent as in the original report - £7,000 p.a.

Block B1

24. Mr Smith valued Block B1 at £190,000 before adjustments. The rental income would be £26,500 when fully let. He reduced his value by £5,000 to take into account the costs involved with finding a tenant for 6 Wesley Street. He then applied a discount of 5% to take into account difficulties caused by the shared yard and the fact that part of 9 Wesley Street is attached to the rear of 8 Wesley Street.

Block B2

25. The rental income for Block B2 is £38,000. Mr Smith valued it at £270,000 but then applied the same discount of 5% to arrive at a figure of £256,500.
26. He concluded that the value of Block B as a whole was £455,000 whereas the sum of the values of Block B1 and B2 was £432,250.

The Third Report

27. In this report Mr Smith was asked to deal with a number of specific questions put to him by Mr Eaton of Birketts LLP and Lynn Atkinson. It is not necessary to refer to all of his answers. The most relevant were:

1. Mr Smith's valuations were on the basis that all arrears of rent were retrievable.

2. Mr Smith did not believe it was a good time to sell. If the court were to order a sale he recommended sale by private treaty and informal tender.

3. He did not consider the proposal to split the B1 properties to be attractive for the reasons he gave in his second report.

4. In his view the best proposal for the division of the properties is on the basis of the 3 Lots – Blocks A, B and C. Although these do not reflect one third of the value they do represent a logical subdivision of the portfolio.

5. The valuation would not differ significantly if part of 9 Wesley Street were not at the back of 8 Wesley Street.

Mr Smith's evidence

28. When Mr Smith gave evidence he dealt with a number of matters. 6 Wesley Street had been let at a rent of £8,000 per annum. He said that he would reinstate the £5,000 he had deducted from the valuation of Block B1 and might add a little to reflect the rent of £8,000 p.a over his assumed rent of £6,500 p.a. Block B2 now has 2 empty shops – 9 Wesley Street and 12 Victoria Road. He said that he would treat them in the same way as he had treated 6 Wesley Street. He would thus deduct £10,000 from his valuation of Block B2.
29. He was cross-examined by Lynn Atkinson over his views as to the proposal to split Block B into Block B1 and B2. He made the point that three of the shop properties (10 Wesley Street and 13 and 14 Victoria Road) have access over the rear yard to the toilet. They had no toilet facilities within the shops. He repeated the point about the boundary of 9 Wesley Street being odd. As 8 Wesley Street falls within Block 1 and 9 Wesley Street falls within Block B2 he thought this was of some significance. His main point, however, was of the shared use of the yard. There would have to be some management arrangement in place so as to ensure that each of the tenants had appropriate use of the yard. The point he was making was that if there was single ownership of Block B and C the yard and the tenancies would be easier to manage.

2.4 Offers and Counter offers

30. As already noted this is a case where there have been a number of offers and counter offers both before and after the issue of proceedings. Some of these offers were initially made on a without prejudice basis. However it was agreed before me that privilege was to be waived in respect of all such offers.
31. I was accordingly taken to the offers during the course of the hearing. As part of her final submissions Lynn Atkinson prepared for me a helpful document setting out in summary form the offers and counter offers that have been made:

Date	Event	Page
28/3/2009	Lynn Atkinson suggested that as a solution to the problems that she received Block A and Block C. This would mean that the Defendants would be relieved of the problem parts of the shops and that they would have the shops in the best condition. This offer was made prior to any valuation evidence and based on the incomes from the portfolio.	531
26/4/2009	Lynn Atkinson suggested 3 possible solutions: she sell her one third share she took Block A and the warehouse (Block C) and invest in them the time and money involved redevelopment of the whole.	533
18/5/2009	In an e-mail Ken Atkinson says that he "was minded to agree to your having [Block A] … On reflection whilst I can see a significant benefit to yourself the other beneficiaries would gain little.	538/9
8/6/2009	In an e-mail Florence Cox offered Rodney Atkinson the whole of Block A . In the alternative he was offered 5 of the shops in Block B which could then be sold at full market value as his share. Offer refused on 9th June 2009 on the basis that Lynn Atkinson's share was not satisfied by Block A alone.	544 – 546
8/8/09	Part 36 offer by Lynn Atkinson: Lynn Atkinson takes Block A and half Block C. She will sell half Block C for £30,000 or buy half of Block C for £30,000 to the Defendants.	555
15/10/09	(Proceedings were issued on 9th October 2009) Birketts response to Lynn Atkinson's Part 36 offer Lynn Atkinson to take Block A but to make a balancing payment of £17,500. This offer is in line with the figures in Mr Smith's first report.	561
18/10/2009	Lynn Atkinson to Mr Eaton of Birketts. offer rejected. Valuation report not disclosed. Refusal to appoint a joint valuer. There should be a sale unless the price can be agreed. Counter offer to purchase Block B at the figures contained in the First Report (£457,500 paid for by her share – valued at £267,500 plus £190,000 in cash).	564
27/10/2009	Mr Eaton to Lynn Atkinson Offer rejected. Counter offer to buy out Lynn Atkinson for £267,500 subject to a number of matters.	569
28/10/2009	Lynn Atkinson to Mr Eaton Rejects offer. Criticises valuations – in particular the valuation for Block B which is said to be far too low. Offers to sell her third share for £340,000.	570
16/11/2009	Lynn Atkinson to Mr Eaton Comments by Lynn Atkinson on valuations. Making the point that only if there is a sale are the values relevant. Proposal that properties in Block B2 are transferred to her with the yard being transferred to the Defendants subject to appropriate rights of access.	574
4/2/2010	Lynn Atkinson to Mr Eaton Sets out the figures in the 2 rival valuations; whilst the valuations for Block A and Block C are very comparable there is a wide difference in the valuations of Block B. Stanton Mortimer value the Block B shops at £572,500 as opposed to the Ashley Smith valuation of £460,000. Accordingly she offers to take either Block B2 or Blocks B1 and C which each amount to slightly under a one third share on either valuation.	618
1/3/2010	Mr Eaton to Lynn Atkinson (by this time Lynn Atkinson had decided not to call her own expert though she had not agreed the values put forward by Mr Smith) Offer to buy Lynn Atkinson's share for £267,500 with no order for costs save for court fees.	633
22/3/2010	Lynn Atkinson to Mr Eaton Offer rejected Counter offer to take Block B2 plus costs. Letter pointing out that her valuation costs were caused by the refusal to agree a joint valuer	633
29/4/2010	Mr Eaton to Lynn Atkinson (after receipt of the 2nd and 3rd reports of Mr Smith) in the light of Mr Smith's view an order for sale is unlikely to be ordered expert opinion in relation to the partition of Block B. Offer to transfer Block A subject to payment of the Defendant's costs to date to assessed if not agreed. [Those costs were estimated to be of the order of £16,500 at that stage]	638
8/6/2010	Lynn Atkinson to Mr Eaton Points out that 2 shops in Block B2 are empty with no tenant and that the tenant of 11 Victoria Road is looking to dispose of his interest. Offers to accept the 6 shops in Block B2 together with the yard and costs. The transfer of the yard will be subject to rights of access.
15/6/2010	[During the course of the trial] In his closing submissions Mr Waterworth, on instructions, offered to transfer Block A without any balancing payment. I understood that offer to be an improvement on the offer of 29th April 2010, that is to say that it did not require the payment of the costs prior to 29th April 2010. The estimate of the Defendant's costs had risen remarkably from £16,500 on 29th April 2010 to £42,500. In her closing submissions Lynn Atkinson rejected the offer. Indeed she went so far as to say that if she were forced to take Block A she would sell it. She repeated her position that she should be entitled to either Block B1 and Block C or Block B2.

2.5 Disputes

32. It was I think common ground that the old disputes between the parties were of limited relevance to any matters that I have to decide. In those circumstances I propose to deal with them relatively shortly.

Money spent on Block A.

33. At one stage Rodney Atkinson was accused of spending a disproportionate amount of money on repairs to Block A including commissioning an asbestos report. Rodney Atkinson disputed this and amongst other documents I was shown an e-mail from the agent which expressly stated that it was the agent (and not Rodney Atkinson) who had commissioned the report.
34. In any event one of the reasons given by Lynn Atkinson for not wanting to have Block A was that he did not want to be accused of feathering his nest by other members of the family.

Loss of one of the tenants in Block A.

35. In October 2009 a tenant occupying a hairdressing salon on the first floor of Block A left without giving proper notice. It was suggested that he left because Rodney Atkinson did not proceed with the negotiations for a new lease and/or because Lynn Atkinson had discussions about refurbishment of the first floor of Block A which would have moved him to the 2^nd floor. It is by no means clear why he in fact left. I was shown an e-mail from one of the Defendants that suggests that she agreed at one stage that Rodney Atkinson should hang fire on a new lease until the current dispute between the parties was resolved. It is common ground that there was some conversation about refurbishment but Rodney Atkinson did not accept that he told the tenant that he would have to move.

Consultation

36. There were disputes on the amount of consultation carried out by Rodney Atkinson before instructing the agents. Rodney Atkinson said that he consulted his co-trustees before making decisions and that no-one was kept in the dark. There were disputes as to the ability of the Defendants as controlling two thirds of the beneficial interest to direct the managing agents. I was shown some of the e-mails relating to this.
37. I do not find it necessary to make any findings on these disputes. It is common ground between the parties that relations between the parties have irretrievably broken down and they must be entitled to go their separate ways.

2.6 Oral evidence

38. The only witnesses (other than Mr Smith, the expert) to give oral evidence at the hearing were Rodney Atkinson on behalf of the Claimants and Mrs Florence Cox for the Defendants. In addition to their oral evidence I had the benefit of witness statements from the Claimants and from all of the Defendants
39. Much of the cross examination of Rodney Atkinson related to matters of dispute which are referred to above. I shall not repeat those issues. He was also asked about Lynn Atkinson's history as a litigator. He agreed that she had been involved in 3 sets of proceedings all of which she won. There was a dispute when her neighbour purloined a strip of her land; there was a dispute with the council over the ownership of (and thus the liability to repair) a wall. There was a claim against her former solicitors for professional negligence over the collection of a debt.
40. Rodney Atkinson was asked why he did not want to have Block A when at one stage of the proceedings he had been willing to take it. He pointed out that he had never been willing to take Block A by itself. He had wanted Block A with the warehouse. He made the point that on Mr Smith's valuations it was worth significantly more than a third of the portfolio. Furthermore he had been accused by the Defendants of manipulating the spending on the shops to benefit Block A. Whilst he denied that as all the spending had been agreed he did not want now to be accused of taking unfair advantage of that spending.
41. Florence Cox also gave evidence on some of the areas of dispute between the parties. I do not need to go into that evidence. She was also asked why Lynn Atkinson should receive Block A and not Block B1 and Block C. She made the point that Block A was easily separable from Blocks B and C. There would be no problem of shared access. At one stage Lynn Atkinson was prepared to take Block A as her share but she has subsequently changed her mind. The Defendants are afraid that Lynn Atkinson will make trouble for them especially in the light of her reputation as a litigator. They would rather have a complete separation and in their view there is no reason why she should not accept Block A.

3 The Law

42. There is an extremely helpful summary of the relevant law in the skeleton argument of Mr Waterworth for which I am very grateful. As Mr Waterworth points out the portfolio is a trust of land and thus the governing statute is the Trusts of Land and Appointment of Trustees Act 1996 (as amended) ("the Act"). Amongst other sections he referred me to sections 7, 11, 14 and 15.

7 Partition by trustees

(1) The trustees of land may, where beneficiaries of full age are absolutely entitled in undivided shares to land subject to the trust, partition the land, or any part of it, and provide (by way of mortgage or otherwise) for the payment of any equality money.

(2) The trustees shall give effect to any such partition by conveying the partitioned land in severalty (whether or not subject to any legal mortgage created for raising equality money), either absolutely or in trust, in accordance with the rights of those beneficiaries.

(3) Before exercising their powers under subsection (2) the trustees shall obtain the consent of each of those beneficiaries.

(4) Where a share in the land is affected by an incumbrance, the trustees may either give effect to it or provide for its discharge from the property allotted to that share as they think fit.

(5) If a share in the land is absolutely vested in a minor, subsections (1) to (4) apply as if he were of full age, except that the trustees may act on his behalf and retain land or other property representing his share in trust for him.

11 Consultation with beneficiaries

(1) The trustees of land shall in the exercise of any function relating to land subject to the trust--

(a) so far as practicable, consult the beneficiaries of full age and beneficially entitled to an interest in possession in the land, and

(b) so far as consistent with the general interest of the trust, give effect to the wishes of those beneficiaries, or (in case of dispute) of the majority (according to the value of their combined interests).

(2) Subsection (1) does not apply--

…

(b) in relation to a trust created or arising under a will made before the commencement of this Act, or

(c) in relation to the exercise of the power mentioned in section 6(2).

(3) Subsection (1) does not apply to a trust created before the commencement of this Act by a disposition, or a trust created after that commencement by reference to such a trust, unless …

14 Applications for order

(1) Any person who is a trustee of land or has an interest in a property subject to a trust of land may make an application to the court for an order under this section.

(2) On an application for an order under this section the court may make any such order--

(a) relating to the exercise by the trustees of any of their functions (including an order relieving them of any obligation to obtain the consent of, or to consult, any person in connection with the exercise of any of their functions), or

(b) declaring the nature or extent of a person's interest in property subject to the trust,

as the court thinks fit.

(3) The court may not under this section make any order as to the appointment or removal of trustees.

(4) The powers conferred on the court by this section are exercisable on an application whether it is made before or after the commencement of this Act.

15 Matters relevant in determining applications

(1) The matters to which the court is to have regard in determining an application for an order under section 14 include--

(a) the intentions of the person or persons (if any) who created the trust,

(b) the purposes for which the property subject to the trust is held,

(c) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and

(d) the interests of any secured creditor of any beneficiary.

(2)

(3) In the case of any other application, other than one relating to the exercise of the power mentioned in section 6(2), the matters to which the court is to have regard also include the circumstances and wishes of any beneficiaries of full age and entitled to an interest in possession in property subject to the trust or (in case of dispute) of the majority (according to the value of their combined interests).

43. In his skeleton argument Mr Waterworth accepted that this was a trust created before 1996 and that the obligation on the trustees under section 11(1)(b) of the Act to give effect to the wishes of the majority of the beneficiaries did not arise. He pointed out, however that the wishes of the majority had to be taken into account by the Court under section 15(3) of the Act.
44. He drew my attention to the observations of Neuberger J (as he then was) in Mortgage Corporation v Shaire [2001] Ch 743 at 759 and 760 to the effect that the outcome of cases will not necessarily be the same as it was under the pre 1996 law and that the court has greater flexibility as to how it exercises its jurisdiction. The wider ambit of section 15 has been emphasised more recently in the judgment of Lightman J in the Court of Appeal in the case of Murphy v Gooch [2007] EWCA Civ 603 (a case involving equitable accounting). In paragraph 14 of his judgment Lightman J summarised the difference between the two approaches:

14. Under the previous equitable doctrine the court was concerned only with considerations relevant to achieving a just result between the parties. The statutory innovation is section 15, which requires the court in determining all applications for an order under section 14 to include amongst the other matters to which it has regard: (1) in all cases (so far as applicable) the four matters referred to by Baroness Hale; (2) in the case of applications relating to the exercise by trustees of the powers conferred by section 13 the circumstances and wishes of each of the beneficiaries who is (or apart from any previous exercise by the trustees would be) entitled to occupy the land under section 12; and (3) in case of any other application (other than one relating to the conveyance of land to beneficiaries absolutely entitled) the circumstances and wishes of any beneficiaries of full age entitled to an interest in possession. The wider ambit of relevant considerations means that the task of the court must now be, not merely to do justice between the parties, but to do justice between the parties with due regard to the relevant statutory considerations and in particular (where applicable) the welfare of the minor, the interests of secured creditors and the circumstances and wishes of the beneficiaries specified.

4 Submissions

45. I have in fact summarised many of the submissions that were made in the preceding paragraphs of this judgment.
46. Mr Waterworth submitted that I should accept the valuation evidence of Mr Smith. He was the only valuer to give evidence. He submitted that I should have regard to the wishes of the majority of the beneficiaries and should order a partition of the portfolio in accordance with Mr Smith's valuations this gave Lynn Atkinson more than a third of the portfolio by way of capital value. There is no reason why Lynn Atkinson should not take Block A. As is clear from the history of offers set out above she was initially prepared to accept Block A. A partition giving Lynn Atkinson Block A would keep her properties separate from those of the Defendant and would thus avoid the shared use of the yard. It would allay the fears of future litigation from Lynn Atkinson. If Lynn Atkinson did not want Block A the Defendants should be permitted to buy out her interest for the sum of £267,500 in accordance with their earlier offer.
47. Lynn Atkinson submitted that she should not be compelled to accept Block A. I have already set out her reasons. She did not accept that there was any practical reason why Block B should not be split up. She pointed out that the property was tenanted and it was the tenants who had access to the yard. She did not see any insuperable management difficulties in her being awarded part of Block B. She did not accept (in so far as it was being alleged) that she was an unsuitable neighbour. She had won her previous litigation; she had made a large number of offers in this litigation and her stance had not shown her to be unreasonable. She had kept the costs down by representing herself. She had even decided not to call her own expert in an effort to save costs. She was willing to accept either Block B1 and Block C or Block B2. Either of these solutions would result in her owning properties which were valued by Mr Smith at (slightly) less than one third of the portfolio. If she was compelled to accept Block A she would sell it.

5 Discussion and Conclusions

48. As none of the parties wish there to be an outright sale of the portfolio, I agree that it would not be appropriate for the Court to make an order for sale. I am fortified in this view by the opinion of Mr Smith that it would not be a good time to sell. However an order for sale is the only way to obtain the actual market value of the portfolio.
49. Despite the submission of Mr Waterworth I do not accept that I am bound to accept Mr Smith's opinions on the values of properties in the portfolio. It is true that it is the only expert evidence before me. It was not, however, agreed evidence and I am not bound to accept it. I do, in fact, have significant concerns about Mr Smith's valuations. If he is right the yield on Block A is significantly lower than the yield on Block B. Based on the figures in Mr Smith's first report the yield on Block A is 8.16% as opposed to 13.9% on Block B. It has to be remembered that this is an investment portfolio where income is of prime importance.
50. There is no explanation for the better yields in Block B in the report. All of the properties are in the centre of Consett and close to each other. To my mind this leads to two possible alternative conclusions. The first is that Block B has been undervalued. If it had a higher value that would, of course reduce the yield.^[1] It is, to my mind, significant that Stanton Mortimer valued Block B at over £100,000 more than Mr Smith. I recognise, of course that Lynn Atkinson did not call her expert but that does not mean I have to ignore the Stanton Mortimer valuation in assessing how far I can rely on Mr Smith's valuation of Block B. The second conclusion is that if Mr Smith's valuation of Block B is correct there is something special about Block B that to justify comparatively higher rents than Block A. It may be that this is what has lead all the parties to want Block B or part of it at the expense of Block A. Both sides were prepared to make offers giving them slightly less that their proper share providing (in the case of Lynn Atkinson) she received a share of the Block B properties or (in the case of the Defendants) they received all of Block B. It rather looks as if both sides take the view that Block B is rather more valuable than the figures given by Mr Smith.
51. As I have concerns about the true value of the property I do not think it would be appropriate to order that the Defendants buy out Lynn Atkinson's share for the sum of £267,500. There is, to my mind, a serious risk that the share is worth significantly more than that. In addition Mr Waterworth frankly accepted that it was possible that I did not have power to make such an order in any event. In the light of my views on the exercise of discretion I do not need to rule on the extent of my jurisdiction.
52. I agree, therefore, that the only practical solution in this case is to order a partition. I am satisfied that there is power under section 14 of the Act to order a partition and to dispense with the consents that the trustees would have needed under section 7(3) of the Act. The only relevant matters under section 15 are those referred to in sections 15(1)(b) and 15(3). As I have already noted the portfolio is held in commercial property primarily to provide an income for the beneficiaries. Thus yields are important. I have already set out and have well in mind the wishes of the majority of the beneficiaries.
53. I was not particularly impressed with the reasons given by Lynn Atkinson for not wanting Block A. The fact that Rodney Atkinson may have been accused in the past of spending too much money on Block A is not a reason for refusing it if all of the other beneficiaries want her to have it. I suspect the reason Lynn Atkinson does not want Block A is commercial. She thinks it is worth less than her one third share. If, for example she had been offered Block A and Block C I suspect she would have taken it. That, after all, was her position in the spring of 2009. I do not, however, criticise Lynn Atkinson for taking a commercial view of her share in the portfolio. This is a commercial dispute about commercial properties.
54. I was equally not impressed with the criticisms levelled at Lynn Atkinson by the Defendants or with the reasons given for wanting her to have Block A. It has to be remembered that all of these properties are let. It is the tenants who, in the main, will be using the common yard. There is no reason to believe that there would be disputes over the use of the yard. Whilst Lynn Atkinson may have been involved in other legal proceedings it has to be remembered that she succeeded in them. I have read much of the correspondence in this case. Lynn Atkinson has been prepared to make offers and has been in no way unreasonable in the conduct of this litigation. Furthermore she was not cross-examined. Again I suspect that the Defendant's reasons for wanting the whole of Block B are largely commercial.
55. I do not overlook Mr Smith's views on the division of Block B into Block B1 and Block B2. However I think he places too much emphasis on the apparent difficulties. The fact that 9 Wesley Street is partly attached to 8 Wesley Street does not to my mind present any real problem. It simply means that the boundary between 8 and 9 Wesley Street is not a straight line. There is in fact no doubt as to what property is constituted by 9 Wesley Street. There is no reason to have joint management of the yard. It can be transferred to one or other of the new owners subject to appropriate rights of access, and maintenance obligations by the other. No one has suggested that the yard has any significant value. I have difficulty in following why this should justify a drop of 5% in the overall value of Block B.
56. It is, of course, impossible for me to satisfy both sides in this dispute. Both have entrenched views about Block A. I therefore have to decide between them. I am conscious that the majority of the beneficiaries wish to exclude Lynn Atkinson from Block B but in the end I have decided that it would not be right to do so. As set out above, if Mr Smith's valuation is correct the Block B properties are particularly high yielding and it would not be right to deprive Lynn Atkinson from all of the high yielding properties. If he is wrong and the Block B properties are worth more than his valuation equally it would not be right to deprive Lynn Atkinson of a share in the undervalued properties.
57. Thus I would award Lynn Atkinson either Block B1 and Block C or Block B2. Lynn Atkinson did not feel strongly which of the two she received. Nor do I. Accordingly I shall give the Defendants the choice. That choice must be exercised by notice in writing to be served on Lynn Atkinson (with a copy to the Court) within 7 days of the handing down of the judgment in this case. If no such notice is served I would award Lynn Atkinson Block B1 and Block C (as that would only give her 4 properties in Block B).
58. Similarly I would give to the Defendants the choice of whether they want the yard subject to rights of access and an obligation to contribute to its maintenance by Lynn Atkinson. That choice must also be exercised by a similar notice in writing to Lynn Atkinson (with a copy to the Court) within the same time period. In default of that notice I would award the yard to the owner of Block B1 and Block C with rights of access in favour of the other party and subject to the contribution of an appropriate share for its maintenance repair or renewal.

Note 1   As I understand it the yield is the Annual Income divided by the Value. Thus if you increase the value you reduce the yield.    [Back]