[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Foreprime Properties Ltd v Cheval Bridging Finance Ltd [2015] EWCA Civ 1525 (10 November 2015) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2015/1525.html Cite as: [2015] EWCA Civ 1525

[New search] [Printable RTF version] [Help]

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT - CHANCERY DIVISION
HIS HONOUR JUDGE BALDWIN QC

		Royal Courts of Justice Strand London, WC2A 2LL
		10 November 2015

LORD JUSTICE TOMLINSON:

1. This is a renewed application for permission to appeal in relation to an order made by Mr John Baldwin Queen's Counsel sitting as a Deputy Judge of the Chancery Division at the conclusion of a trial which took place in June of 2014. The judge delivered his judgment on Friday, 20 June on what I assume was the fifth day of trial and thereafter an order was made on, I suspect, 24 September 2014.
2. The nature of the application is very straightforward. The claimant, Foreprime Properties was the mortgagor of a property in Stamford Hill, North London and the defendant was the assignee of a finance company which had lent money on the strength of a charge over the property. The loan agreement fell into arrears and, in due course, the defendant foreclosed and the property was sold. The claimant contended that the defendant had failed in its duty to realise an appropriate price relying on well-known authorities such as Cuckmere Brick Co Ltd v Mutual Finance Limited [1971] 1 Ch 949 and the finance company counterclaimed the extent of the indebtedness which was, I think, a little in excess of £700,000 once facility fees and interest were taken into account. I should have said the original loan was one of £600,000.
3. The claim which is asserted is now, I think, of the order of about £150,000. The counterclaim has never formally been quantified. The judge referred to this aspect of the matter at paragraph 39, the last paragraph of his judgment in which he recorded that Mr Charles Douthwaite who appeared then as he appears now for the claimant applicant had suggested that he need not trouble himself with the fine detail of the amount outstanding and that if there were any further matters, the matter could be restored to the Master. It seems that a pragmatic view may well have been taken, because it seems that it had been indicated by the alter ego of the claimant, a Rabbi Rottenberg, that whatever figure was arrived at the counterclaim would not be met as there was no money with which to do so. It may be for that reason that in due course, the agreed order was, as far as concerns the counterclaim, "There be judgment for the defendant on its counterclaim with no award of damages". The judge also dismissed the claim.
4. I asked Mr Douthwaite at the outset of this hearing how the court would be able to work out the consequences of a successful appeal, bearing in mind that the counterclaim had never been quantified and that there now appears to be no mechanism pursuant to which it could be quantified. I remain puzzled, but Mr Douthwaite said that he did not think he could seriously oppose a suggestion by the defendants, in that event, that the counterclaim should now be quantified by the Master.
5. However, that is an academic point because, for the reasons I am about to give, I do not consider that an appeal, as far as concerns the claim, has a realistic prospect of success. As was recognised by Mr Douthwaite, that appeal can only succeed if there is some real prospect of the claimant challenging the judge's valuation of the property at £600,000, bearing in mind that the property was in fact sold for £605,000. The value per square foot of the property was agreed at £230 per square foot, on the basis of a property in good repair or, at any rate, as it was in one part of the evidence put, in accordance with the norm for the market. There were two imponderables which the judge had to resolve. One was what was the gross internal area of the property to which the agreed value per square foot should be applied, the second was the state of repair of the property which would reflect the relevant discount which should be made from the value which a straight multiplication of the agreed value to the gross internal area would produce.
6. As the judge records at paragraph 15 of his judgment, neither surveyor who gave expert evidence at the hearing was able to make or conduct measurements of the property in the conventional sense, because neither of them had had access to the interior of the property in order to consider, measure or evaluate its size or condition. Mr Orr for the mortgager relied on some reduced size photocopies of scale plans and came up with a figure of 3,684 square feet for the gross internal area. I should sale that Mr Orr also measured an adjacent property which was said to be similar, although not, I think, identical, but it is plain from other material that the two, although having the same basic footprint, had been subject to some modification.
7. Mr Tobin, for the mortgagee, relied on two actual measurements contemporary to the sale. One by a Mr Penford came out at 3,218 square feet, although that is criticised by Mr Douthwaite on the basis that he said Mr Penford made an elementary error in assuming that the ground floor was the same square footage as the first floor, whereas it is apparent that the ground floor is, he says, larger. The second was an actual measurement made by a Ms Mariner who appears to have been a surveyor working in the same company as Mr Tobin who had made her own measurements of the property pursuant to an instruction from another intending purchaser. Her figure was 3,219 square feet. Mr Douthwaite points out that her measurement is recorded in a single sentence of her report which is itself, in part, redacted for reasons of confidentiality, where it is recorded, "The approximate gross internal area is 3,219 square feet".
8. Mr Tobin was cross-examined about these matters and it is plain that he had had certain discussions with Ms Mariner concerning her methodology. The relevant evidence is at page 124 of the bundle or internal page 6 of the relevant transcript of evidence, where Mr Tobin is dealing with the methodology mandated by the RICS handbook, measuring from skirting to skirting and how one deals with areas of restricted ceiling height. At that point, he gave evidence about some of his discussions with Ms Mariner. Mr Tobin, naturally, relied upon the fact that the measurements made by Mr Penford and Ms Mariner came up with a very similar result.
9. It is apparent, as I remarked a moment ago, from reading the transcript of the cross-examination of Mr Tobin and the discussions with the judge that the judge was completely on top of the evidence that was given as far as concerns the competing measurements. As I have indicated, the correctness of the measurements depended, in part, upon how one treats areas with restricted headroom, treatment of circulation spaces and there is some considerable discussion in the transcript of what evidently were fairly complicated matters, so much so that, as I have perhaps somewhat unfairly pointed out to Mr Douthwaite, at page 127 of the transcript he had to accept that he had not quite grasped whatever was the point there being discussed about common parts, but those behind him had informed him that the judge had the point correctly.
10. Mr Tobin explained at pages 128 to 129 of the transcript why he regarded the exercise which Mr Orr had done from the small scale plans as being unreliable and why he preferred the two actual measurements made completely independently of each other which were mutually corroborative. Mr Douthwaite wishes to be at liberty to pursue this aspect and suggests that the measurements of Mr Penfold can be shown to be unreliable by reference to the floor plan. The fact of the matter is that this was pre-eminently an exercise of fact finding where the judge has reached a conclusion which is well within the ambit of reasonable decision making, the source of which was that he accepted, as more likely to be reliable, the two contemporary actual measurements rather than the measurements taken from small scale drawings, verified or sought to be verified by the measurement of another building which was not exactly the same. I have no doubt that permission to appeal should be refused on the question of the gross internal area of the building.
11. As far as concerns the state of repair of the building and the discount that was required, Mr Tobin, in his report for the purposes of the litigation recorded, and I am looking at page 70 of the bundle, that some photographs taken by Mr David Tropp at the time of repossession in October 2008 spoke for themselves. From those photographs Mr Tobin noted,

"Broken glazing, damaged window frames, graffiti, damaged plasterwork, defective decorations, possible rising dampness (at least plaster showing signs of being damp), boarded up windows where glazing missing, peeling ceiling plaster, apparently dangerous wiring (i.e. cables running across the floor), a WC with unfinished wall plaster, severe dampness in a bathroom (perished plaster), cracks in wall plaster, general filth and debris, defective external window sills, cracking to external rendering, possible dampness to basement walls, very severe cracking in an external wall of one of the study rooms (the one with double timber doors), pebble dash rendering unkeyed under a rear window, dilapidated succah, cracking over stone window head to ground floor front bay, broken stone sills."

Mr Tobin went on,

"It is difficult to draw precise conclusions from unannotated photos but the general impression is unequivocal: the building was in a shocking state."

12. That was in stark contrast to the assumptions which had been made by Mr Orr for the purposes of his first report which he had made upon the basis of misleading information given to him by the mortgagor as found by the judge in paragraph 11. Ms Mariner in her report had concluded that the building required complete overhaul, including works for "penetrating damp, re-plastering the tracking and electrics et cetera will need to be updated." She recommended that an engineer be instructed to report on the cracks.
13. The judge dealt with the condition of the building and it will be remembered that neither of the experts had had access to the building for the purpose of assessing its condition. At paragraph 23 he said this,

"A difficulty, of course, is that neither expert has or had any real idea of the extent of the repair necessary. It is plain from the photographs taken by Mr Tropp that the property was in a very poor condition at the time but the photographic record does not and, indeed, was not intended to give an indication of the extent of any costs that were necessary for repair or, indeed, the extent of those areas which needed repair and those that did not. Taking all matters into account, I consider that Mr Tobin's approach is the right one. I think there should be a deduction of about £165,000 for repairs. This gives a market value of £600,000 at the relevant time."

14. I should say that Mr Tobin's approach to which he there referred is the approach Mr Tobin had himself suggested as being appropriate in his first report which appears at paragraph 8.3, page 76 of the bundle, to this effect,

"I now have to consider the effect of the substantial disrepair. The papers provided to me are equivocal as to the structural cracks. But Ms Mariner's opinion, given at about the time of the instant valuation date and for the purpose of advising a prospective purchaser, is less sanguine. I am supported in this by the presence of the trees which I noted. I therefore assume that at least some structural repair was needed. Clearly wholesale refurbishment was necessary. I spot price this at £50/ft² for renewal of services, complete decoration, fit out with kitchen, DDA compliance, sanitary facilities, insulation, fire protection, etc. This approximates about one-third of my estimate of complete re-build at £150/ft² which I think was fairly conservative for the time. Thus the estimated cost of repair and improvement is in the order of £170,000."

He went on to say at paragraph 8.6,

"I should reiterate that the repair cost at £50/ft², whilst I believe is realistic is no more than a spot estimate based upon slender information. However, I am confident that this rate is unlikely to be less than about £40/ft², so a value around £600,000 is in my judgment reasonably realistic.

15. The judge's finding, therefore, as I read it from paragraph 23 of his judgment was that on the basis of the evidence before him, the only approach that could be taken was to apply a reduction to the entire gross internal area. Some parts of the building, of course, would require more repair and refurbishment than others, but the figure of £50 per square foot given by Mr Tobin in his initial report took that into account.
16. This, to my mind, renders completely academic the sub-issue as to what the experts did or did not agree and record in their memorandum of 6 June 2014 which was drafted by Mr Tobin. In fact, what Mr Tobin said he understood by that memorandum is, as I understand it, entirely consistent with what he said in his report. Furthermore, contrary, I think, to what Mr Douthwaite has submitted, Mr Tobin did not say in his evidence that he regarded Mr Orr as having agreed that £50 would be applied to the entire gross internal area. He explained at paragraph 122 of the transcript what his thinking had been and the limit upon the extent to which he and Mr Orr had been able to reach agreement. As I read it, the agreement between the parties was broadly to the effect that if one was to cost the repairs on the general basis that one could simply apply a figure to the whole on the assumption that no other method could be adopted, £50 per square foot would be an appropriate figure, but that Mr Orr had not agreed that that approach was appropriate since he had not reached any agreement as to the extent of the necessary repairs. Indeed, looking at the foot of page 122 and the top of page 123 of the transcript of the cross-examination of Mr Tobin, it looks as if the extent of the necessary repairs was not discussed at all.
17. To my mind, there is nothing misleading about the manner in which Mr Tobin recorded the agreement or incomplete agreement between himself and Mr Orr at the second paragraph 4.4 of the memorandum. It is, I think, perfectly comprehensible in the light of the limitations of what they were able to agree. However, the more compelling point, it seems to me, is that the judge was entitled to accept on the basis of the evidence Mr Tobin's approach, whether Mr Orr accepted it or not. It is plain from the judge's judgment at paragraph 22 that that is precisely what he did. The judge says this,

"Mr Douthwaite for Foreprime submitted that Mr Tobin could not be right and that it was clear from the minutes of the meeting which recorded what had been agreed between the experts that the £50 figure only applied to the arrears in need of repair. Mr Tobin, however, is an experienced and respected surveyor and he gave his evidence clearly and persuasively and I have no hesitation in believing him in the evidence which he gave to me. Moreover, the £50 per square foot figure is the figure which Mr Tobin, himself, had used in his report. He describes in that report how he justified it as being the right figure and also that, in his view, it should apply to the whole of the gross internal area. And he gave persuasive reasons for that opinion. The fact that Mr Tobin used it in his own report seems to me strongly to support his evidence that this was the way he intended it when he wrote the minute. I accept, however, that Mr Orr did misunderstand that."

18. It is unfortunate that the misunderstanding did not emerge at a stage when Mr Orr was himself giving his evidence, and that he had, apparently, departed abroad by the time that Mr Tobin was in the witness box. It was however not suggested that the trial should be adjourned so that Mr Orr could be recalled in order to deal with this and in any event, as it seems to me, bearing in mind that the judge plainly made clear that he could make no reliable finding as to the extent of the repair necessary, it seems to me that it would remain perfectly within the realms of reasonable decision-making for him to accept the evidence of Mr Tobin, that the proper approach was simply to apply a rough and ready figure to the entire gross internal area.
19. As it seems to me, given the inability to make any finding as to the extent of the repairs necessary, it would simply not be possible to adopt any other approach. Accordingly, I would refuse permission to appeal on that finding of that fact too.
20. In those circumstances, the complaint about the valuations and the manner in which the sale was conducted simply fall away, because there is no basis upon which it can be asserted that the sale failed to achieve the appropriate value of the property.
21. Mr Douthwaite also seeks permission to appeal insofar as the judge reached a conclusion adverse to Foreprime on the true construction to be given to an Iskar letter, the purpose of which was to make the transaction as recorded in the loan offer and documentation compatible with Jewish law and tradition. The text of that letter is set out by the judge at paragraph 33 and it read as follows,

"I, the undersigned, Moshe Rottenberg of Foreprime Limited, whose registered number is 03673257 have received from Cheval Property Developments Limited ('Cheval') the sum of £600,000 repayable within three months after the date hereof for the purposes of investment in property in which profits and losses are to be equally shared. However, the said Cheval Property Developments Limited has agreed in lieu of such sharing of profits and losses, which would require substantiation of all losses by two trustworthy witnesses, the verification of all profits by oath, it will accept our payment of an annual percentage of 17.4% (1.45% per month) of the said sum of £600,000 in accordance with the terms of an offer letter dated 18th January 2007 and will waive all other profits which may be earned by the advanced funds. We have received a token payment of £1.00 from Cheval for our efforts in connection with this undertaking, and have signed a note evidencing the receipt of the sale of the said £600,000."

22. As the judge rightly recorded, the purpose of that letter was an attempt to justify the interest element of the loan in a manner compatible with the Jewish faith and tradition. The letter did not by its terms purport to deal with the facility fees and other charges such as interest and other charges to which the mortgagee was entitled under the offer letter of 18 January 2007. Mr Douthwaite submitted to the judge that the effect of the agreement was to deprive Cheval of the facility fees and other charges that it was entitled to include in the amounts to be repaid, and the judge had to consider whether on its true construction the document achieved that end. That was a one-off exercise in construction in relation to which, again, it seems to me, the judge reached a conclusion which was, if I may respectfully say so, obviously correct and not arguably wrong. I would refuse permission to appeal on that point.
23. The last point is a short point as to costs. It is plain that the disclosure exercise conducted on behalf of the defendant was defective and Mr Douthwaite, at the end of the trial, made a submission about costs in the course of which, and it is plain, he invited the judge not simply to disallow the defendant's costs in their entirety but to award the claimant its costs in order to reflect the court's disapproval of the manner in which the disclosure exercise had been conducted. Mr Douthwaite's real point, as it seems to me, or real complaint was that the method in which disclosure had been done, belatedly, piecemeal and in an incomplete way had a potentially prejudicial effect on the mortgagor. That, of course, was a matter which needed to be addressed at trial and appropriate relief sought in the shape of an adjournment to enable or to ensure that disclosure was properly complete. That was not something which Mr Douthwaite, no doubt for very good reasons, sought at the time. Again, some judges would perhaps have marked their disapproval of the conduct of the defendant by making an order in somewhat more draconian terms than did the judge who marked this submission by depriving the defendant of any part of their costs incurred in relation to their disclosure obligation. Mr Douthwaite points out, not unrealistically, that such costs may be quite small bearing in mind that they have not conducted the disclosure obligation with the appropriate thoroughness.
24. However, I have no doubt that in making his order as to costs, the judge had many aspects of this litigation in mind. It was litigation in the course of which he had good reason to be critical of both parties and, no doubt, his overall approach was that usually the justice in the case is reflected by the loser, that is to say, he who pays the cheque, paying the costs. I certainly would not grant permission to appeal on this costs order if, as it does, it now stands alone as the only remaining point upon which permission to appeal is sought. For that reason, I refuse permission to appeal but in any event as I have indicated, the submission simply does not take into account the many other factors which the judge properly would have had in mind in determining what was the appropriate costs order at the end of this litigation.
25. For all these reasons, therefore, I refuse permission to appeal.

Order: Application refused.