Stephens & Anor v Cannon & Anor

Judgment

MR JUSTICE WILSON:

1. This appeal and cross-appeal, brought with the permission of my Lady, Arden L.J., relate to the assessment by Master Price, reflected by order dated 29 June 2004, of the damages owing to the appellants (a couple whom it will be convenient to describe as the sellers) by the respondents (a couple whom it will be convenient to describe as the buyers).

2. The appeal raises a general point about the circumstances in which a court is entitled to despatch a disputed issue of fact by resort to the burden of proof. The cross-appeal has two parts, both of which are specific to the facts of the case.

3. By contract dated 5 December 2000 the buyers agreed to buy from the sellers land and buildings known as Surrey Hills, Chilworth Road, Albury, Surrey, at a price of £600,000. The dispute arises out of conditions incorporated into the contract, which were later varied by a Supplemental Agreement, the effect of which was to oblige the buyers first to obtain planning permission to construct at least one dwelling on the property, second to construct it, third to sell the property and fourth to account to the sellers for part of the profit from the sale in accordance with an overage condition. Speaking generally, the condition obliged the buyers to pay to the sellers one half of any excess over £1,000,000 in such of the proceeds of the sale by the buyers as might remain following certain deductions.

4. Notwithstanding that in February 2001 they duly obtained planning permission for the construction of one dwelling on the property, the buyers have never constructed it. They continue in occupation of the property and inhabit the buildings which existed at the time of the sale.

5. The sellers took proceedings for specific performance of the obligation to construct the dwelling and sell the property and to account to them for overage, or for damages in lieu. In due course the buyers accepted that they were liable in damages for breach of the overage condition; and judgment was entered for the sellers with damages to be assessed.

6. By the order under appeal, the master gave judgment for the sellers against the buyers in the sum of £220,478 plus interest and awarded the sellers their costs of the claim on the standard basis.

7. The sellers contend that the award of damages is too low because, according to them, the master proceeded on the basis of too low a figure for the price which, had the new dwelling been built, the property would have achieved upon sale. The buyers dispute that he fell into error in that regard. In the first part of their cross-appeal the buyers contend, however, that he fell into error in his construction of the overage condition and, specifically, in his holding that the sum payable to the sellers thereunder was not to be calculated after making a deduction from the sale price of the property of such sum as had been borrowed by the buyers, on mortgage, in order to effect the purchase of the land and to pay for the construction of the dwelling. The second part of the cross-appeal is a challenge to the exercise by the master of his discretion to award the sellers all their costs of the claim.

8. The overage condition is Condition No.7 incorporated into the contract for sale dated 5 December 2000. Conditions Nos 8 and 9 are supplemental to the overage condition. The three conditions are as follows:

“7. The Buyers will obtain planning permission for a single new dwelling on the property and thereafter market the property for sale. In the event that the new property is sold for a sum in excess of £1m, the Buyers will pay to the Sellers 50% of the amount in excess of £1m for which the property is sold subject only to the deduction therefrom of one half of the legal and estate agency fees incurred in connection with such sale.

8. In the event that the Buyers wish to retain the new property, the parties hereto shall appoint an independent valuer…to value the property and if such valuation is in excess of £1m the Buyers shall pay to the Sellers 50% of such amount of the valuation in excess of £1m.

9. In the event that the property has not been sold by the 28^th February 2003 the Sellers require the Buyers to place the property on the market forthwith and to sell the property.”

9. The contract provided that the deposit payable on exchange should be £300,000; that completion should take place on 31 January 2001; that on completion the buyers should pay a further £200,000 to the sellers and that the balance of £100,000 should be left owing to the sellers under charge. In the event, with the consent of the sellers, the buyers did not complete the purchase on 31 January 2001.

10. It seems that, in order both to make the payment to the sellers of £200,000 on completion and to fund the costs of constructing the new dwelling, the buyers were proposing to obtain bridging finance from the Bank of Ireland under charge over the property. By letter dated 5 February 2001 the solicitor for the buyers wrote to the solicitor for the sellers as follows:

“The Bank’s lawyers have come back indicating that the Bank is probably likely to agree a provision that clauses 7, 8 and 9 should apply but only after any monies due to the Bank under its security have been discharged in full. I assume that you do not have any major problems with this suggestion, although perhaps you would be so good as to confirm.”

By their solicitor the sellers, who were keen that the buyers should be in funds with which to complete and to construct the dwelling, indicated that they were willing to enter into a Supplemental Agreement with the buyers which made clear that the bank’s proposed charge over the property took priority over their rights under the overage condition. But they also wanted to make clear that the amount of overage payable to them by the buyers remained as before. By a letter from their solicitor dated 20 February 2001 they suggested that the Supplemental Agreement should conclude with the words:

“Provided that any money in excess of £1m repaid to Bank of Ireland from the proceeds of sale of [the property] shall first be taken from the share of the buyers.”

That in the event those words did not find their way into the Supplemental Agreement was attributable to objection not by the buyers but by the bank. For, as a letter from its solicitors dated 21 February 2001 made clear, the bank construed them to be a restriction on the enforcement of its security.

11. In the result the wording of the substantive clause of the Supplemental Agreement, executed by the parties and dated 27 February 2001, was as follows:

“THE PARTIES hereto wish to vary the terms of special conditions 7, 8 and 9 of the Contract to the extent that special conditions 7,8 and 9 should only take effect provided that the legal charge in favour of the Bank of Ireland to be registered against both titles has been repaid in full and the entries in the Charges Register to both titles in respect of the legal charge have been cancelled and that the provisions of clauses 7,8 and 9 only apply to net proceeds of sale after the said charge has been discharged.”

12. The parties also entered into a Deed of Covenant dated 16 March 2001. The primary purpose of the deed seems to have been to ensure that any assignee of the buyers was bound to comply with the overage condition. By paragraph 1 of the schedule to the deed, the overage condition was recast as follows:

“The Buyers will obtain planning permission for one or more new dwellinghouses (not exceeding three) on the Property…and thereafter construct such new dwellings as soon as reasonably practicable and thereafter market them for sale. In the event that the new dwellings are sold for a combined sum in excess of £1m, the Buyers shall pay to [the Sellers] 50% of the amount in excess of £1m subject only to the deduction therefrom of one half of the legal and estate agency fees incurred in connection with such sale.”

The effect of paragraph 2 of the schedule to the deed was to replicate the facility in Condition No. 8 for valuation and for an analogous payment to the sellers in the event that the buyers wished to retain the property or part of it.

13. Completion of the contract appears to have taken place on 10 July 2001.

14. The hearing before the master proceeded over two days, namely 7 and 8 April 2004. Both counsel who appear before this court appeared before him. He heard oral evidence from the male seller, the male buyer and two valuers. The first valuer was Mr Smart, a chartered surveyor in practice under the name ‘Boyce Thornton’ in Claygate, Surrey. On 9 April 2003 the master had directed ‘that evidence be given by the report of a single joint expert in the field of building, development, surveying and property valuation instructed jointly by the parties’; and Mr Smart was the expert thus jointly instructed. His report, however, had not been to the liking of the buyers and, by order dated 23 December 2003, they had persuaded the Chief Master to give them permission to adduce further expert evidence to be obtained upon their sole instructions. They therefore adduced evidence from Mr Harvey, a chartered surveyor and partner in the firm ‘Huggins, Edwards and Sharp’ of Great Bookham, Surrey.

15. Upon conclusion of the oral evidence, it was arranged that counsel would make their submissions by delivery in writing to the master. In due course, namely on 27 May 2004, he disseminated his written judgment to the parties. There followed an oral hearing before him on 29 June 2004 at which orders were made reflective of his judgment and at which he made the order for costs to which the buyers object.

16. The first issue which the master addressed in judgment related to the contention of the buyers that, properly construed in the light of the Supplemental Agreement, the overage provision yielded to the sellers 50% of any excess over £1,000,000 only in such sum as reflected the difference between (on the one hand) the price achieved upon sale of the property and (on the other hand) not only the costs of sale but also the sum borrowed under charge by the buyers referable to purchase of the property and to construction of the dwelling. As I have indicated, the master refused to adopt any such construction.

17. The master thereupon went on to make other decisions which are not in issue in this court. He held, contrary to the contention of the sellers, that, for the purpose of the overage provision, the buyers were not obliged to build more than one dwelling. He held, also contrary to their contention, that the buyers ought to have completed the construction of the dwelling by between March and May 2002, rather than by any earlier date. He held, contrary to the contention of the buyers, that the dwelling should have been sold in the summer of 2002, rather than in February 2003 by which time prices had on one view fallen.

18. The master then had to consider the rival evidence as to the price for which the property, inclusive of the hypothetical new dwelling, would have been sold in the summer of 2002. Mr Smart contended for £1,900,000; Mr Harvey, by contrast, contended for £1,500,000. By a route which I will explain, the master in the end adopted Mr Harvey’s figure, if not his evidence. So, by taking the figure of £1,500,000 and then making an uncontroversial deduction of £59,044 in respect of likely costs of sale, he calculated that the excess over £1,000,000 was £440,956, of which the half payable to the sellers would have been £220,478, namely the figure for which he entered judgment in their favour.

19. Although in my view the only substantial matter raised in these appeals is that raised by the sellers, namely the master’s decision to adopt Mr Harvey’s figure, I believe that logically I should first address the first part of the buyers’ cross-appeal, namely their objection to the master’s construction of the treatment dictated by the overage provision of whatever they might owe to the Bank of Ireland under charge referable to expenditure on the property at the time of their sale.

20. This point, which was first taken by the buyers only at a late stage of the proceedings, depends entirely upon the terms of the Supplemental Agreement. For nothing could be clearer than the provision in Condition No.7 of the contract dated 5 December 2000 that, in calculating the threshold above which overage would be payable, the price achieved by the buyers on sale would be taken ‘subject only to the deduction therefrom of one half of the legal and estate agency fees incurred in connection with such sale’ [emphasis supplied].

21. The buyers rely on clause 2 of the Supplemental Agreement which, as has been seen, purports to ‘vary’ the terms of Condition No. 7 (as well as of Nos. 8 and 9) and of which there are two limbs:

(a) that the condition should only take effect provided that the legal charge in favour of the Bank of Ireland had been redeemed in full; and

(b) that the provisions of the condition should only apply to net proceeds of sale after the said charge had been discharged.

The buyers rely upon the second limb of the clause in arguing that the overage threshold is calculated after deduction of whatever is owed under the charge (as well as of legal costs) from the proceeds of sale.

22. In rejecting the buyers’ contention in this regard the master said:

“In the first place it is clear that this is the true construction of the original contract of 5^th December 2000 which makes no reference to construction costs at all. This is equally true of the deed of covenant. The correspondence which led up to the supplemental agreement shows that this was purely a requirement of the bank and there is nothing in my view which indicates that there was to be any variation of the original agreement under which the [buyers] took the risk of development costs exceeding the difference between the price they paid, that is to say £600,000, and the figure of £1m, that is to say overall costs of £400,000. In giving evidence [the male buyer] accepted that he had originally taken the risk in respect of the amount of the construction costs…However he says that he instructed his solicitor to re-draft the contract so as to exclude the overage provisions and that it was this which led to the supplemental agreement. However, I do not accept his evidence on this…In my view [he] has persuaded himself of this supposed variation subsequently…upon realisation that the development costs would by far and away exceed the amount which he had estimated.”

23. For the following reasons I have no doubt that the master was correct in reaching the above conclusion:

(a) The mode of calculation of the overage threshold could not have been more clearly expressed under Condition 7. Clear language would be necessary in order that a clause in a supplemental agreement, reached less than three months later, should dramatically alter the effect of the condition. Yet the second limb of the clause is thoroughly ambiguous.

(b) The correspondence which led to the making of the supplemental agreement showed that the need for it was driven only by a demand by the Bank of Ireland that, prior to making a loan to the buyers, clear provision should be in place for its security to take precedence over the right of the sellers to overage. When the sellers pressed for the inclusion of a proviso which would have made it totally clear that the provision for the calculation of overage under Condition 7 was to be unaffected, objection came not from the buyers but from the bank.

(c) Had the Supplemental Agreement made the dramatic alteration in the calculation of the overage threshold for which the buyers contend, one would expect to see the change reflected in the way in which the provision for overage was recast in paragraph 1 of the schedule to the Deed of Covenant dated 16 March 2001. Yet in that regard the wording of the deed is identical to the wording of Condition No.7.

(d) Mr Holland on behalf of the buyers argues that it would make no commercial sense for their borrowings from the bank not to be the subject of initial deduction from the price prior to the division of profit. I disagree. It is clear that the thinking of the buyers in entering into Condition No.7 was that they could fund the construction of the dwelling for £400,000 and that their total outlay on the property, above which the price obtained for it would be all profit, would be about £1,000,000; and the master records the concession of the male buyer in evidence that he had originally taken the risk that his estimate of £400,000 might prove too low. In my view it is the buyers’ suggested construction of the overage condition, as varied by the Supplemental Agreement, which makes no commercial sense: for, were their construction right, the buyers would be motivated to borrow every penny of the sum required for purchase and construction from the bank upon charge, rather than to fund any part of it out of their own resources, in order to eliminate or reduce the overage.

I have no doubt that the two limbs of the variation effected by clause 2 of the Supplemental Agreement were belt and braces: both should be construed as providing that, as between the bank and the sellers, the former were to have priority, in respect of whatever was owed under charge, over the latter in respect of whatever was owed by way of overage. Neither limb altered the calculation of overage payable to the sellers in any way.

24. I turn to the ground of the sellers’ appeal, namely that the master was wrong to adopt Mr Harvey’s figure of £1,500,000 as the likely sale price. The appeal centres around the fact that the master adopted Mr Harvey’s figure by reference to the burden of proof, namely by reference to the fact that it was for the sellers to establish a higher figure and that in his judgment they had failed to do so.

25. In his final written submissions to the master, Mr Holland on behalf of the buyers had presciently adverted to the difficulty in which the master might find himself in weighing the evidence of Mr Smart against that of Mr Harvey:

“It is always invidious for a court to have to choose between the views of two apparently honest and competent experts especially when their valuations are so far apart and there appears to be little material with which the court can bridge the gap.”

26. In his judgment the master stated that he would address compendiously the questions as to when the property would have been sold and as to the price at which it would have been sold. He went on:

“This aspect of the case is also by far the most difficult since I am confronted with expert evidence of two professional surveyors who are unable to agree upon a price range and who both present valuation ranges which are some way apart.”

27. The master began by summarising Mr Smart’s report in two paragraphs. He noted the dimensions of the hypothetical dwelling, as suggested by Mr Smart, and the fact that it would have had a view over a pond. He referred to the price achieved for the comparable property, namely Sherbourne House, mainly relied on by Mr Smart and to the fact that, as Mr Smart accepted, the latter had more land than the hypothetical property but, on the other hand, lacked a view over water and suffered from traffic noise. The master then referred to Mr Smart’s evidence as to the value of three other allegedly comparable properties.

28. Then the master devoted a paragraph to Mr Harvey’s report. He recorded that Mr Harvey considered that the postal address of the buyers’ property, the quality of the surrounding properties and the propinquity of a landfill site detracted from its value. The master said that Mr Harvey had referred to Mr Smart’s four comparable properties and had added two others which he had conceded were not very helpful. And the master referred to a letter obtained by Mr Harvey from Messrs Hamptons suggesting a guide price of £1,600,000 for the hypothetical property.

29. Thereupon, no doubt by reference to his notes, the master devoted two paragraphs to the evidence given by the experts in cross-examination. He recorded Mr Smart’s concession that his valuation of £2,200,000 as at April 2002 had been bold and that £2,000,000 would have been more appropriate. He recorded that Mr Harvey had been pressed with the fact that in 2001 he had valued the property in its existing condition at £950,000 and with the suggestion that it exposed his valuation of the hypothetical property as too low.

30. Then the master referred to the fact that the two valuers had together produced a schedule identifying, in terms of percentages of value and under six headings (namely location, quality, layout, size, date of sale and other), the rival degrees of weight which they sought to place upon such features of the four comparable properties relied on by Mr Smart as were allegedly different from those of the hypothetical property.

31. Thereupon the master said as follows:

“21. I have to say that at the end of the day I found it very difficult to satisfactorily resolve this conflict of evidence which is based upon a difference of professional opinion, reflecting a number of matters of appreciation which are to some extent subjective in relation to the comparable properties. In particular I should mention that I do not think it is possible for me to enter into my own subjective view of the application of the particular factors, since that would be for me to set myself up as an expert and to usurp the role of the experts. It is necessary for me to choose between the views which are expressed on both sides, if it is possible to do so.

22. However, the conclusion which I have reluctantly reached is that I am unable to decide that I prefer one view over the other, and in those circumstances the case falls to be decided on the basis of the burden of proof. As the claimants bear the burden of proof to satisfy me on the balance of probabilities that their view is correct, and as they have failed to do this, I shall adopt the view put forward by the defendants. Accordingly I will proceed upon the basis of Mr Harvey’s evidence, which is that the property would have sold for … £1.5m.”

32. In his unreserved judgment on costs the master summarised his approach to the issue as to price by saying:

“because of the burden of proof, I felt constrained to accept the defendants’ evidence”.

33. The gravamen of the sellers’ appeal is that the master abdicated his judicial responsibility by failing to reach a conclusion, in the light of the evidence of the two experts, as to the price which would have been achieved upon sale. The sellers seek a rehearing of that issue by a High Court judge of the Chancery Division.

34. I deal initially with one of Mr Holland’s responses to the appeal. He contends that the point made by the sellers is misconceived in that the master did in the end accept the evidence of Mr Harvey. Mr Holland points to the statement of the master in his substantive judgment that he would “adopt the view put forward by the defendants” and in his judgment on costs that he “felt constrained to accept the defendants’ evidence”. I disagree with Mr Holland. The master had gone out of his way to explain in his substantive judgment that, in relation to the experts, he was unable to prefer one view over the other. When later he said that he was “accepting” the evidence of Mr Harvey, he meant, I believe, only that the result of his resort to the burden of proof was that he should not proceed upon the basis of any figure higher than that suggested by Mr Harvey.

35. I should record that, in his written argument before this court, Mr Blaker himself made an initial point, namely that the master should have embarked upon his analysis of the evidence of the two experts with a rebuttable predisposition to accept the evidence of Mr Smart, in that he had been jointly instructed by both sides, where it was in conflict with that of Mr Harvey, in that he had been instructed on behalf only of the buyers. But, in my view wisely, Mr Blaker now abandons the point.

36. A summary of Mr Blaker’s submissions in support of the appeal is that the type of case in which, following evidence on both sides, a judge should resort to the burden of proof is extremely rare; that the present case was not of that type; that there was no impediment to the court’s reaching a conclusion as to the value of the property; that the master abdicated his duty to do so or at least to strive to do so; and alternatively that, if he strove to do so and genuinely found it impossible to do so, he has neither demonstrated that he strove to do so nor explained why he found it impossible to do so.

37. A summary of Mr Holland’s submissions in opposition to the appeal is that, as he had foreshadowed in his written submissions to the master, the task of valuing the property was extremely difficult; that this was particularly so because the property was non-existent; that the master showed by his summary of it that he had the expert evidence on each side in mind and that he understood it; and that it would have been an arid exercise, not required by the law, for him to have sought to explain the difficulties which lay behind his non-conclusion.

38. In my view there are seven relevant authorities.

39. The first is the decision of the House of Lords in Rhesa Shipping Co. SA v Edmunds[1985] 1 WLR 948. This was not a case in which the trial judge resorted to the burden of proof but one in which it was held that he should have done so. Faced with an allegation by the claimants that the ship had been sunk by a collision with a submerged submarine and a contrary suggestion by the defendants that it had sunk as a result of wear and tear, the trial judge found that the claimants’ allegation was inherently improbable but that, since the defendants’ suggestion had effectively to be ruled out, the claimants’ allegation should be accepted as true on the balance of probabilities. Lord Brandon of Oakbrook said at 955H – 956A:

“[It is] of great importance… that the judge is not bound always to make a finding one way or the other with regard to the facts averred by the parties. He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden. No judge likes to decide cases on burden of proof if he can legitimately avoid having to do so. There are cases, however, in which, owing to the unsatisfactory state of the evidence or otherwise, deciding on the burden of proof is the only just course for him to take.”

40. The second is the decision of this court in Morris v London Iron and Steel Co. Ltd [1988] QB 493. An applicant claimed before an industrial tribunal that he had been unfairly dismissed. The respondent, his former employer, alleged that, instead of being dismissed, he had resigned. The tribunal rehearsed the rival evidence of dismissal and resignation, found that the probabilities were equally balanced and so dismissed the application on the basis that the applicant had not discharged the burden of proof. This court held that the tribunal had been entitled to do so. May L.J. said at 504C-D that “in the exceptional case” a judge confronted with an issue of fact might be in breach of his judicial duty to do other than to resort to the burden of proof. Then, at 505E, he addressed a submission on behalf of the applicant that the tribunal “should have set out in much greater detail than it did its findings on other facts, its reasoning, its analysis of those facts, where that analysis had led it, and why in the end it found that it was unable to reach a conclusion one way or the other.” He rejected the submission. At 506A-D he explained that the purpose for which a tribunal gives reasons was to tell the parties in broad terms why they had lost and won and to provide them with the materials which would enable them to know that it had made no error of law in reaching its findings of fact; and he held that there was no reason why, in the simple circumstances of that claim, the tribunal was obliged to provide any more detailed analysis of its reasoning than it had given.

41. The third, upon which the sellers heavily rely, is the decision of this court in Sewell v Electrolux Ltd, The Times, 7 November 1997. Following an accident at work the claimant suffered substantial back pain and the issue before the recorder was whether it had been caused by the accident or by a pre-existing condition. In this respect two orthopaedic surgeons gave conflicting evidence. Unlike the master in the present case, the recorder did not even summarise the expert evidence (let alone seek to analyse its strengths and weaknesses) and, after a brief reference to the notes of the claimant’s GP, he announced that, in relation to this issue, the claimant had failed to discharge the burden of proof. This court held that the recorder had abdicated his duty to make findings and, in the words of Hutchison L.J., “to address and resolve the central issue and such of the subsidiary issues as it was necessary to resolve to decide that central issue.” In my view however the court cannot be taken to have held that it would never be proper to resort to the burden of proof in such a case. Such resort is last resort; and the recorder’s judgment was so perfunctory that it failed to demonstrate that he was even within reach of being entitled to fall back on it.

42. The fourth is the decision of this court in Ashraf v Akram, unreported, 22 January 1999. The parties had had a fight and claimed against each other for assault. The judge’s essential task was to identify which party had started the fight. Having heard their evidence and that of the claimant’s son, he warned counsel that he could not decide the issue; and in due course, without apparently any express explanation for his difficulties, he dismissed both claims by reference to the burden of proof. The court held that he had been entitled so to do. Chadwick L.J. observed that the case was of the exceptional type described in Morris and he distinguished Sewell as being a case in which the evidence was expert and inherently credible. Sedley L.J. said that there would be the occasional case in which the common path to the resolution of the ultimate issue, namely who was telling the truth, was blocked by an intractable evidential tangle.

43. The fifth is the decision of this court in English v Emery Reimbold and Strick Ltd[2002] 1 WLR 2409. This is the leading case on the extent to which, under the common law and by virtue of Article 6 of the European Convention on Human Rights 1950, a court must give reasons for its decisions. I need quote only from §21 of the judgment of the court:

“The essential requirement is that the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the judge’s decision.”

44. The sixth is the decision of this court in Lloyds TSB Bank v Hayward, unreported, 12 December 2002. The trial judge had declined to make a finding in relation to the date when a note had been written. A central part of the dispute related to what had been agreed at a meeting and, on its face, the note, if prepared after the meeting, was likely to illumine it. In his judgment the trial judge said only that, since he regarded the date when, and the circumstances in which, it came to be made as wholly uncertain, the note was of no help to him in deciding what had been agreed at the meeting. In remitting the matter for rehearing, this court concluded that the judge had fallen into error in not making a finding as to whether the note had been made before or after the meeting. Thus at §66 Jonathan Parker L.J. said that the judge should have tackled the issue of the note “head on” and have made a finding about it. There was no reference in the judgments to the burden of proof since the date of the note was only a piece of evidence relevant to an issue and did not of itself need to be established for the purposes of the claim. But, had the judge demonstrated that he had striven hard to make a finding about the date of the note and then explained the basis for a conclusion that it was impossible to do so, the charge against him of an abdication of his duty could surely not have been sustained.

45. The seventh is the decision of this court in Cooper v Floor Cleaning Machines Ltd and Crompton, The Times, 24 October 2003. A motor collision resulted in cross-allegations of negligence between the two drivers, namely the claimant and the second defendant. They were the only witnesses. The judge dismissed both claim and counterclaim for failure to discharge the burden of proof. This court held that he had been wrong to do so and that on proper analysis the evidence established the counterclaim. In §3 and §23 respectively Scott Baker L.J. and Thomas L.J. each said that, before resorting to the burden of proof, a court should, as in Ashraf, raise with counsel the possibility that such a course might have to be taken. In §3 Scott Baker L.J. said that it would be wholly exceptional, particularly in a road traffic case, for a judge to be entitled to determine an issue by reference to the burden of proof; and in §15 he said that the judge erred in failing to analyse the evidence and that, had he done so, he would have found that the defendants had discharged the burden of proof. In the present case the master was clearly unaware of the exhortation in Cooper to invite comment from the advocates before resorting to the burden of proof.

46. From these authorities I derive the following propositions:

(a) The situation in which the court finds itself before it can despatch a disputed issue by resort to the burden of proof has to be exceptional.

(b) Nevertheless the issue does not have to be of any particular type. A legitimate state of agnosticism can logically arise following enquiry into any type of disputed issue. It may be more likely to arise following an enquiry into, for example, the identity of the aggressor in an unwitnessed fight; but it can arise even after an enquiry, aided by good experts, into, for example, the cause of the sinking of a ship.

(c) The exceptional situation which entitles the court to resort to the burden of proof is that, notwithstanding that it has striven to do so, it cannot reasonably make a finding in relation to a disputed issue.

(d) A court which resorts to the burden of proof must ensure that others can discern that it has striven to make a finding in relation to a disputed issue and can understand the reasons why it has concluded that it cannot do so. The parties must be able to discern the court’s endeavour and to understand its reasons in order to be able to perceive why they have won and lost. An appellate court must also be able to do so because otherwise it will not be able to accept that the court below was in the exceptional situation of being entitled to resort to the burden of proof.

(e) In a few cases the fact of the endeavour and the reasons for the conclusion will readily be inferred from the circumstances and so there will be no need for the court to demonstrate the endeavour and to explain the reasons in any detail in its judgment. In most cases, however, a more detailed demonstration and explanation in judgment will be necessary.

47. I have considerable sympathy for the master in confronting the task of valuation in this case. The valuation was of a dwelling which did not actually exist and which therefore had to be appraised only by reference to the drawings which had attracted planning permission. It is clear that the evidence of comparable properties was difficult to apply: Mr Smart said that Sherbourne House was the only true comparable and Mr Harvey described it as the best of an inadequate bunch. Yet unfortunately, after protracted thought, and with great respect to the master, I find myself unable to accept either that he strove to make a finding in relation to the issue of value or that he could not reasonably do so. I cannot infer from the circumstances that he strove to do so but could not reasonably do so; and there is certainly no demonstration or explanation thereof in his judgment.

48. Giving rise to the global difference of £400,000 between the experts were about 16 specific issues between them, in particular as to the effect upon the value of both the hypothetical property and Sherbourne House and indeed the other alleged comparables, of the allegedly positive and negative features which each had. The master ventured no finding in relation to any of them; and in §21 of his judgment, set out in §31 above, he made a curious reference to his “subjective view of the application of the particular factors”, which on one reading suggests that he did not regard it as appropriate for him to do so. I believe that, had he sought to work his way through the specific issues between the experts as to the effect on value of the allegedly positive and negative features of, at any rate, Sherbourne House, he might well, in the light also of the other evidence, have found his way to a conclusion, one way or another, without resort to the burden of proof.

49. I have an allied concern that the master regarded himself as required to adopt one of only two figures, namely £1,500,000 and £1,900,000, and as thus precluded from adopting any intermediate figure. For he spoke of being required to “choose between the views … expressed on both sides” and of being unable to “prefer one view over the other”; and in his judgment on costs he referred to the onus on the sellers “to satisfy [him] that their valuation was right.” Of course I do not wish to be misunderstood as commending any unprincipled splitting of differences; such is a practice which furious advocates sometimes suspect to be in hidden operation, which encourages submission of unreasonable figures and which brings the law into disrepute. But, had the master asked himself not “which of the two valuations should I accept?” but “what, in the light of the evidence of the two valuers, was the probable value of the property?” and had he then not merely noted some of the specific differences between the valuers but sought to adjudicate in relation to them, he might well,I believe, have been able to answer it.

50. It follows that I consider that the master was not entitled to resort to the burden of proof in the manner in which he did so. I propose that the appeal be allowed; that the award of damages be set aside; and that the single issue of valuation and thus of price be remitted for rehearing by a High Court judge of the Chancery Division. I propose that each side be permitted to adduce evidence on that issue from one expert; that it should be for each side to determine whether their valuer should be the valuer who gave evidence on their behalf before the master or be a freshly instructed valuer; and that the values for which each side will contend be not constrained by the values for which each contended before the master.

51. The result of the above disposal would be that the master’s order for costs should also be set aside and that the costs which were the subject of his order should be included in the costs at large before the High Court judge. That would render academic the objection to the master’s order for costs reflected in the second part of the buyers’ cross-appeal; and in such circumstances I would propose not to address the rival arguments on that point. In the light, however, of the fact that there are unresolved criticisms of the way in which the master reached his conclusion in relation to costs, it would be important that the High Court judge addressed all issues of costs denovo.

LADY JUSTICE ARDEN:

52. I agree.

LORD JUSTICE AULD:

53. I also agree.