Akasuc Enterprise Ltd & Ors v Farmar & Shirreff (A Firm)

This is a trial of an action brought by the Claimants against the Defendants a firm of solicitors for damages arising out of an agreement (“the Agreement”) dated 22 November 1996, whereby the First Claimant (“Akasuc”) entered into a conditional contract to sell the property (“the Property”), being a parcel of land at Osier Way, Banstead, Surrey to Mansard Country Homes Limited (“Mansard”) for a minimum sale price of £619,500.00, but with overage entitlement in the event that the Property was developed for residential units and sold by Mansard.

Akasuc’s shares were at all times material to the dispute held in a family trust (“Akasuc Trust”) set up in Guernsey by virtue of a Trust Deed (“the Trust Deed”) dated 1^st October 1985 between (1) Colin Guille (“the settlor”), (2) Tourgand Trustee Company Limited and (3) Notara Anstalt. The entitlement of the Second and Third Claimants to the family trust set out in the Settlement is not to be discerned from the terms of the Settlement itself, but rather from the reality, as acknowledged by Mr Snaith, a partner in the Defendant firm, who was responsible for setting up the Settlement and Akasuc.

Mr Choudhury the Second Claimant gave evidence. His wife’s evidence (she being the Third Claimant) was agreed by the Defendants on the basis that the decision to locate in Guernsey was communicated to her by Mr Choudhury.

In addition the Claimants called a Mr Pendlebury who was the Land Director at Persimmon Homes (Southeast) Limited (“Persimmon”).

The Defendants called Mr Snaith and the partner responsible for the conveyancing transaction, the subject matter of the claim, Elizabeth Anne Dolding (“Miss Dolding”).

Both parties called experts in relation to the valuation of the Property, the Claimants calling Mr Desmond Marcus Stewart Hampton FRICS a former partner in Cluttons now a full time working consultant in the Equity Partnership. The Defendants called Mr A R Adams-Cairns BSc FRICS a director of F P D Savills. There was a significant measure of agreement between the experts shortly before they gave evidence.

Akasuc was incorporated in June 1984 in Guernsey, it was intended to be a vehicle for property and other investments. The Akasuc Trust was established by the settlement to which I have made reference. It received the Akasuc shareholding, but Mr Choudhury is now the shareholder.

At the time the Akasuc Trust was set up it was not known what assets Akasuc would purchase, but Mr Choudhury contends that it was made clear to him, both by Mr Snaith and his accountants that he would have to go and stay outside the U.K. Tax Jurisdiction for a period of three years or more if tax liability on any gain Akasuc might make was to be minimised. In this context I refer to Mr Snaith’s letter to him dated 31^st January 1990. As that letter shows, under the Settlement, neither Mr or Mrs Choudhury are identified as having any association with the Settlement in any way. That is confirmed also by the Settlement. The settlor for example is a resident in Sark, the second party is a company incorporated in Guernsey and the third party is an Anstalt incorporated in Liechtenstein. The trust period in clause 3(1)(D) is the first event that shall occur being 80 years, the day on which shall expire the period of 20 years after the death of the last survivor of the descendants of King George V or such day as the trustees may appoint. The beneficiaries widely defined in clause 3(1)(E) as being any person who is in existence or is born before the expiration of the Trust Period, or any spouse or children of the named persons or (and the most significant provision) any person or classes of persons or Charity, Charities or class or classes of Charities added to the class of beneficiaries by the Trustees in exercise the power conferred upon them by paragraph (1) of clause 7 of the Settlement. The named beneficiaries in schedule B are friends of Mr Choudhury, but are not related to him. As Mr Snaith said in his letter of 31^st January 1990, they had to be people “[Mr Choudhury] could trust very well”. The excepted persons are the settlor and any spouse and any person excluded by the trustees or connected with the Trustees or the Protector. The Protector was someone also known to Mr Choudhury.

There are powers under clause 42 whereby the protector can appoint replacement trustees and if there is no Protector, then the trustees can exercise the power. The Protector is given the power to remove trustees with a proviso that if there is no Protector, the surviving trustees have a power to appoint. It is expressly provided that no settlor nor member of the beneficiaries shall be a trustee.

The intent behind this settlement is summarised by Mr Snaith as “in practice the arrangement is that they are to act in accordance with your written wishes, which are that the benefit of the trust and all of its assets shall be paid to your wife or your children”.

In this context there is in fact nothing surprising in Mr Snaith’s observation in paragraph 8 of his witness statement that Mr Choudhury found it difficult to respect the fact that the trust was administrated by off shore trustees and tended to treat it as his own vehicle, despite advice for the need not to be seen to be connected with the Trust and the Inland Revenue’s power to investigate. I accept that Mr Choudhury handled the Trust/Companies affairs in relation to the Property, personally negotiating banking, planning and sales relationship. This should not of course be surprising to Mr Snaith either, because he set the arrangement up and well knew that ultimately the purpose of the Settlement was to benefit Mr and Mrs Choudhury in accordance with any wishes that Mr Choudhury in particular would express. Mr Snaith accepted this in his evidence.

I also accept at these stages that whilst the Defendants gave no specific tax advice they were aware that the purpose of the arrangement was to minimise tax and Mr Snaith would be aware of the need for off shore residence for the purposes of ensuring so far as possible any gains Akasuc made were free from U.K. tax. I also accept that partners within the Defendants ought to have been aware of that as Mr Snaith acknowledged in cross examination. This might have had an impact on the damages, but Mr Goodman did not proceed with any submissions on this basis. Both parties accepted that any damages should be made without taking any tax consequences into account.

Akasuc purchased the Property on 9^th January 1987 for £155,000.00 as an investment. It was assisted in the purchase with a loan of £140,000.00 from Barclays Bank Plc. Mr Choudhury had given a personal guarantee for that amount. The Property was a former goods yard and was purchased from British Railway Board. In late 1989/early 1990 the borrowing was transferred to National Westminster Bank Plc (“NatWest”).

In the early 1990’s Mr Choudhury encountered financial difficulties. These arose out of two other speculative property investments that he embarked upon, one at 1 Hinde Street. London W1, and a site known as the Norwegian Seamen’s Sports Ground in Barking Essex. Both transactions proved to be disastrous. In both cases the proposals collapsed and receivers were appointed. As a result of these difficulties Mr Choudhury had to enter into an Individual Voluntary Arrangement (“IVA”). Mr Snaith was his legal adviser in respect of the IVA.

By 1991, Mr Choudhury was substantially indebted to the Defendants. They did not participate in the IVA but instead obtained a charge over the Property with the agreement of the Trustees in Guernsey. The charge was executed around 20^th October 1992 and secured not only Akasuc’s debts to the Defendants, but also Mr Choudhury’s personal debts. It also secured an obligation to pay interest at the judgment rate of 15%. Mr Snaith in cross examination acknowledged that that was a variable rate depending on the judgment rate from time to time. Ultimately, when the Property was sold the Defendants were paid all of their fees amounting to £86,494.68 and interest of £30,948.81 making a total of £117,443.49. There is no challenge to that arrangement, although Mr Choudhury states in his witness statement that the Defendants charge was a relevant factor in encouraging any eventual sale to Mansard. I reject that evidence. I do not accept that the Defendants were motivated with that personal objective in mind at all. Naturally they would be anxious to secure the repayment of the substantial credit they had afforded Mr Choudhury and Akasuc over the years.

Although the Property was acquired in 1987, marketing it for development purposes proved a difficult exercise. By early 1994, Mr Choudhury’s IVA was in place. He had completed the IVA due to payments of £32,500.00 to his supervisor from friends of his a Mr Rahman and a Mr Uddin. He said in his evidence before me that his IVA was completed in March 1996, but that he personally was not under any financial pressure when negotiations with Mansard were taking place. I do not accept that evidence. It is plain form the correspondence between the Defendants and NatWest that the bank was very concerned. It may be that if pressed to refinance Mr Choudhury may have been able to obtain finance elsewhere, but the whole exercise was clearly a juggling exercise that he had carried on for a number of years.

As I have said the Property was acquired from British Railways. Its title was registered at HM Land Registry under title number SY568587 and was roughly triangular amounting to 2.67 acres. It had originally been a chalk pit and at the date of the sale to Mansard the site was at a lower level that the surrounding land. The lower level consisted of material dumped on top of the old chalk pit workings and was accordingly made up ground some of the material being contaminated.

From 1991, over a period of four years various attempts had been made to market the Property and although there were various offers of or expressions of interest, only one ripened into an agreement before the Agreement which led to the sale to Mansard. The prior interest was from Linden Homes South-East Limited (“Linden”).

In June 1994 Linden, after a lengthy negotiation period of five months (during which their position changed from an outright purchase) entered into a six-month option agreement in respect of the Property upon payment of £20,000.00. The exercise price was £1,075,000.00. There was therefore no overage payment if Linden exercised its rights under the option. By 13^th September 1994 the Defendants were writing on behalf of the Claimants complaining about the lack of progress on the part of Linden. Ultimately, by 24^th February 1995 Linden was seeking a meeting at which they sought to renegotiate the terms of the option. Mr Snaith wrote to the Guernsey trustees saying that he was quite sure they were going to try and negotiate a reduced price. He reported that Linden had informed him that the access approval was more expensive than expected, but that he had made it clear that they would attract little sympathy. As an undated attendance note of Mr Snaith’s (probably late February 1995) shows he was being told by Linden that there were two major difficulties about the Property. The first problem was that Linden had obtained soil reports, which showed contamination, which would require the excavation of the whole of the site and for it to be made good. Second, the site Property had no access and would have to negotiate access rights from the local authority. It, applying the principle of Stokes -v- Cambridge, was seeking £300,000.00. On that basis, Linden was seeking to reduce its price by at least £450,000.00 and the purchase price would be £150,000.00 to £200,000.00 up front and the balance deferred.

On 13^th March 1995 Mr Choudhury spoke to Mr Snaith and urged him to contact all other interested parties without disclosing the ground situation. He stated that he did not believe Linden had no idea of adverse ground conditions. Despite the warning from Mr Snaith that that might run the risk of losing Linden and any other buyer, Mr Choudhury stated that he was prepared to take the risk.

I should at this juncture point out that whilst in the Particulars of Claim Mr Choudhury was described as an experienced property developer, I accept his evidence that in reality he had little or no experience of property development (and those that he had were disastrous). He certainly had no experience of development of a site as complicated as the Property and like a lot of people who have a site the developers might be interested in acquiring he had an over optimistic view, in my opinion of the worth of the site and was blind to the difficulties.

Mr Snaith contacted Linden’s agents, Messrs Pitmans on 16^th March 1995, indicating that the desire on the part of Linden to reduce the price by £450,000.00 was deeply unattractive. On 21^st March 1995 Linden wrote to Mr Snaith, saying that they were happy to negotiate and to provide all relevant information on the basis that there was a serious intent on the part of Mr Choudhury to negotiate in good faith. As a result they enclosed the technical report that they had obtained together with the budget cost. Mr Choudhury did not take up that offer. I suspect he did not believe there were serious problems, but the reality is that he never sought another report from a third party and all other subsequent developers had to deal with the same two key problems when they attempted to address the development potential of the Property. Mr Snaith attempted in his letter of 31^st March 1995 to express surprise about Linden being unaware of the nature of the site beforehand. Mr Snaith reported to the trustees on 6^th April 1995, reported that Mr Choudhury suggested that the trustees might consider sale by tender as an alternative to dealing with Linden on the basis it might catch any developer unwary enough to tender without carrying out ground conditions. Linden on 20^th April 1995, paid £5,000.00 for a two month extension of the option and stated “I look forward to hearing from you once your client has concluded his investigation regarding the ground conditions”. No such investigations, as I have said has been disclosed. Ultimately, on 20^th June 1995 Linden wrote to Mr Snaith (the letter being copied to Mr Choudhury) setting out the fact that they would have to pay £300,000.00 to the local council to obtain access and that the site difficulties meant that they made a revised offer of £625,000.00 with a deposit of £150,000.00 to be paid and the balance on legal completion six months later of £475,000.00. In addition if Linden achieved sales in excess of £4.35 million, then Akasuc would receive overage of 35%. The letter concluded “if your client is serious about selling in the foreseeable future, then Linden can achieve this, but only if the problems are recognised and adequately reflected in the value of this site”. The Claimant did not respond to that and after several enquiries with other developers (none of which came to fruition) Mr Choudhury instructed Mr Snaith to attempt to revive a solution with Linden to sell the Property for £650,000.00 only, with a deposit of £250,000.00, completion six months after exchange and no overage. By contrast Berkeley Homes through their agents Lee Barker and Co. Ltd. offered a subject to contract price of £250,000.00. This was down to the fact that they perceived the soil problems as likely to cost £500,000.00 and the access requirements would also reduce the price. Linden did not accept the counter proposal put forward by Mr Snaith on behalf of Mr Choudhury.

A change of tack was then embarked upon. New agents Nelson Bakewell were retained and they proposed a sale by an informal tender. Their advice was that the site was worth approximately £1.4 million and after discount of some £0.4 million for soil costs, expressed the view that the site was worth a value of £1 million. That valuation figure was not in a formal document. Nor does it address where the costs for the access falls i.e. does it fall on the seller or the buyer?

Nelson Bakewell’s marketing exercise led to five tenders, as reported to Mr Snaith in their letter of 22^nd January 1996. Clearly some of the tenderers had seen Linden’s report. It had not made a fresh submission. When adjustments were made to the tenders, the best bid was Fairclough Homes (Southern) Ltd. of £447,000.00. Fairclough dropped out almost immediately, which led to the probable correct conclusion that it was a speculative offer. The second highest bidder was Taywood Homes, whose net bid was £350,000.00 were then contacted, but having become aware of problems by 6^th March 1996 they retracted their offer as they believed the site had no value.

Accordingly, by April 1996 the Claimants had lost Linden a year earlier and no other developers had shown anything like the interest at the level that Linden had originally put forward. The next proposal came from Willowbank Homes Ltd., which offered £400,000.00 subject to accepting all responsibility for land reclamation and access costs on its part. On 25^th June 1996 Mr Choudhury informed Miss Dolding that that offer was not high enough. On 28^th June 1996, Miss Dolding had a telephone conversation with Mr Choudhury and the solicitors representing Willowbank Homes. By this time Mr Choudhury had obtained an even lower offer from another bidder, Brydon Homes and tried to raise Willowbank Homes up to £500,000.00. They were not prepared to increase the offer and finally made an offer on 27^th August 1996 of a flat £100,000.00 “as seen”. Mr Choudhury did not accept that offer, not surprisingly. By this time he had received an offer from Mansard. This negotiation led to the Agreement and I shall deal with this in more detail further in this Judgment.

Before I deal with the Mansard approach, it is useful to review Akasuc and Mr Choudhury’s financial position as at September 1996.

I have already set out earlier in this Judgment the financial difficulties Mr Choudhury encountered in the early 1990’s. Akasuc had borrowings on the Property, which it was unable to service. Both it and Mr Choudhury were unable to pay the Defendants and they gave credit in circumstances, which I have set out above. On 12^th April 1994 NatWest had demanded £104,997.25 from Akasuc, being the balance of there outstanding. They were dissuaded from seeking to recover that by the efforts of the Defendants, who drew to NatWest’s attention offers from Linden and Barratt. By 20^th May 1994 they were seeking £110,000.00 as the consideration for the option from Linden (the amount required to pay off NatWest). The option agreement with Linden nevertheless persuaded the bank to stay its hand. Accordingly, it wrote on the 20^th June 1994, setting out terms upon which it was prepared not to seek immediate payment of its monies. An initial period of grace was for six months, but if the option was not exercised within that period, it reserved the right to undertake a further full review.

On 16^th March 1995 the Defendants informed NatWest of Linden’s reduced offer. It reacted with disappointment and indicated in its letter of 21^st March 1995, that it expected to receive £1,000.00 for each month the option period was extended. By this time Akasuc’s affairs had been moved to NatWest’s corporate insolvency section, a cheque for £1,000.00 was sent to it in March 1995, and a further £2,000.00 was sent to in on 28^th April 1995. Nothing was received and on 7^th November 1995 NatWest required proposals and interim payments on a monthly basis commencing in November 1995. At that stage it was only prepared to confirm withholding of legal proceedings until March 1996.

On 1^st April 1996, it required a full report from the Claimants agents setting out the up to date position on the negotiations with the respective purchasers, making it clear that NatWest was seeking a sale within the short term. Mr Snaith (on instructions from Mr Choudhury) had indicated that there were no other resources to make interim payments, but NatWest in its letter made it clear that if interim payments were made, it would allow a long period for a voluntary sale. On receipt of that letter Mr Snaith spoke to Mr White the Claimants selling agents at Nelson Bakewell. Mr White said to Mr Snaith, that the news was not good as Berkeley’s Homes had pulled out, Fairclough Homes had pulled out, Linden had gone cold, but might be available. Mention was made of an auction sale, and that he would draft a letter to the Bank. On 3^rd April 1996 Mr Snaith spoke to the bank who said that they would not act before Wednesday 10^th April 1996. Later that day Mr Choudhury said he would pay £4,000.00 to the bank. On 3^rd Arpril 1996, Mr White wrote to NatWest Bank where they reported on the marketing exercise. They listed the two hundred and forty enquiries, the sixty-three detailed enquiries and six offers. They also told the NatWest that they had been in negotiations with bidders with a view to exchanging contracts and “were in discussion with Linden Homes regarding a disposal and I am expecting an imminent exchange of contracts”. It is difficult to see any basis for the contents of this letter. Mr Snaith was unable to provide any understanding of how the letter could have been written. On 12^th April 1994, by which time the indebtedness had risen to £117,842.32 written proposals were required by the next week. Mr Choudhury offered the payment of £5,000.00 and the bank required resolution by the end of the year. Accordingly, Mr Snaith wrote on 10^th April 1996 setting out NatWest’s requirements to Mr Choudhury. £13,000.00 was required. Mr Choudhury telephoned him on the 14^th April 1996 to tell him that £6,500.00 would be available then and a further £6,500.00 would be available before 31^st May. On 15^th April 1996 Nelson Bakewell confirmed Linden Homes had pulled out and that they had now exhausted all offers and the only option left was an auction. On 17^th April 1996, the offer of the £13,000.00 staged as I have said above was made to NatWest, which (perhaps surprisingly) it accepted by its letter of 18^th April 1996. This bought Akasuc time.

On 19^th April 1996 Nelson Bakewell reported an offer of £600,000.00 from Willowbank but subject to the access with the local authority being sorted out at the Akasuc’s cost. This was set out in writing by a letter from D W R H & Co. chartered surveyors dated 19^th April 1996.

By 26^th April 1996, Mr Choudhury said he was inclined to accept on the basis that the price of £600,000.00 would be subject to a reduction of only £200,000.00, for access rights leaving him £400,000.00 of which £200,000.00 would be utilised to pay NatWest and the Defendants debts leaving the Claimants £200,000.00 clear. He reported to Mr Snaith that he was keeping a refinance option open but if all else failed, the instructions were to put the Property in auction in December. On 3^rd May 1996, when the local authority was still in insisting on £300,000.00, Mr Choudhury informed Mr Snaith that he would refuse an offer, which would only produce a net figure of £300,000.00. In fact Mr Choudhury only paid the £6,500.00 first instalment on 24^th May 1996. As I have already set out earlier in this Judgment, Willowbank Homes offer reduced to £400,000.00 and ultimately reduced to £100,000.00.

In addition to having difficulties paying NatWest, Akasuc was unable of course to pay the Defendants and had been unable to pay the fees due to Nelson Bakewell, who instructed Wedlake Bell to institute proceedings. In addition the second payment of the £6,500.00 was missed and was still outstanding by the end of September 1996.

On 9^th July 1996 Nelson Bakewell complained that Mr Choudhury had sought delay in paying the invoices whilst Mr Snaith was on holiday. On 25^th July 1996, Mr Choudhury gave Miss Dolding £1,000.00 in cash to cover the monthly instalment payment due to NatWest. He was hoping to borrow £6,500.00 from a friend in the USA who was having a liver transplant and they were going to buy 44, Beech Field from his brother, which would raise another £5,000.00. Nelson Bakewell’s outstanding fees remained unpaid throughout September 1996.

The conclusion I draw is that over the two years preceding the Agreement with Mansard, Akasuc and Mr Choudhury were under increased financial pressure from NatWest Bank and only staved it off as a result of the efforts of the Defendants and the realisation no doubt on the part of NatWest that the only way out was the sale. I conclude that if a sale was not agreed in some way by the end of 1996, NatWest would have in all probability have not continued any further extensions. Thus it was important for the Claimants to achieve a sale by the end of 1996, failing which, either NatWest would intervene or there would be the equivalent of a fire sale, namely an auction.

As set out above, shortly before the meetings with Mansard the last developer to show interest Willowbank had reduced its offer to £100,000.00. On 9^th September 1996, Mr Choudhury telephoned Miss Dolding and told her that he had had an offer from Mansard, where he had an up front payment of £150,000.00 and 25% of the gross sale, with an estimated sale of £4.7 million. He went back to them and said that he would accept 25%, but wanted £400,000.00. He was concerned to discuss with Miss Dolding the question of protecting the overage payments or whether the Property would be transferred to Mansard immediately. Miss Dolding records in her attendance note “he wanted to know whether the land would be transferred to them or how he would be protected. I explained that there would be a caution over the land”.

He also reported that his main concern was to pay off the NatWest and give himself about £100,000.00, which is what £400,000.00 would do.

I should say something at this stage about the evidence of Mr Choudhury and Miss Dolding. There had been disputes about what was said at meetings. In particular Mr Choudhury was insistent that he required a charge at all times and did not understand there to be any lesser form of protection than a charge. As I shall set out in the review of Miss Dolding’s attendance notes the possibility of protecting the overage provision by way of a caution was according to the notes, discussed with Mr Choudhury. I found Miss Dolding to be an honest witness and a conscientious one. She was for example, frank enough to admit in cross examination, that she had made a mistake in relation to the drafting of the Agreement. I can see no reason why her attendance notes should not be accurate, and where there is a dispute between her evidence and Mr Choudhury’s and the formers is supported by an attendance note I unhesitatingly prefer the contents of Miss Dolding’s attendance notes. The next day after this conversation Mr Choudhury instructed Miss Dolding to reject the Willowbank offer of £100,000.00. NatWest was simultaneously pressing for the balance of the £6,500.00 that was due in May 1996. There was a discussion between Mansard and Mr Choudhury about fees. He was insisting that Mansard pay his fees and as a result of that Miss Dolding sent an estimate of the fees as being £5,000.00. In fact the Defendants billed the Claimants at a total of £8,000.00. The difference between them remained unexplained, but fortunately is not a dispute, which I have to resolve in these proceedings. It is fair to say that Miss Dolding made it clear that if considerably more work was needed the charge would be higher.

On 12^th September 1996, Mr Choudhury spoke to Mr Snaith and his hand written note sets out the proposed prices and overage. It is clear from Mr Snaith’s note, that the conversation with Mr Choudhury, that the percentages of overage were to increase in bands. Thus the first £3 million would attract an overage of 20%, £3 to £3.5 million would attract 25%, £3.5 to £4 million would attract 30% and over £4 million would attract 40%.

Mr Choudhury had a further discussion with Miss Dolding on 18^th September 1996, where he reported that Mansard wanted to pay £400,000.00 plus overage with £200,000.00 on full planning permission and £200,000.00 on construction. Miss Dolding advised him that that did not seem a very good idea. Thus as she acknowledged again, frankly in cross examination, she was advising Mr Choudhury as to the advisability of some to the financial aspects of the proposed sale. Tellingly, she noted that they had guaranteed him £600,000.00, but it was looking more like £1 million on the sale of £4 million on the site.

On 25^th September 1996, Mr Choudhury attended Miss Dolding at the Defendants offices. It was now stated that Mansard would pay £200,000.00 on signing the Agreement and they would exchange contracts as soon as everyone was ready. A further £200,000.00 would be payable on commencement of construction or April 1997, and that he would get 20% on each property up to £3 million and above £3 million he would get 30%, it is recorded that they will pay his costs and that included release of the caution for each property as it is developed. Whilst this meeting was taking place, Mansard’s letter under the heading Vanguard Group Ltd. of offer dated 25^th September 1996, was considered. It was faxed by Mr Choudhury to her. The proposals clearly reflect there having been a discussion between Mansard and Mr Choudhury about a caution. Paragraph 1 is a little difficult to understand. It says:-

“1.

Purchaser to pay £200,000.00 on receipt of renewed and outline planning permission. Purchaser will take a first charge on the property with the vendor leaving a caution in place”.

Mr Tregear QC on behalf of the Defendants submitted that. Paragraph 1 meant that the purchaser would have a charge in respect of the unpaid purchase price, the vendor having the benefit of the caution against dealings, I do accept that. The reference to a caution in favour of the vendor naturally flows from the discussion recorded in Miss Dolding’s note of 9^th September 1996.

Paragraph 3 deals with the overage, and once again, makes it clear that the overage was 20% up to £3 million and thereafter 30% of sales over and above £3 million. Mr Choudhury had of course received this letter. He never once suggested that the overage figure was to be 30% on the full £3 million once the £3 million had been received. Such an arrangement would not make commercial sense for Mansard. For example, if the total sales were £3,010,000.00, the extra £10,000.00 would cost Mansard a further £100,000.00 on sales up to £3 million. I cannot believe that that was intended. It is not supported by the contemporary documentation and Mr Goodman was right to abandon this claim in his closing speech.

On 26^th September 1996, there was a further telephone conversation between Mr Choudhury and Miss Dolding. He told her that Mansard had said they would exchange within two weeks and that he was anxious because he wanted the money and he did not want them to change their minds. Mr Choudhury denied that he was thus minded, but I reject his evidence. Nevertheless, I do not believe that he was so desperate as the Defendants contend that he would have signed any transaction that was put to him by Mansard.

On 30^th September 1996, the Defendants wrote to Matthews & Co., Mansard’s solicitors, and amongst other things, corrected paragraph 3 as regards overage to make it clear that the sales should be gross sales and not net sales. The significance of that of course is that they did not seek to claim overage as contended by the Claimants in this case. If the overage figures were as contended in this case by the Claimants, Mr Choudhury would have been bound to have raised that with Miss Dolding when he showed her Vanguards letter.

Over the next week Mr Choudhury telephoned repeatedly, in view of the apparent silence coupled with NatWest’s pressing for the second £6,500.00. Ultimately, a chaser was sent by Miss Dolding on 8^th October 1996, replied to by letter of 8^th October 1996 saying that they understood the terms had been agreed subject to contract and asked for title to be deduced so that they could draft a contract, conditional upon outline planning consent. On 8^th October 1996, Mr Choudhury told the Defendants that he was unable to pay the £6,500.00, because his friend had died, but asked them to tell NatWest of the sale. Fortunately for Mr Choudhury, NatWest wrote on 9^th October 1996 expressing regret at the lack of ability to pay the £6,500.00, but indicated that they would not press for the payment whilst making it clear the final deadline for full repayment was 31^st December 1996.

On 18^th October 1996, Matthews & Co. set out the terms subject to contract, as they understood them. The overage figure had once again been linked to net proceeds. In addition, the Claimants costs up to a maximum of £5,000.00 were to be paid if the matter completed. By 18^th October 1996, Mr Choudhury was plainly becoming anxious at the lack of action on the part of Mansard and their lawyers. On 21^st October 1996, Miss Dolding wrote to Matthews & Co. in response to Matthews & Co.’s fax of 18^th October, and in paragraph 2 she indicated that on the transfer of the land, the Claimant must have a legal charge over the Porperty to remain in force until the last house was sold. That attracted a reply dated 22^nd October 1996, where Matthews & Co. indicated that a legal charge was not on the table because Mansard’s banker would require a first charge and might well insist no further charges were put upon the property, saying “your clients will need to rely upon his contractual rights”.

The conclusion to be drawn from that sentence in my opinion is that Matthews & Co. were hoping to persuade the Claimants to accept an unsecured promise to pay the overage. Miss Dolding plainly considered that letter with Mr Choudhury and he in turn spoke to Mr Baty the relevant director of Mansard. As a result of that conversation he telephoned Miss Dolding as set out in her attendance note of 24^th October 1996, that they were willing to take a second charge. She reiterated that in her letter to Matthews & Co. of the same date. In a separate note of the same day Miss Dolding records that Mr Choudhury was insistent upon a legal charge, and that he had been told by Mr Baty that that is what could be given so he invited Miss Dolding to insist, which she did by the letter that she wrote. This is when any conversation took place as regards the charge and I reject Mr Choudhury’s evidence in paragraph 12 of his witness statement, that he had a conversation with Miss Dolding on 26^th September 1996 where he insisted a charge was necessary and that a caution would be worthless.

At about this time two other developers showed interest. One was Gleeson, who were interested in making an offer of £1,237,000.00 for a clean site. In addition, Persimmon Homes sent a letter of 1^st November 1996 offering a minimum price of £640,000.00 subject to contract. I will refer to this letter further in the Judgment when I consider the evidence of Mr Pendlebury. Ultimately, no offer was received from Persimmon before that and by 12^th November 1996 Mr Choudhury had formed the view that they were stalling.

Matthews & Co. on 1^st November 1996 agreed that:-

“Our clients agree that in principle some form of security should be provided to your clients.

For the reasons expressed in our letter of 22^nd October this may not be possible by way of a second charge. They are considering how best to provide your client with security and will advise further”.

A copy of this letter was sent to Mr Choudhury on the 4^th November 1996. Although she did not expressly draw to Mr Choudhury’s attention the lack of a charge, that is not significant to my mind. Mr Choudhury would have seen from the letter that there was serious doubt about whether or not the Claimants would obtain a charge of security for the payment. It was not significant because Miss Dolding had already flagged it up, as I have said above, and considered the possibility of protecting the overage payments by a caution.

On 1^st November 1996, NatWest made it clear that there would have to be exceptional circumstances beyond the 31^st December 1996, if there was no repayment by that date. By that date it indicated it had a firm intention to appoint an LPA receiver with a view to the land being realised at a realistic market value within the very short term. If the bank had intervened and appointed a receiver, it seems to me unlikely that the receivers would have embarked on a marketing exercise of any length. The sale would have been a sale “as is” basis, and in that eventuality would not have achieved the minimum price under the Agreement of £617,000.00.

On 5^th November 1996 Mr Choudhury discussed the Persimmon offer with Miss Dolding. He expressed the view that he might be able to raise them to £500,000.00 on receipt of planning and 27% at point 4 of their letter.

On 11^th November 1996 there was a further discussion about the Persimmon offer and the reports (I assume the soil survey reports) were posted to them. Nothing happened after that and by the 12^th November, Mr Choudhury concluded that Persimmon were stalling. There is no evidence to show that Persimmon would have come back with an offer that would have bettered the Mansard offer in late 1996. It is possible that they might have come back with a higher offer in mid 1997 when the market conditions according to the experts were changing. However, in this context I bear in mind the evidence of Mr Pendlebury as to the structure of the Persimmon offer. When Persimmon had truly evaluated the site it seems to me quite clear that their offer would have been reduced at the very highest to take into account two factors. First, the cost of the access was to fall on the Claimants (which would be £300,000.00) and second they would have revisited the abnormal decontamination costs, but the best evidence I have of those is that of the experts who agreed in effect the costs and they would have been around £340,000.00. The guaranteed minimum of £940,000.00 would only give the Claimants £640,000.00 (assuming absorbing the access costs) and even less if Persimmon sought to throw some of the reclamation costs on them.

I do not accept therefore that in late 1996, there were any other viable offers beyond Mansard.

Mr Choudhury has produced a letter from Petrola Training Corporation Ltd. of Dahka, Bangladesh to loan him £150,000.00 to refinance the existing mortgage. He did not disclose this to the Defendants, but that is not significant. That would have been enough to pay off the NatWest charge if necessary. It would have been an expensive loan (arrangement fee of 3% and interest at 6% above Barclays Bank UK base rate). However, I am satisfied that if Mr Choudhury had been unable to secure a buyer by December 1996, then if NatWest insisted in repayment he would have obtained refinance although that would have been more expensive for him. In the event that would have enabled him to keep the land into the next year. That is significant, because it is clear to me that the market changed in 1997.

On 18^th November 1996, Matthews & Co. enclosed a contract, which they said they understood was agreed. Miss Dolding considered the draft with Mr Choudhury on 18^th November 1996, and she went through the enquiries before contract and the draft agreement spending 50 minutes on that exercise according to her note, 40 minutes drafting replies to the enquiries and 45 minutes amending the contract. Her note does not record the extent of the discussion, but in evidence before me she said she took Mr Choudhury through the draft contract line by line. As a result of that discussion she returned the draft contract amended in read to Matthews & Co. via the DX on the 18^th November 1996. She included an amendment to clause 5.10 by inserting an extra provision requiring Mansard to grant a second charge in favour of the Property and obligations for it to use its best endeavours to obtain full planning permission and to notify the seller each time a house is sold, giving full information of the gross sale proceeds and any incentives.

Matthews & Co. on 19^th November 1996, faxed an engrossed contract back and sought confirmation that it was agreed. Miss Dolding considered this and replied, raising 8 queries. The most significant one was query 7, where she noted that Matthews & Co. had deleted her amendment, creating a second charge in favour of Akasuc. In that fax she noted that she had not yet spoken to her client. She has disclosed 4 notes of telephone conversations with Mr Choudhury on that date. The sequence of them is not easy to reconcile, as they are not time noted. The contents are not challenged. Matthews & Co. apparently told Miss Dolding that the contract must be accepted in its drafted form or they would withdraw and that none of Miss Doldings amendments would be accepted. She communicated that to Mr Choudhury in one of these discussions, and he called her and told her that he had spoken to Mr Baty. There is an observation (either Mr Choudhury’s or Mr Baty’s not clear) that Mansard’s solicitor was unreasonable. He reported that there had been discussions and that Mr Baty had told him that the bank had not said that the Claimants could not have a second charge. There was a discussion then about a charge being released after payment of £400,000.00 and then have a caution.

That seems to me, to record that Miss Dolding is saying, that a charge and caution in combination is acceptable. In this context acceptable means as a method of providing security for the overage payments. When Mr Choudhury said those words, it was plainly in my opinion, in the context of the previous discussions for Miss Dolding to confirm that the proposals would be acceptable. The more likely scenario in my view, given that I have found that she raised the issue of a caution earlier, is that she raised again the question of a caution on being told that Mr Baty was willing to have a charge to be released after £400,000.00. This seems to reflect another note of the same date, which records a discussion between Miss Dolding and Mr Choudhury about the approach of Matthews & Co. and the important question and answer “If no legal charge can have caution? Yes but legal charge would be better”.

On 20^th November 1996, Miss Dolding records, Mr Choudhury telephoning her and informing her that he had spoken to Mr Baty, who knew the Linden Chairman and that Mr Baty had agreed a second charge up to £400,000.00 limit and “then caution”.

On 22^nd November 1996, Miss Dolding agreed amendments with Matthews & Co. over the telephone, including a charge to secure £200,000.00 on the basis that there would be a deed of postponement, postponing priority to Mansard’s bank. She reported that back to Mr Choudhury. On 22^nd November 1996 the draft charge was sent by Matthews & Co. and forwarded on to the Guernsey Trustees. At 3.25 p.m. on 22^nd November 1996, contracts were exchanged under formula B.

Having considered the contemporaneous notes of Miss Dolding, which were not challenged by Mr Goodman in his closing speech, as being inaccurate, my conclusions are as follows.

Miss Dolding acknowledged in cross examination that the caution itself would not have provided security. The reason for that is as Mr Tregear QC conceded the Agreement imposes no obligation on Mansard to develop and sell, but only imposes on it an obligation to pay an overage if it does so. The Agreement does not attempt to impose the obligations to pay the overage on successors in title. Thus lodging a caution (although in fact Miss Dolding did not lodge any caution any way) would not have been successful, because HM Land Registry would have rejected a caution based under the agreement, because there was no cautionable interest, because the obligation to pay was personal to Mansard and did not bind successors in title from it.

On 27^th November 1996, Mr Choudhury obtained an offer from ICC Bank Plc of Dublin, to lend him Ire.£100,000.00. The terms were that the bank should have a first floating charge extending over all of his assets and a first specific charge over all other free hold land. Those monies would not have been sufficient to discharge the NatWest Bank borrowings. That did not matter because on 11^th December 1996, NatWest Bank clearly agreed to postpone matters pending further developments on the agreed sale. ICC Bank made a further offer on 7^th January 1997, but this too suffers from the same difficulties. Nevertheless, as I have concluded above, I am satisfied that if NatWest Bank had insisted on repayment, Mr Choudhury, one way or another would have obtained funds, even if more expensively to refinance his borrowings from NatWest Bank. This as Mr Tregear QC conceded would only have arisen if I find that Mansard would not have entered into a revised agreement as contended for by the Claimants, so that the Claimants would have been left with no contract and looking again in the market.

Under clause 5.5 of the Agreement, in the event that either a deed of grant or approved planning permission in a form satisfactory to Mansard was not obtained within 3 months, either party was entitled to rescind it. That right of rescission therefore arose on 22^nd February 1997. The Agreement was conditional upon obtaining approved permission, the deed of grant and the soil and ground investigation reports. Under clause 5.1.6 “soil and land investigation reports”, means reports to the Buyer by appropriately qualified consultants which satisfied the buyer in all respects relating to the soil and ground conditions of the Property and the viability scheme based thereon.

Mr Tregear QC submitted that this provided Mansard with a let out, which I accept in the sense that provided there was reasonable evidence to justify it not proceeding on that basis there was an option on the part of Mansard to rescind, because the condition had not been satisfied, although the right of rescission under 5.5 does not expressly extend to that condition. I do not accept that (nor did Mr Tregear QC in argument) that Mansard could use the clause to escape without a genuine justification, if for example they realised the Agreement they made was a bad one.

On 10^th February 1997, Kingsacre Properties Ltd. wrote to Akasuc saying, that they were interested in putting forward an offer to purchase the site, but gave no details.

On 11^th February 1997, Miss Dolding wrote to Matthews & Co. saying that the Claimants would be willing to extend the option period if in the event of rescission it would be entitled to retain the some to £10,000.00 from the deposit being held. Matthews & Co. wrote on the same day suggesting that the parties agree a 3 month extension. On 18^th February 1997, she wrote to Matthews & Co. suggesting that an extension would only be agreed on the basis of £12,000.00 instead of £10,000.00 being the relevant figure. Matthews & Co. rejected that on 18^th February 1997. In a further letter dated 19^th February 1997, Matthews & Co. set out the difficulties which Mansard were then encountering in relation to the deed of grant and the site investigation. On 20^th February 1997, Matthews & Co. capitulated and a supplemental agreement was entered into. This followed discussions that had taken place again between Mr Choudhury and Mr Baty. At the same time Kingsacre were stated to be very keen, but Mr Choudhury had indicated to Miss Dolding that he would only accept an unconditional offer from it. Kingsacre were apparently going to make an offer a couple of days after 21^st February 1997, and Mr Choudhury on that date asked Miss Dolding to delay matters vis-à-vis Mansard. On 24^th February 1997, it transpired that Mr Choudhury was expecting £12,000.00 and Miss Dolding raised this with Matthews & Co. who agreed to pay the £12,000.00 in exchange for the supplemental agreement that was executed also on 24^th February. This gave an extension until 27^th March 1997. Also on the same day Kingsacre decided not to proceed, because there was an agreed sale, but indicated that they would be delighted to hear further if that no longer represented the current situation. Also on the same day NatWest enquired as to the progress, and were told the next day of the extension to 27^th March.

Somewhat belatedly on 10^th March 1997, Mr Baty sent the ground investigation report to Mr Choudhury, observing that the site had been discovered to be highly contaminated. He included a summary of the abnormal costs, which amounted to £504,000.00. He also reported that the Council’s elected representatives despite a recommendation of support from the officer had rejected an offer of £200,000.00 for the grant of the right of way (as opposed to the stance of £300,000.00). in the letter he also set out that the agreement guaranteed a minimum of £600,000.00 and that in their opinion it was unlikely that the sales revenue would exceed £3.5 million. That would lead to an additional payment of £150,000.00 with a total payment of £750,000.00. He set out the abnormal costs and suggested that they then believed that the site value would only be worth £450,000.00. Significantly, Mr Baty said this:-

“To simplify matters we would wish to agree a fixed price, which will become payable within 28 days of the following:

1.

Satisfactory detailed planning consent…

2.

The acquisition of … rights of access …”.

He said further in the letter:-

“We are very much committed to this project and to date have expended in the order of £50,000.00 in surveys, application for professional fees. Substantial additional expenditure and effort is now required to bring the site to a state where it can be developed.

Without an access and in its present condition the site is undevelopable and practically worthless. We are prepared to work with you to overcome all the problems, but clearly this is going to take longer than anticipated.

A meeting to discuss the above and to exchange information and ideas is essential, and I would appreciate a call to arrange a date upon receipt of this letter”

This demonstrates, in my opinion, that Mansard were serious developers in 1996 and entered into the Agreement in an expectation that they would satisfy the conditions and assume a liability to pay the overage payments. There was nothing to suggest in the evidence before me that Mansard did not believe that the Property would not have been developed by them in accordance with what presumably would have been their calculations. By February 1997, difficulties were clearly being encountered. They nevertheless, showed a commitment to the Agreement by in effect giving the Claimants an extra £12,000.00 in the event that they withdrew a little over a month later. The soil tests whilst Mr Choudhury did not give credence to them, showed the same difficulties that Linden Homes had encountered. (Indeed all the developers who investigated the site raised the two same points, namely access and contamination). These were genuine difficulties, which affected the viability of the development. I have already observed that in 1996, this led to the withdrawal or substantial reduction of many offers that were made for the site subject to contract. Nevertheless, it is clear that if there was a renegotiation Mansard felt they could proceed.

It is clear from an attendance note of a conversation between Miss Dolding and Mr Choudhury on 13^th March 1997, that Mr Choudhury did not accept that there was any genuine justification for Mansard’s stance. On the same day Matthews & Co. telephoned Miss Dolding and reiterated that Mansard were anxious to proceed. Miss Dolding in a letter of 13^th March 1997, to Mr Choudhury reminded him of the potential consequences if NatWest Bank were told that they were not going to proceed, reminding him that the deadline had expired.

Mr Choudhury was not prepared to meet or discuss matters beyond agreeing a 3 months extension to the deed of grant, which was apparently agreed on 21^st March 1997. Matthews and Co. sent a draft reflecting that on the same day to Miss Dolding. This changed the right of rescission by inserting a new clause, which only enabled Mansard to rescind in the event that the conditions were not satisfied. It provided, however, a further payment of £2,500.00 if the agreement was not rescinded by 27^th April 1997.

No doubt out of exasperation, on the 18^th April 1997 Mansard wrote to Mr Choudhury. In this letter they indicated that the Council had now accepted a figure of £300,000.00 for the deed of grant, but the provision of temporary access would cost £40,000.00. They believed that the revenue would be down to £3 million. They offered to consider an outright purchase with payment upfront and not deferred, but must be on a realistic land value basis and expressed a willingness to negotiate. Mansard apparently threatened to withdraw a planning application if the proposals were not agreed, but Mr Choudhury believed they were bluffing. On 6^th May 1997, in a conversation with Miss Dolding, Mr Choudhury instructed her to rescind. She then asked him whether he had another firm offer, as without that the bank would sell and might even sell to Mansard. Mr Choudhury “after some further thought” said he did not want her to seek rescission of the Agreement. It is quite clear in my opinion, that Mr Choudhury accepted that he had no other buyer available at that time. The effect of the second supplemental variation agreement was to release monies to Akasuc, but extended the period for satisfaction of the conditions until 27^th June 1997, when either party could thereafter rescind the same.

The transaction proceeded to completion. Miss Dolding sent a completion notice out indicating that the amounts due on completion net after charge back was £185,375.00. NatWest provided a statement as at 12^th June 1997, showing £98,977.45 as being due to it, giving credits for £16,500.00 and being released to it from the deposit provided by Mansard. Completion was agreed for the 4^th July and the day before completion Matthews & Co. informed Miss Dolding that the second charge was not necessary, because Mansard had decided to advance the balance of the monies and pay £385,375.00 immediately. This apparent generosity on the part of Mansard did not alert Miss Dolding. The amount required to redeem NatWest Bank was £101,178.46 by that date with the result that the matter completed on 4^th July 1997, NatWest was paid off, the Defendants were paid off on their second charge and the balance was released to the Claimants.

I have already observed Miss Dolding made no attempt to register a caution. On the date fixed for completion she sent an application to the Durham District Land Registry enclosing the Agreement and the two supplemental agreements and asking it to register a notice against the title in respect of the Agreement. Although she described it as a notice, what she was applying for was a restriction preventing any disposition without the consent of Akasuc. On the same day she told Mr Choudhury about the registration of the caution in the light of his comment that he did not trust Mansard.

On 14^th July 1997, (after a significant period of delay) Matthews & Co. objected to a restriction, indicating that there was no provision in the contract to enable that to take place.

The reason for the delay is self-evident. On 7^th July 1997, Mansard sold the Property to Charles Church Developments Ltd. (“Church”) for £1,050,000.00. At first sight that enabled Mansard to make a profit on the sale without any development costs of something of the order of £400,000.00. I stress however, that is at first sight because as I shall set out in this Judgment, Mansard did not make a profit of anything like that amount. Nevertheless, it was enabled to transfer the title to Church and defeat the overage obligation, because it did not develop and Church was not under an obligation to pay overage to the Claimants in the event that it developed. The overage obligations were thus entirely circumvented.

Thereafter, Miss Dolding attempted to lodge a caution and protect the Claimants interests, but the reality is that the horse had well and truly bolted and the land had gone and the opportunity to obtain overage payments had gone with the transfer to Church.

Church developed the site and received a total of £5,083,000.00.

The Claimants initial claim was for a claim for overage based on that of some £930,000.00 plus interest. Alternatively, in the event that it established that Mansard would not have entered into the contract then it is contended that Akasuc would have sold the land to one of a number of purchasers and lost its opportunity so to do.

In addition the Claimants sought further sums or a tax indemnity arising out of the incorporation of the settlement and Akasuc. Mr Goodman did not seek this extra head in his closing speech and Mr Tregear QC did not suggest that any damages payable to Akasuc should be reduced to take into account any potential tax liabilities. Equally, the suggestions in the opening of Mr Goodman that as part of this exercise the Defendants ought to have had regard to the interests of the individual claims was similarly abandoned.

Mr Goodman in his closing, also abandoned any argument based on the Agreement providing for 30% overage for the whole of the proceeds of sale, if the total exceeded £3.5 million. He was right in my view to abandon that point as it was plainly unsustainable on the evidence of the attendance notes and Mr Choudhury when cross examined on it.

The Claimants case is based on the loss of opportunities to secure the overage. It is quite plain that the Agreement as drafted and as unamended by Miss Dolding did not secure the overage payments. Miss Dolding frankly in cross examination acknowledged that she had missed the point. This was undoubtedly due to her lack of experience in this area. She accepted that this was the first such agreement in which she had encountered. Likewise Mr Choudhury, whilst his particulars of claim asserted that he was an experienced property developer, he was plainly not an experienced successful property developer and had no reality of the intricacies of these agreements. He was however, clearly extensively involved in negotiations.

I have no evidence from Mansard. This has an impact on how any value of the land taking into account the two clearly defined difficulties, namely access and decontamination costs can be ascertained. Nor did I have any evidence from Church. All I was provided with was the documentation, which showed the purchase price that Church paid (£1,050,000.00). That payment was made on the assumption that it would contribute £270,000.00 towards the access costs. Nevertheless, it expected Mansard to carry out some of the decontamination costs and the experts have agreed in effect that the cost of those was some £340,000.00 to Mansard. By reason of the sale to Church, subject to those terms, Mr Adams-Cairns expressed the view that Mansard changed a loss of £70,000.00 to a profit of some £60,000.00, thereby enhancing its position by £130,000.00. I accept that evidence. Thus as I said, the bargain was not as profitable as it might otherwise seem.

As I have said I have concluded that Mr Choudhury obtained from Mr Baty before the Agreement was entered into everything that Miss Dolding advised him was necessary, namely a limited charge and a caution. Equally, as I have said, the caution was useless because of the wording of the Agreement.

Miss Dolding failed to address the Agreement and whether or not it together with a caution provided the claimant with security.

The first question to be answered is whether or not mechanisms could have been inserted into the Agreement to protect the overage. In this context it is necessary to consider the pleaded allegations. In paragraph 23 of the Particulars of Claim it was contended that Miss Dolding should not have permitted an exchange of contracts or Akasuc coming under liability to complete without a sufficient mechanisms in place to prevent Mansard from purchasing at the minimum Purchase Price and then selling the development on. The pleading then goes on to identify 4 potential mechanisms. The first is a covenant, which would have provided for the equivalent of a maximum purchase price to be paid either by Mansard or a successor as a covenant, which ran with the land or was at least sufficient interest to make a caution registrable. It seems to me that such positive covenant could not have been made on its own to run with the land see Rhone Trust -v- Stephens [1994] 2 AC 310. This deals with Miss Dolding’s confession that the insertion of the words “and its successors” in the Agreement would have achieved that. That wording does not achieve that purpose because as the Rhone case establishes, section 79 of the Law of Property Act 1925 does not have a substantive effect (CP section 78 LPA 1925). I do not see that the covenant of itself would have achieved it. There are ways in which a positive covenant can be made to run with the land, such as, by the creation of an Estate Rent Charge under the Rent Charges Act 1997, or by right of entry on breach of covenant (see Shiloh Spinners -v- Harding [1973] AC 691 H.L.). Mr Goodman did not press any of these and therefore I do not believe the mechanism firstly identified would have achieved any such purpose.

The second proposal was requirement for an express contractual provision, which provided for any subsequent purchaser of the development to pay a proportion of the proceeds of sale to Akasuc. That in itself would not have created an interest in land and would require a further mechanism, obligating Mansard to procure such developer and enter into a direct contract. That would be a personal obligation which itself would not be a cautionable interest. It would then need some form of protection. I was referred to Jessel “Development Overage and Clawback”. Based on that text book (and in particular section 3.4) the obligation to repay would be protected by a restriction lodged pursuant to section 58 LRA 1925 restricting a disposition of land unless the Seller consents. I do not accept that there is any evidence that a funding bank for Mansard would have objected to such a restriction, the more so if a deed of priority was sought and obtained in respect of it. In that eventuality I am satisfied that Akasuc would have conceded the priority issue (like it did in relation to the second charge).

There remains the question of whether or not the method is effective. By the time of the writing of his book (2001) Mr Jessel was able to say (paragraph 3.5) “restrictions on the register are widely used for overage and if the court were to strike them down then many bargains made in good faith would be upset. There are problems of principle in using them, and restrictions were designed for trusts and charities. However it is unlikely that a modern judge would find a wide spread modern commercial arrangement unlawful because if offends against statute passed in the thirteenth century to prevent Barons exploiting their freehold subtenants”.

The later is a reference to the Statute of Quia Emptores 1290. Further as he observed in paragraph 3.4.7 restrictions are in wide use and are generally acceptable to the legal profession. It is fair to say that he acknowledges that they have not been upheld in court, but observes that there must be many thousands of restrictions entered on registers and titles around the country in the form in question. For example, registered chargees have restrictions, entered as a matter of course. Another example is the sale of council houses, subject to a repayment discount, which contains almost inevitably a restriction preventing a sale without repaying the discount. Similar restrictions are to be found to protect agreements under section 106 of the Town and County Planning Act 1991, but I accept that the validity of such restrictions in the context of this statute has not been argued. Mr Tregear QC equally did not wish to argue the point. I express no concluded view, but I would be surprised if the courts would with full arguments strike down the power imposed by statute to put restrictions on title under the LRA 1925. It is not necessary for me to come to a conclusion, because the issue would only arise when Mansard’s position was considered in July 1997, when it would seek to sell on the Property. At that time I am of the opinion that any developer would conclude that a restriction would probably be a successful way of protecting overage payments.

The third alternative was a submission that a second charge in respect of the whole anticipated maximum purchase price could have been obtained. This seems to me to be a non-starter, because on the evidence I conclude that no such charge would have been conceded by Mansard. The evidence shows that Mr Choudhury was able to secure only a limited charge and there is no evidence to show that he would have been any position further to move Mansard. I reject the possibility number 3 accordingly. The fourth possibility raised was the question of a right of pre-emption registered as a class C IV charge. Mr Goodman did not suggest this was a satisfactory method.

Clarification had been sought of the paragraph, in particular as to whether or not the Claimants intended to rely on any other mechanisms. This was answered by the Claimants “no, although the same were provided by way of example”. Mr Tregear QC challenged Mr Goodman’s ability on the pleading to make submission based on a claim that Miss Dolding could have obtained a direct covenant with Akasuc to pay overage supported with their restriction. He also objected to any argument based on a vendor’s lien together with a notice or caution. This was raised in the closing speeches and I granted Mr Goodman permission to raise these matters, but reserved the question of whether it was necessary for him to have an amendment to deal with those and any costs implications arising out of them.

The question of lien seemed to me to be relatively straightforward on analysis and after argument. A lien would not have arisen unless the wording of the contract was altered. The lien would merely confer a sufficient interest to lodge a caution. The contract would still have to be amended so as to create a purchase price, which would still be outstanding. It would therefore be necessary to draft the contract so as to ensure that any payments that remained outstanding would extend to payments on development by successors in title. The advantage of the lien however, circumvents the difficulties (if any) posed by the restriction method of protecting the same obligations.

In conclusion it seems to me that Miss Dolding could have provided mechanisms to protect the overage payments. She failed to do so and I therefore conclude that she was negligent in respect of the retainer. This is not an advice situation, as I have said, as it is a matter of a lawyer drafting documentation to carry out her instructions, namely to secure so far as she can security for the overage payment. Conveyancing devices were available for her to achieve that purpose.

In my opinion, on the evidence before me, I conclude that in November 1996, Mansard would have accepted a provision, which secured the overage, but did not give rise to an objection by its bankers. That would have if necessary, I find led the Claimants to have conceded priority just like they did in relation to the second charge, which was agreed.

Mansard were clearly willing developers. In November 1996, I am entitled to conclude that they had entered into an agreement on the basis that they believed they would have been in a position to develop the site, make a profit and make the overage payments. To find otherwise, would, as Mr Goodman submitted, required me to find that Mansard was indulging in an elaborate charade and only ever intended to acquire the Property and sell it on undeveloped and evade overage obligations based on draftsmanship into which the Claimants had been trapped. That does not reflect Mansards efforts in 1997, set out above. It follows therefore their initial take it or leave it stance would not have prevailed in my opinion, if Mr Choudhury properly advised by Miss Dolding had sought a mechanism of the types identified in Mr Jessel’s book to protect overage.

If that conclusion is wrong, then Mansard would have withdrawn. As I have already observed, even if NatWest had sought to enforce its charge in December 1996, I am satisfied that Mr Choudhury would have been able to refinance the charge and buy time, sot that the Property would still be available to Akasuc for marketing in 1997. That remarketing opportunity was lost because Mansard had the benefit of a contract, which was disadvantageous to Akasuc for the self evident reasons that it did not provide for any overage payments to be made, other than by Mansard. I will deal with the assessment of the consequences of the opportunity thus lost further in this Judgment.

The second relevant factor is that Mr Tregear QC conceded that if I find that Mansard would have entered into a revised arrangement protecting the overage, any difficulties as regarding NatWest Bank would have disappeared, because the agreement would have put Akasuc in a stronger position than the Agreement did.

I do not accept that Akasuc would have found another developer willing to enter into a contract in substitution for Mansard in 1996, but I do find that if necessary, it would have found a developer by July 1997. As to the terms of any such arrangement I shall deal with those further in the Judgment, but it suffices for this purpose to say that the main factor appears to me to suggest that change is the fact that the experts agree that the market turned in 1997 and started to rise. As I have concluded that Akasuc would have been able to sustain itself in financial terms until 1997, the inability to find a developer in late 1996 would have had no difference to the overall result.

The Claimants case is that it lost the opportunity to obtain overage based on the Church contract. As the case developed, especially in the light of the expert evidence this became unsustainable and Mr Goodman did not seek to press that method of calculating the loss of opportunity. It seemed to me, that if there had been in place a mechanism protecting the overage, come July 1997, Mansard would have done one of two things. It would have withdrawn form the contract, because it would not have believed that it could have obtained any profit by a sale to another developer who would have to pay overage based on its agreement. That would have left the market free to Akasuc to negotiate with another developer. It is self evident that it would have had an opportunity to negotiate in July 1997, with at least one developer, namely Church. I am satisfied on the evidence before me that Church was not a potential purchaser identified, until after Mansard realised it had entered into a bad bargain (a stance confirmed by both sides experts). That attitude probably came to realisation before the second supplemental agreement was entered into when it was clear that Mr Choudhury would not renegotiate the Agreement.

If Mansard did not rescind the contract then they would have had to negotiate with Church on the basis that Church would assume an obligation to pay overage. It seems to me, that what would have happened then would have been that Akasuc would have been brought into the negotiations in effect to achieve a tri-party arrangement.

Both these opportunities were removed from Akasuc because of the negligent drafting of the Agreement and the lack of protection of the overage.

The lost chance is as I have already identified namely the loss of an opportunity either to find an alternative buyer in October 1996 or more realistically either to participate in negotiations with Mansard and Church in July 1997 or in the event that those did not proceed the opportunity to find another developer who would enter into a contract with Akasuc in July 1997.

Akasuc received £619,500.00 on completion of the sale to Mansard on 4^th July 1997. The chance that requires assessment is the chance of obtaining sums higher than that.

A number of factors are relevant.

On that basis the valuation of the Property by Mr Hampton must be considered. As I have said his valuation was £1 million. He justified that in cross examination on the basis of taking the unimproved value at £600,000.00, ignoring the excess costs, because that was paid by Church and assuming that the costs of reclamation were absorbed by Church. That on the evidence before me is wrong.

The Mansard-Church contract had a price of £1,050,000.00 being Mr Hampton’s valuation of the Property and in effect the opportunity lost by Akasuc was an opportunity to negotiate with Church, or any other developer better terms than Mansard achieved. In view of Mr Hampton’s evidence that was to achieve a maximum price of £1 million and in reality that was an opportunity to persuade a prospective purchaser or Church to absorb the whole or part of the reclamation costs, to raise the price beyond the £619,500.00 already payable under the Agreement.

His opinion was that given the access and decontamination costs, on sales of £4,250,000.00 Mansard would assume a liability of paying £994,500.00 to Akasuc and on Mr Adams-Cairns costings in particular of Build costs, that would yield a net profit of £49,178.00 to Mansard if it had developed in accordance with the Agreement. He observed rightly, that Mansard would have made little or no profit. Mr Hampton did not disagree with the disadvantage of Mansard’s contract.

Mr Adams-Cairns also identified in his report that Mansard, had as a result of the sale to Church turned a loss of £70,000.00 (wasted fees) into a profit of £65,000.00 i.e. it achieved a benefit of something like £135,000.00. Finally in this, he carried out an appraisal of the position of Church (appendix 33 to his report). On an assumption of payment of the acquisition of land costs of £1,050,000.00 he arrived at a figure of £625,987.00 profits on sales of £4,500,000.00. I have already observed that that is on the assumption that the decontamination costs were not part of the costs laid out by Church.

On that basis he valued the land at £600,000.00 in its unimproved state, a figure as I have said, with which Mr Hampton agreed.

There are of course a number of ways of valuing a site. Builders regularly work out a residual valuation, building in elements such as costs of building; bank finance costs, planning costs and their required profit. These models become very sophisticated. A slight distortion in them can produce quite dramatic results. In the present case a comparison of Mr Adams-Cairns Church appraisal with a similar exercise done by Mr Hampton shows that a profit could be made of 13.05% on Mr Hampton’s calculation even on the basis of the developer paying both the access and decontamination costs on a land acquisition cost of £1.024 million. The major difference between this appraisal and Mr Adams-Cairns is as to the building costs. Mr Hampton arrived at a figure of £1,650,000.00, whereas Mr Adams-Cairns figure was £2,112,000.00, a difference of some £460,00.00. Mr Adams-Cairns figure was arrived at by reference to the guide to house building costs of the RICS applicable to rebuilding for insurance purposes. Mr Hampton’s figures were based on an agreement made between him and Mr Adams-Cairns in respect of a one off building in a different area. The difference between them was £60.00 per square foot (Mr Adams-Cairns) and £47.00 per square foot (Mr Hampton). Neither of course had access to the actual figures. There are a number of factors, which both sides raised to justify their figures and criticise the others. Mr Hampton observed that Mr Adams-Cairns figures were based on an insurance standard, which is higher than a cost that a builder would be likely to incur. Mr Adams-Cairns accepted that, but readjusted the figures. There was a disagreement between them as to whether or not the figures used by Mr Hampton were in respect of a particular standard that was lower than the specification quality on the Property as built out by Church. I was unable to resolve that dispute, having so little evidence of the specifications. There was disagreement as to whether or not a builder would achieve savings of scale or whether a smaller builder would cut corners and carry out the works at a lower rate. I was quite unable to resolve that.

These difficulties show why the residual valuation method is a risky method of valuation. It is to my mind a method of valuation, which should be resorted to if better comparable evidence of sales is not available. The reality in this case is that there was a perfect comparable of the value of the site as at June 1997, namely the Church purchase price of £1,050,000.00. It is difficult to see how there is any better evidence of value than an actual sale that took place at arms length between two commercial organisations at the relevant time. Mr Hampton expressed the view that that was the best valuation and I agree with him.

It is essential however, to attempt to identify so far as possible the basis upon which the price of £1,050,000.00 was arrived at. It is quite clear, as I have set out above, that it was arrived at on the basis that Church incurred no costs of decontamination, but did pay for the access rights. The major costs element of any exercise is the building costs. I have no evidence to show that Church’s costs were either closer to either Mr Hampton’s or Mr Adams-Cairns’ figures. I suspect that Church’s costs would be less than Mr Adams-Cairns’ figures. I suspect also that they would probably be more than Mr Hampton’s figures for a one off building.

I am also mindful as of two further factors. Both experts worked out their residual appraisal on a figure of £4.3 million. Church received a higher figure. Second, as Mr Adams-Cairns said in his report, (section 15) the market recovered in the South East with an acceleration starting in spring 1996 and a dramatic increase up to the summer of 1997. Further, between the summer of 1997 and spring 1998 the values plateaued, before appreciating strongly again.

It seems to me therefore that if the Property had come back on the market in June 1997, that would be in the context of an appreciating market, but without a corresponding increase in either the building or decontamination costs. Mansard was in a difficult position, in that it wanted to get out of the contract because of its bad bargain and would wish to cover its losses. If it pulled out I do not believe that Akasuc would be in a similar weak position assuming as I have said it had secured refinance. Against the backdrop of a rising market I am firmly of the opinion that in June 1997 Akasuc would have been in a stronger position than Mansard at entering negotiations with Church.

Equally, in the rising market and given the potential possibilities of savings for costs identified earlier in this Judgment, and given the increased income received by Church, I am of the opinion that Church would have been open to negotiation beyond a base price of £600,000.00.

I was impressed with Mr Hampton’s approach to the possibility of such negotiations. It seems to me that had Akasuc had the opportunity it would have been in a position to negotiate a movement from £600,000.00 towards £1 million. It would have done that against the backcloth of rising market values and Church clearly having come on to the scene late and moved rapidly.

The assessment of a chance where a third party is involved is set out in the Court of Appeal decision of Allied Maples –v- Simmons and Simmons [1995] 1 WLR 1602.

Taking into account all of the factors which were available to the parties in June 1997, I am of the opinion that Akasuc would have persuaded Church that it should absorb some of the costs of the decontamination. There is an element of slack, because if Mansard drop out as nobody wishes to deal with them, it made a profit of £130,000.00 on the reclamation works. Factoring that in and the relative strengths of Akasuc and the rising market, I am of the opinion that it would have persuaded Church to pay another £250,000.00. If one applied that to the appraisal of the Church position prepared by Mr Adams-Cairns in the light of Mr Hampton’s assessment, that would have shown a profit of £573,930.00 plus another £110,000.00 (being the difference between the calculated sales price of £960,000.00 and my suggested sale price of £870,000.00), which would bridge the difference between the two experts assessment of building costs significantly.

Accordingly, I determine that Akasuc lost an opportunity of obtaining a further £250,000.00 on its purchase price. That is the measure of damages in my opinion, which Akasuc has sustained.

There is a plea for contributory negligence, but I can see no basis for it being made out. First, as I have said above, I do not consider that Mr Choudhury had an expertise as he thought. Second, the failure is entirely down to the inadequate draftsmanship of the Defendants.

Accordingly, I award Akasuc damages of £250,000.00 to which interest should be added.