Falmouth House Ltd & Anor v Rahmizadeh & Ors

The judge’s findings in relation to the October 2003 figures and the November 2003 figures meant that there had not been a determination by Mr Davies for the purposes of clause 3.3.1 prior to completion in April 2004. The judge then dealt with an argument put forward by the lessees of Flats 32 and 36 based on estoppel. The judge held that the sums requested of the lessee on completion in accordance with the November 2003 figures did not involve the Nominee Purchaser making an unequivocal statement that nothing more would be claimed later under the Participation Agreements. The Judge also held that the lessees paid the completion monies because a Mr Collins, who was advising the lessee of Flat 36 and possibly also advising the lessee of Flat 32, had advised the lessees that they had to pay. The judge had earlier pointed out that he had heard no evidence as to what Mr Collins himself believed. The judge also held that the lessees could not say they had suffered any detriment by completing the leases and paying what was demanded. The judge then referred to the state of the evidence on that point. He also referred to events in 2004 when the lessees and their representatives did not object to the recalculation of the figures and that suggested that they did not believe that completion had necessarily settled all financial claims against them. Accordingly, the lessee’s argument of estoppel failed.

The learned judge then considered the position in relation to the figures published in April 2005. The lessees had argued that the figures in April 2005 did not amount to a determination by Mr Davies as Mr Davies had been instructed to go about the exercise in a particular way and the instruction was given by one party only to the Participation Agreement. Having recorded some of the arguments on that point, the judge then held that the Nominee Purchaser had not sought to rely on the binding nature of the determination in April 2005 because the position taken by the Nominee Purchaser at the trial was that it was unnecessary for the purpose of its claim for there to be a determination by Mr Davies of the relevant proportion. Before reaching his conclusion on that point, the judge dealt with a further argument put forward by the Nominee Purchaser on the basis that the lessee’s challenge to the April 2005 figures was upheld. The Nominee Purchaser contended that in such an event the lessees would be estopped from challenging the April 2005 figures because of certain statements made in the period between completion and April 2005. The judge said that this plea of estoppel by the Nominee Purchaser had not been pleaded by the Nominee Purchaser and the lessees had not had the opportunity on the pleadings to meet this case of estoppel.

These considerations led the learned judge to conclude that he would not hold that the Nominee Purchaser was entitled to a money judgment against the lessees but instead there should be declarations which reflected what he had decided. It would be open to the parties to agree the sum due from the lessees to the Nominee Purchaser and “if necessary” Mr Davies would have to make a further certification or determination.

The order made by the County Court, following judgment on the 24^th January 2007, recorded that the apportionment of the Price (but not the Costs) for the purpose of calculating the Leaseholders Contribution was required to be carried out by the Company’s Surveyor whose decision would be final and binding on the Company and Participating Leaseholders. The order went on to declare that there was no such determination in October or November 2003. The order further declared that notwithstanding completion of the purchase of the freehold and the grant of the new leases and the payments made by the lessees on or about the 21^st April 2004 it remained open to the Nominee Purchaser to call upon Mr Davies to make a final determination under clause 3.3.1 of the Participation Agreement and that that determination could be based upon the correct floor areas of Flats 32 and 36 as determined by a surveyor who had previously carried out an accurate measurement. The order then recited that the court did not rule upon the validity of Mr Davies’ purported determination of 8^th April 2005. The order made provision for other matters to which it is not necessary for me to refer. The order then dealt with the costs of the claim and a counterclaim; in particular, the Nominee Purchaser was ordered to pay 75% of the lessees’ costs on the claim.

The appeal and the cross-appeal

The Nominee Purchaser has appealed the judge’s order in so far as the order did not contain a ruling on the validity of the determination in April 2005 and in relation to the order for costs of the claim. The amended/perfected grounds of appeal contended that the learned judge ought to have ruled upon the validity of the determination of April 2005 and also on arguments that the determination of April 2005 had been vitiated by the nature of the instruction given to Mr Davies and on arguments of waiver or estoppel relied on by the Nominee Purchaser against the lessees. The grounds of appeal also raised a number of matters in connection with the appeal on costs but by reason of a subsequent order of the High Court, the appeal in relation to costs has been deferred until the outcome of the present appeal.

Lindsay J gave the Nominee Purchaser permission to appeal on the 28^th June 2007.

On the 17^th July 2007, the lessees of Flat 32 and 36 served a Respondent’s Notice by way of cross-appeal. The orders challenged by the Respondent’s Notice were the declaration that there was no determination by Mr Davies in October or November 2003 and the order that it remained open to the Nominee Purchaser to call upon Mr Davies to make a final determination notwithstanding completion in April 2004. The grounds of appeal contended that the judge should have held that the amount of the Leaseholder’s Contributions were determined conclusively in October or November 2003 and in any event that the purported determination in April 2005 was vitiated because of instructions given by the Nominee Purchaser to Mr Davies at that time. The Respondents also challenged the judge’s order for costs but that challenge is not presently before me.

Mann J granted the lessees permission to cross-appeal on 30^th July 2007.

The issues on the appeal and the cross-appeal

The skeleton arguments prepared on behalf of the parties for the purpose of this appeal and the cross-appeal substantially agree on the issues which the parties say now arise.

The first issue is whether there was a valid determination of the Leaseholder’s Contribution to the Price payable for the transfer of the Property to the Nominee Purchaser pursuant to clause 3.3.1 of the Participation Agreements in October 2003.

The second issue arises if the answer to the first issue is “no”. In that event, the second issue is whether the Nominee Purchaser is estopped from denying that there was such a valid determination.

The third issue arises if there was not a valid determination in October 2003 and if there was no estoppel preventing the Nominee Purchaser from denying that there was a valid determination. The third issue is whether there was a valid determination in April 2005.

The fourth issue arises if the third issue arises and if the answer to the third issue is that there was no valid determination in April 2005. The fourth issue is whether the lessees of Flats 32 and 36 are estopped from denying that there was a valid determination in April 2005.

It will be seen that the above statement of the issues refers to a possible determination in October 2003 but does not refer to a possible determination in November 2003. However, the Respondent’s Notice had referred to possible determinations in “October or November 2003”. The possibility of an argument that there was a determination in November 2003 is referred to in the supplemental skeleton argument on behalf of the Nominee Purchaser but only for the purpose of referring to the concession made by the lessees in the County Court that the schedule of November 2003 was not a valid determination. In the supplemental skeleton argument on behalf of the lessees (see paragraph 7.7) it appears to be accepted that the November 2003 schedule was not a valid determination.

In view of the fact that cases based on estoppel tend to turn upon their particular facts and in view of the further fact that the cases which the parties wished to argue in relation to estoppel had not been fully pleaded before the trial, I invited both sides at the hearing of this appeal to set down in writing, in the form of a pleading, the case being put forward by that party in relation to the estoppel it asserted.

I will begin by referring to the estoppel case put forward by the lessees. The lessees contend that the Nominee Purchaser made a clear and unambiguous series of representations (intended to be acted on) that the figures contained first in the October schedule and then as revised in the November schedule were based on a “conclusive determination” by Mr Davies. The lessees then contended that they acted on those representations by paying the sums demanded under clause 3.3.1 of the Participation Agreements. It is then pleaded that the lessees would suffer a detriment if the Nominee Purchaser was permitted to resile from its representations. Alternatively, the lessees contended that an estoppel by convention prevented the Nominee Purchaser from resiling from the figures contained in the November schedule.

It will be seen that the lessees’ case in relation to estoppel relies on the November 2003 schedule in addition to relying on the October 2003 schedule.

The estoppel now relied upon by the Nominee Purchaser does not, of course, relate to the October or November 2003 figures but relates to the circumstances in which Mr Davies was instructed to prepare further figures, which he did in April 2005. The estoppel as now pleaded by the Nominee Purchaser refers to one feature of the instructions to Mr Davies. It is contended that there was a common assumption between the Nominee Purchaser and the lessees of Flats 32 and 36 that figures calculated in accordance with that feature of the instruction would comply with clause 3.3.1 of the Participation Agreements so that it would be unconscionable to permit the lessees to resile from that assumption. The unconscionability is said to arise from the fact that Mr Davies acted on that instruction and the figures he produced had led to the contributions of other participating tenants being adjusted in accordance with the April 2005 figures. The Nominee Purchaser also contends that the lessees of Flats 32 and 36 had themselves requested the Nominee Purchaser to reapportion the costs using the basis which the Nominee Purchaser asked Mr Davies to use so that the lessees of Flats 32 and 36 should not now be entitled to challenge the determination in April 2005 by reason of the instruction given to Mr Davies in this respect. It is further contended that the lessees of Flats 32 and 36 represented to the Nominee Purchaser that the lessees would be content to have the relevant costs recalculated on the basis which was then stated in the instruction to Mr Davies and the lessees are estopped from contending that that basis was not agreed by them. The Nominee Purchaser’s pleading of the estoppel relied upon particularises the documents and other evidence said to support the pleading.

The first issue: the evidence

The first issue is: was there a valid determination of the Leaseholder’s Contribution to the Price payable for the Transfer of the Property to the Company pursuant to clause 3.3.1 of the Participation Agreements in October 2003?

By October 2003 the freeholder and the Nominee Purchaser had agreed, subject to contract, the price to be paid for the freehold and the head lease of the block. On the evidence that price was £3,180,231. The question is whether that price of £3,180,231 was apportioned between the participating tenants pursuant to clause 3.3.1 of the Participation Agreements. It has been stressed that the price of £3,180,231 was not contractually binding on the freeholders in October 2003. However, in the event, the price which was agreed, subject to contract, in October 2003 remained agreed and became the price contractually payable to the freeholder and that price was paid on completion of the transaction. Accordingly, if Mr Davies was asked to apportion that specific price for the purposes of clause 3.3.1 of the Participation Agreements and if he did so then the question does not arise whether his apportionment of that price would be binding on the Nominee Purchaser and the participating tenants if the freeholders had resiled from that price and if a later higher price had become payable. If that question had arisen, my provisional view would have been that if the price of £3,180,231 was replaced by a later price of, say, £4 million then the apportionment of the earlier lower figure would not be binding on the Nominee Purchaser and the participating tenants when the relevant Price for the purpose of the Participation Agreements was £4 million. However, I acknowledge that the fact that the price of £3,180,231 was not set in stone in October 2003 must be taken into account when considering what Mr Davies was asked to do and what he did in October 2003.

On the 2^nd October 2003, the solicitors for the Nominee Purchaser wrote to the lessee of Flat 32 and the lessees of Flat 36. The letters are in the same terms. The first paragraph of the letter states that the negotiations with the freeholder and the head lessee had been concluded and subject to the terms of the transfer the price payable for the freehold had been agreed. The second paragraph of the letter reads:

“Simon Davies is currently in the process of apportioning the premium and the costs recoverable from (sic) by the freeholder and we anticipate being in a position to confirm the amount payable by you in accordance with the Participation Agreement shortly. What is already clear is that that amount will be significantly less than your Estimated Maximum Contribution.”

The third paragraph of the letter stated that the solicitors would write again shortly and the lessees should consider making arrangements for payment of their contribution.

On the 15^th October 2003, Mr Dao wrote to the lessee of Flat 32 and the lessee of Flat 36. Mr Dao was the person defined as the Appointed Representative in clause 1.15 of the Participation Agreements. The Appointed Representative was the person appointed by the Nominee Purchaser from time to time. The two letters of 15^th October 2003 are in the same terms, save as to the detailed figures. The letters of 15^th October 2003 stated that the Nominee Purchaser had agreed a favourable price for the purchase of the freehold and the head lease. In the letter to the lessee of Flat 32, Mr Dao stated that the revised contribution from that lessee was £371, 991 and he then referred to the deposit of £5,000 that had already been paid. After deducting the deposit, the balance was said to be “payable”. Mr Dao stated that the Nominee Purchaser aimed to complete the transaction on or before 17^th November 2003. His letter also referred to the solicitors completing the legal formalities and finalising the transaction. It is relatively clear that Mr Dao on behalf of the Nominee Purchaser thought that the amount of the price had, for all practical purposes, had been established and that completion was not far off. In his letter of 15^th October 2003 to the lessees of Flat 36, he stated that the revised contribution was £381,984.

On 17^th October 2003, the solicitors for the Nominee Purchaser wrote to the lessee of Flat 32 and the lessee of Flat 36. In the first paragraph of the letter in relation to Flat 32 the solicitors wrote:

“Further to my letter dated 2 October I am now able to confirm that your contribution to the total costs of the freehold acquisition, in accordance with the Participation Agreement and Mr Dao’s attached letter is £371,999.”

In the letter of 17^th October 2003 to the lessees of Flat 36, the figure for that flat was stated to be £381,984.

The letters of 17^th October 2003 stated that the solicitors aimed to be ready to complete the purchase on 17^th November 2003 and asked for payment of the balance of the specified sum (after deducting the deposit of £5,000) by 14^th November 2003. The letter went on to state that “on receipt of funds” and prior to completion of the transaction each leaseholder would be issued with a share certificate in the Nominee Purchaser and new 999 year leases would be granted to each participating tenant following completion.

A schedule which Mr Davies produced in October 2003 was available at the trial and is now in the appeal bundle. This document was not shown to the lessees of Flats 32 and 36 in October 2003. That schedule gives the address of each flat and the expiry date of the lease of each flat. The schedule gives details about each flat and, in particular, the area of the flat. The area for Flats 32 and 36 is stated, in each case, to be 94 square metres. Those areas were wrong and, indeed, the fact that those areas were wrong led to further discussions after completion and is the principal contributor to the conclusion that the revised figures in April 2005 were significantly higher than the figures in October (and November) 2003. The schedule distinguishes between the tenants who are participating tenants and the non participating tenants. The schedule correctly stated that there were 27 participating tenants. The schedule then identified the total payable from the 27 participating tenants as £3,437,370. This figure is apportioned between the participating tenants and the figure for Flat 32 was stated to be £371,991 and for Flat 36 was stated to be £381,984. It can be seen that the figures in this schedule of October 2003 are the same figures as were used in the letters of 15^th and 17^th October 2003 to which I have referred. It is also clear that the total figure of £3,437,370, exceeds the price payable to the freeholder and the head lessee which had been agreed in October 2003 as £3,180,231. A possible explanation for the disparity is that the difference is represented by the various other sums over and above the Price referred to in clause 3.3.1 but it is fair to say that the schedule of October 2003 does not spell out the reason for the difference. It is also right to note that the schedule of October 2003 does not contain the figure within the totals payable for each flat which is the element represented by the proportion of the price of £3,180,231.

Mr Davies prepared a witness statement for use at the trial. He also gave oral evidence at the trial and was cross-examined. His witness statement refers to the October 2003 schedule. At paragraph 6.1 he refers to the document in the appeal bundle described as the October 2003 schedule as a copy of the valuation template that was distributed to participating flat owners in October 2003. In fact, that statement is not correct in that the October 2003 schedule was not distributed at that time to lessees. Mr Davies also refers to what he describes as “the valuation template” that was distributed while he was on holiday in November 2003. At paragraph 6.2 of his statement, Mr Davies describes the adjustments he had made to capital value “in compiling the October 2003 schedule”. At paragraph 6.3 of his statement, Mr Davies describes his understanding as to how it came about that there was a further schedule produced in November 2003. This was due to the fact that an agent, Mr Collins, acting for the lessee of Flat 36 had “pestered” the Nominee Purchaser’s Solicitors about the apportioned amounts for Flats 32 and 36. The way in which Mr Davies describes the circumstances leading to the November 2003 schedule does not suggest that the October 2003 schedule was provisional in some way or that he had any expectation that the October 2003 schedule would be the subject of ongoing revision.

In paragraph 6.5, Mr Davies describes how he arrived at the figure of £371,991 for Flat 32 in the October 2003 schedule. The price which was to be apportioned to Flat 32 comprised two elements which are relevant for present purposes. The first element can be referred to as the price for Flat 32 itself and the second element was attributable to the fact that the block of flats comprised 40 flats but only 27 tenants were participating. In relation to the other flats (occupied by the non-participating tenants or the caretaker) the participating tenants had to contribute to the sums payable to the freeholder and head lessee for the non-participating flats. Mr Davies’ witness statement gives the figures for the element attributable to Flat 32 and the contribution from Flat 32 for the non-participating flats. He also gives the figures for costs and for stamp duty. His notes give further information about the calculations but it is not necessary for present purposes for me to refer to those explanations.

Paragraph 6.5 of Mr Davies’ statement also describes, in a similar way, the position in relation to Flat 36. The total (as appears from the October 2003 schedule) for Flat 36 was £381,984 and Mr Davies identifies in his statement the makeup of that figure and the elements in that figure representing the price for Flat 36 itself and the contribution from Flat 36 towards the sums payable to the freeholder and head lessee for the non-participating flats. As before, Mr Davies gives detailed explanations of the calculations but it is not necessary for me to set those out.

In paragraph 6.6 of his statement, he describes how he valued individual flats “in compiling the October 2003 valuation”. He also refers to the fact that he had not agreed the landlords’ valuation fees and legal charges when he produced the October 2003 schedule and he also refers to a possible delay in completion by reason of Section 74 of the Finance Act 2003 changing the position in relation to stamp duty, or stamp duty land tax.

I have been provided with a transcript of the hearing in the County Court and, in this way, I have a transcript of Mr Davies’ evidence. He was not asked to supplement his witness statement by way of evidence in chief. In cross-examination, he was asked about the work which he had done in October 2003. His answers include the following passage:

“The purposes of that schedule, which was prepared in haste as I was just about to depart on holiday, was to get some money in. The solicitor was very concerned that time was moving on and he wanted to get some money in and that did not really have to be precise because he knew that if push came to shove he would have to produce to the landlords £3.18 million. Of course, my schedule passed of (sic) more than £3.18 million because it also asked for the landlord’s surveyors fees and legal costs or a proportion thereof; the tenants’ surveyors’ fees and legal costs, VAT on that; stamp duty and land registry fees, and therefore if we got our proportion of the total amount in it was likely to be more than the required sum to hand over to the landlords. Any adjustments could be worked out later. Here I would like to tell the court that the schedule of October 2003 has the spread sheet of the October 2003 and, indeed, the earlier spread sheet of November 2003 did have errors in them. They weren’t significant in that there would have been a difference in the final sum of £20,000 or £30,000 in the final sum but nevertheless I have subsequently had an audit prepared of all my spread sheets that had been lodged with the court and we have found where the mistakes are, but they are not significant in this context.”

Later in his evidence, Mr Davies was cross-examined further about the work he did in 2003. The purpose of the questions appears to have been to elicit Mr Davies’ understanding of the process in which he was engaged and for him to confirm that he understood he was performing a function under the Participation Agreements of apportioning the Price. That line of questioning appeared to have arisen from the fact that there was an issue between the parties on the true construction of the Participation Agreements as to whether it was Mr Davies’ function to certify the gross amount of the Price or to apportion the Price between participating tenants. There was also an issue as to whether the Nominee Purchaser was estopped from denying that Mr Davies was asked to perform the function of apportioning price between the participating tenants. It is doubtful whether questions as to Mr Davies’ state of mind were in any way material to those issues as the judge pointed out in the course of the cross-examination. Indeed, when the judge pointed this out, the cross-examination was brought to an end. Nonetheless, I ought to refer to some of the exchanges at that stage in the cross-examination. Mr Davies referred a number of times to assisting the Nominee Purchaser by apportioning the Price but he suggested that he was aware at the time that that was not something required of him under the Participation Agreements. Later he said he hadn’t given the matter “a second thought” and he said:

“I was asked if I would apportion the figures and I arranged for them to be apportioned in the only way that I knew.”

Mr Davies was not re-examined.

The transcript of the hearing includes the closing submissions of counsel for both parties. Those submissions discussed the effect of the October 2003 schedule. In the ordinary way, counsel for the defendants, the lessees of Flats 32 and 36, made his closing submissions first and there was then a reply from counsel for the claimants, the Nominee Purchaser. Counsel for the defendants then made further submissions and I was asked to note an exchange at the end of those further submissions. Counsel for the defendants indicated that he had brief submissions to make as to whether there was a conclusive determination by Mr Davies in 2003. The judge made some comments in relation to that. I was told that counsel for the defendants understood that the judge didn’t need to trouble him on those submissions i.e. that the judge was in the defendants’ favour on that point. It may be that what the judge was indicating was that because counsel for the defendants had already made his submissions on that matter and counsel for the Nominee Purchaser had replied, the judge would not give counsel for the defendants a second go. In the event, it does not seem to me to matter very much.

The first issue: the judgment

The judge gave an ex tempore judgment. He set out the facts in some detail. He dealt with Mr Davies’ involvement in October 2003 and in paragraph 4 of his judgment he said:

“In October 2003, Mr Davies calculated in his office what he regarded as the amount payable by each of the participating tenants.”

At paragraph 15 of his judgment, the judge said this:

“Then [counsel] submits that there was a binding determination by Mr Davies in October 2003, before Mr Baars wrote his letters of 17^th October to the participating leaseholders. It is at this point that [counsel’s] argument breaks down. The documents sent to Mr Baars, the October schedule, contains no identifiable apportionment of the purchase price. Indeed there is no reference to the purchase price at all. It is an apportionment, or a purported apportionment, of the total sums payable by each lessee. If there was to be a binding determination it needed to be a settled decision of Mr Davies which was manifested to the outside world. The October 2003 schedule is inadequate for this purpose. There is the further point that the schedule is headed “without prejudice” and “confidential”. Moreover, after hearing Mr Davies in evidence I am not persuaded that his October 2003 calculations were intended by him to be a settled and final decision. He testified that its purpose was to get some money in and that it did not have to be precise. There could be adjustments later. I am sceptical as to his testimony to the effect that he did not believe he was given the function of deciding apportionments under the Participation Agreement. However, I am not prepared to hold that he produced the October 2003 document intending to exercise that function.”

The first issue: the submissions

I now turn to the submissions made on the appeal on behalf of the lessees of Flats 32 and 36, in relation to the October 2003 schedule. Those submissions drew attention to the instructions from solicitors for the Nominee Purchaser in April 2004 to counsel when advice was sought on the course to be adopted by the Nominee Purchaser. Those instructions included the following paragraph:

“Counsel was asked to advise as to whether, under the terms of the Participation Agreement, the Company has the scope to ask Simon Davies to recalculate his final allocation of the amounts payable in respect of each participating flat” (emphasis added).

The lessees of Flats 32 and 36 submitted a supplemental skeleton argument which again dealt with the question as to the October 2003 schedule. It was submitted that it was perfectly open to the Nominee Purchaser to ask Mr Davies not only to apportion the Price but also to apportion the various costs. These submissions referred again to a suggested schedule which had been overlooked by the judge.

The submissions for the Nominee Purchaser, on the hearing of this appeal, carefully set out the judge’s findings. The submissions referred to the fact that in October 2003 the Price was not finally ascertained. It was submitted that “putting some figures on a piece of paper” was not enough to be a final determination. Mr Davies’ subjective intention was relevant. The failure to manifest the determination to the outside world was relied upon as evidence of the expert’s intention. In so far as the judge’s finding of fact as to subjective intention was concerned, it was submitted that that was a matter for the trial judge.

In relation to the suggestion made by the lessees of Flat 32 and Flat 36 that there was another October 2003 schedule which had been overlooked, the Nominee Purchaser submitted that no such schedule was in the trial bundle so that there would have to be an application to adduce fresh evidence which would have to satisfy the requisite tests.

I need to say a little more about the suggested October 2003 schedule which had been allegedly overlooked. Counsel for the Nominee Purchaser opened her appeal and did not develop an argument in relation to that topic. Counsel for the lessees then made his submissions. Towards the end of the court day, he dealt with the suggested overlooked schedule. He began an explanation of why the schedule had not been in the trial bundle and why it had not been shown to the judge at the trial. Counsel for the Nominee Purchaser then intervened to make clear that the Nominee Purchaser did not agree to the schedule being referred to and put before me on the appeal. Counsel for the lessees then indicated that an application to adduce fresh evidence would be made the following morning.

Counsel on both sides plainly had second thoughts, albeit different second thoughts, about this suggested new schedule. On the morning of the next day, Counsel for the lessee indicated that he was not pursuing an application to admit the new schedule. Later, Counsel for the Nominee Purchaser made submissions in reply and began by referring to the suggested second schedule in October 2003. She had plainly looked at the second schedule and made submissions to me that this second schedule did explain some of the figures in the October 2003 schedule which was in the trial bundle but when one examined the Price which was apportioned between participating tenants it was not the Price which had been agreed in October 2003 and which ended up being paid to the freeholder and head lessee, namely, the price of £3,180,231. Counsel for the lessees then intervened to say that this second schedule could not be used against the lessees. The upshot of these various changes of stance was that no application was made by either side for this second schedule to be received into evidence, as fresh evidence on the appeal.

I ought to deal at this stage with the position in relation to the suggested second schedule. It is clear that this second schedule was not in evidence at the trial. It is also clear that neither side has applied to me to admit this schedule as fresh evidence on the appeal. In my judgment, that means that the second schedule is not before the court on this appeal and I must therefore leave it out of account.

The first issue: my conclusions

I can now express my own conclusions in relation to the first issue, as to the effect of the October 2003 schedule. In my judgment, it is necessary to look at the facts in detail. The lessees have submitted that I should not accept a finding of fact made by the trial judge. I will therefore refer to the matters which weigh with me and consider whether it is necessary and appropriate for me to depart from the trial judge’s finding of fact.

For the purpose of determining what Mr Davies was asked to do, and what he did, in October 2003, I would rely heavily upon the contemporaneous material. The letters of 2^nd, 15^th and 17^th October 2003, to which I have already referred, are very strong pointers to the conclusion that Mr Davies was asked to perform the function conferred upon him by clause 3.3.1 to apportion the Price between the participating tenants and that he performed that function. He was also asked to calculate the amount payable by a participating tenant and the amount payable was not restricted to a contribution to the price but included other items. However, in order to calculate the amount payable it was necessary as an important first step to apportion the Price.

It was important for Mr Davies to be asked to perform the function conferred upon him by clause 3.3.1 because if Mr Davies did not perform that function, the Nominee Purchaser was not contractually entitled to receive anything from participating tenants. In October 2003, the solicitors for the Nominee Purchaser put the matter to the lessees of Flats 32 and Flat 36 on the basis that the Nominee Purchaser was asking for the sum which the Nominee Purchaser was entitled to and which the lessees were obliged to pay. The matter was not put to the lessees on the basis that they were asked to pay some form of provisional sum with the correct amount to be considered at a later stage.

The fact that different figures came on the scene not long afterwards in November 2003 does not seem to me to throw doubt upon the exercise carried out by Mr Davies in October 2003. Mr Davies went to some lengths in his evidence to explain that he did not participate in the recalculation in November 2003.

The suggestion that the exercise carried out in October 2003 by Mr Davies was provisional and stopped short of being a determination of the contributions to the price was not put forward in Mr Davies’ witness statement. I have already set out the relevant parts of that witness statement. It is true that Mr Davies uses the word “template” which might, not very clearly, have been intended to convey the impression of provisional figures only but elsewhere in his witness statement he uses language suggestive of a determination of the contributions to the price. For example in paragraph 6.6 he refers to “compiling the October 2003 valuation”.

I have considered carefully the evidence Mr Davies gave when cross-examined. I have read the whole of the transcript of his evidence and not just the passages I have quoted. In addition to reading the appeal bundle, I have also read the trial bundle so that I have before me the same material as was before the trial judge. I think the trial judge was entirely right to be sceptical about some parts of Mr Davies’ evidence. The suggestion by Mr Davies that he was to be a final arbitrator on the Price but not on the apportionments of the Price does not stand up to scrutiny when one reads the whole chain of correspondence in the trial bundle which refers to Mr Davies’ involvement. I have to say that that passage in Mr Davies’ evidence appears to have been designed by him to be helpful to the legal argument being run by the Nominee Purchaser at the trial that Mr Davies’ involvement was in certifying the Price but not determining the apportionment of the Price. It is not necessary to consider further how Mr Davies came to give the evidence he did on that topic but it would have caused me to be very cautious indeed about accepting his other evidence based upon the thoughts he said he had, when that other evidence was not corroborated and was at variance with the contemporaneous documents.

The evidence which Mr Davies gave about the October 2003 figures not having to be precise so that adjustments could be worked out later is difficult to square with the contemporaneous documents. Although his evidence is not wholly clear on the point, it may be that he was purporting to describe the position adopted by the solicitor as well as his own position. If he was describing the solicitor’s approach, the evidence is not clear whether Mr Davies is saying that the solicitor communicated this approach to him. It is also not clear whether Mr Davies was giving evidence that he described his approach to the solicitor. In so far as Mr Davies said that the solicitor was concerned to get money in, that evidence is plainly correct. If the suggestion was that the solicitor believed that adjustments could be made later then it appears contrary to what the solicitor wrote at the time and it is also relevant that the solicitor did not give evidence at the trial to this effect, or at all. For the same reasons, it is also difficult to believe that the solicitor told Mr Davies that this was the solicitor’s approach.

My own conclusion considering the documents and Mr Davies’ witness statement and his oral evidence would be that Mr Davies was asked to carry out an apportionment and he did so and he did not carry out that exercise on a provisional basis but rather he did it for the purpose of identifying the contribution to the Price which would be contractually due from the lessees. I would not be able to make any finding on the evidence that the solicitor had asked Mr Davies for a provisional apportionment nor that Mr Davies had told the solicitor that he had only carried out a provisional apportionment. I would be very sceptical about Mr Davies’s suggestion that he thought, even privately, that the figures were provisional and could be adjusted later. If, which I very much doubt, Mr Davies did think about adjustments being worked out later, I could not regard that as being referable to anything other than changes in costs and fees or, conceivably, changes in the Price but not in relation to an unchanged Price.

The judge’s findings in this respect appear to be quite narrow ones. He did not expressly find that the solicitor instructed Mr Davies to carry out a provisional apportionment. He did not expressly find that Mr Davies informed the solicitor that the apportionment was provisional only. The judge did however find that Mr Davies did not intend the apportionment to be settled and final. The judge did not make it clear when he referred to the “purpose” of the apportionment, whether he was referring to Mr Davies’s purpose or to somebody else’s purpose.

The lessees of Flats 32 and 36 invite me not to accept the judge’s finding of fact as to the exercise carried out by Mr Davies. I have considered the approach which I should take in relation to that submission, having regard to the fact that the learned judge heard Mr Davies and conducted the trial and my role is to review the judge’s decision by way of appeal. The approach I should adopt is described in Assicurazioni Generali SPA v Arab Insurance Group Practice Note [2003] 1 WLR 577, in particular, in the judgment of Clarke LJ at [12] to [23].

My conclusion on the facts is that Mr Davies was asked by the Nominee Purchaser to perform the contractual function under clause 3.3.1 of the Participation Agreements to apportion the Price between the participating tenants and that Mr Davies did so. I find that the solicitor did not ask Mr Davies to carry out a provisional apportionment. I find that Mr Davies never said at the time that his apportionment was provisional only. On that basis, it is not relevant to inquire into Mr Davies’s private and unexpressed views about the legal consequences of his apportionment and whether it was legally open to the Nominee Purchaser to do the apportionment a second time and recover further amounts from lessees. If it is relevant to make a finding about Mr Davies’s private and unexpressed views then I would not be prepared to hold that, when Dr Davies did his apportionment, he subjectively believed that the work fell short of being such a determination because the figures were provisional only. If the judge actually held that the solicitor and Mr Davies, objectively speaking, were intending to produce provisional figures then I fear that I have to find that the judge’s conclusion about that would be “plainly wrong”. Further, to the extent that it is necessary I would also hold that the judge’s finding about what Mr Davies privately thought was also “plainly wrong”. In these circumstances, I am able to substitute my findings of fact for those made by the judge.

That is not the end of the matter in relation to the October 2003 schedule because paragraph 15 of the judgment contains a number of other reasons for the judge’s conclusion.

The first point made by the judge is that the October 2003 schedule, as it appeared in the trial bundle, did not set out the purchase price and did not apportion it. That is true but in order to calculate the total payable, Mr Davies had to start with the exercise of apportioning the Price and then adding costs and fees. Indeed, Mr Davies said in his witness statement that that is what he did and he gave the figures. Accordingly, it is not right to hold that Mr Davies did not perform the exercise required by the Participation Agreements because the document in the trial bundle did not show the workings (although Mr Davies’ witness statement did show the workings). Mr Davies’ apportionment of the Price is nonetheless such an apportionment even though he carries on and also adds in the costs and fees to calculate the total payable and even though that second part of the exercise was not something that was contractually left to him under the Participation Agreements.

The next point made by the judge is that Mr Davies’ determination had to be manifested to the world. In my judgment, what Mr Davies had to do was to make his determination and if an issue arises in court as to whether he made a determination and what that determination was, there will plainly need to be evidence on both points. In my judgment, the evidence in this case demonstrates that Mr Davies did make a determination and it is also known what that determination was in terms of amount.

The next reason given by the judge is that the schedule was headed “without prejudice” and “confidential”. I do not regard the use of the word “confidential” as being relevant in any way to the present discussion. It is clear that the representatives of the Nominee Purchaser were nervous about information leaking out from the lessee’s side and getting into the hands of the freeholder and head lessee before the transaction was finally concluded. That concern did not prevent Mr Davies being asked to apportion the Price which had been agreed “subject to contract” nor did it prevent Mr Davies performing that function. The phrase “without prejudice” deserves more consideration. It is notorious that surveyors use this phrase in many circumstances where lawyers would say it is completely inappropriate. A surveyor producing a valuation for his client in circumstances where there is a risk that there might be a valuation dispute between that client and another party might want to be cautious and mark the valuation “without prejudice” so that the other party in any later valuation dispute could not rely upon the valuation in evidence and could not cross examine the surveyor upon it. It was probably some sense of caution of that kind that led Mr Davies to add the words “without prejudice” to his schedule. I do not read those words as conveying or intending to convey, the idea that the figures are provisional as between the Nominee Purchaser and Mr Davies.

The result of the above findings and reasoning is that I hold that Mr Davies was asked to perform the contractual function identified in clause 3.3.1 of the Participation Agreements and that he did so.

The consequences of my conclusion on the first issue

The consequences of the above conclusion are as follows. Clause 3.3.1 of the Participation Agreements provided for the determination exercise to be carried out once in relation to any particular Price. The evidence before the trial judge was that the Price apportioned by Mr Davies in October 2003 was £3,180,231. That Price did not change and the result is that it is not open to the Nominee Purchaser to invite Mr Davies to carry out a second different apportionment of that same Price. It was not suggested to the trial judge, and it was not suggested to me, that any possible “mistakes” in the data used by Mr Davies or the methods he had adopted would entitle Mr Davies to carry out the exercise again or entitle the Nominee Purchaser to invite Mr Davies to carry out the exercise again. In the pleadings, the Nominee Purchaser had asserted that one or more of the lessees of Flats 32 and 36 had misrepresented certain data to the Nominee Purchaser but that allegation was not persisted in at the trial.

It was not suggested on the hearing of this appeal that, if I reached the conclusion I have reached as to the October 2003 schedule, the lessees were estopped by virtue of what happened in 2004 and 2005 from relying upon the October 2003 schedule. Nor was it submitted that there was a later agreement under which the lessees contracted to abide by the result of a later determination such as the April 2005 determination in place of the contractual position brought about by the October 2003 apportionment. I have already described the arguments put forward by the Nominee Purchaser (although none of them was pleaded) as to estoppel. The estoppel claimed by the Nominee Purchaser was limited to the argument that the lessees were estopped from challenging the April 2005 figures on the basis that the April 2005 figures were not the independent determination of Mr Davies but were the result of an instruction given to Mr Davies. That estoppel, as alleged, does not prevent the lessee succeeding, as I hold they are entitled to, on the basis of the October 2003 determination.

I should also point out that the lessees of Flat 32 and Flat 36 have not claimed to recover the sums which they paid in April 2004 which were in excess of the sums properly due in accordance with the October 2003 determination. As no claim has been made in that respect, no submissions were made about it to me and I say nothing further about it.

The above conclusions mean that the cross-appeal should be allowed and the appeal should be dismissed. It is not necessary for me to deal with the other issues which were identified and which were argued on this appeal. However, I will make brief comments on those matters.

I would like to mention, first, the possibility that, if there had not been a valid determination in October 2003, there was a valid determination by Mr Davies in November 2003. It was conceded by the lessees that the November 2003 figures were not Mr Davies’ work. However, there were many indications in the documents that Mr Davies had adopted those figures. Further, I was never completely persuaded that it was contractually open to the Nominee Purchaser to make a demand under clause 3.3 for one figure, which was then paid, which led to the completion of the transaction and then for the Nominee Purchaser to demand a further sum. Apart from arguments based on estoppel, I would have been receptive to the submission that a demand which is settled by a participating tenant amounts to performance of the participating tenant’s obligation to pay and a discharge of that obligation.

If it had been necessary to consider the lessees’ case based on estoppel then, in my judgment, the real area of difficulty would come in determining whether it was inequitable for the Nominee Purchaser to recover a price which was based on the correct floor areas for Flats 32 and 36 rather than the incorrect and smaller floor areas used in October and November 2003.

As regards the figures produced in April 2005, prima facie, in the absence of agreement or estoppel, the lessees would not be bound by calculations which were not the independent determination of Mr Davies but proceeded on a basis that he was instructed to adopt by one party to the Participation Agreements. Accordingly, in relation to the April 2005 figures, any prospect of reliance on those figures would have to turn upon the Nominee Purchaser establishing an informal agreement to be bound by those figures or an estoppel. The case for an informal agreement was not particularly relied upon by the Nominee Purchaser and was not obviously right. The case for an estoppel may have foundered on the fact, as the judge held, that if there was not a determination in April 2005, there could be another determination which would probably produce similar answers. Beyond that, hearing an appeal as I am, I would have had some difficulty in dealing with the Nominee Purchaser’s estoppel case when it was not pleaded at the trial, may not have been properly investigated in the evidence and did not result in the judge making findings of fact specific to such a case.

Beyond making those limited observations on the other issues, it seems to me that no advantage is achieved by dealing with those issues more thoroughly and I do not do so.

The overall result

The overall result is that the cross-appeal is allowed and the appeal is dismissed.

Costs

The question of the costs of the appeal and cross-appeal can be argued following the handing down of this judgment. The question of the costs in the County Court were the subject of separate appeals and cross-appeals and were not argued before me. Those costs can be considered following the handing down of the judgment and the focus will be upon the outcome of the appeal and cross-appeal rather than the outcome in the County Court itself.