Cuckmere Brick Co Ltd v Mutual Finance Ltd

Last updated

Cuckmere Brick Co v Mutual Finance
Royal Coat of Arms of the United Kingdom.svg
Court Court of Appeal of England and Wales
Full case nameCuckmere Brick Company Ltd and Leslie Arthur Fawke v Mutual Finance Limited
Decided25 February 1971 (1971-02-25)
Citation(s)[1971] EWCA Civ 9
[1971] Ch 949
[1971] 2 All ER 633
[1971] 2 WLR 1207
Case history
Prior action(s)The appellant (defendant bank) lost at first instance
Appealed fromHigh Court (Plowman J)
Case opinions
Salmon LJ thought no inquiry as to damages necessary and would have accepted the rough figure awarded by Plowman J.
Concurring judgments as to all other elements of Cross and Cairns LJJ
Case opinions
Decision bySalmon LJ
ConcurrenceCross LJ and Cairns LJ
Keywords
Mortgage; auction particulars; planning permissions

Cuckmere Brick Co v Mutual Finance [1971] EWCA Civ 9 is an English tort law case, establishing the lender must publish/promote the materially beneficial key, intrinsic facts as to land in mortgage repossession sales. As it affects the duty of mortgagees (secured lenders), to that extent it can be considered within the periphery of English land law also.

Contents

The tripartite panel at appeal established negligence on the part of the lender or its auctioneer agent. A 2-1 majority directed an enquiry as to damages (as opposed to rough award ordered at first instance) to be carried out.

Facts

In 1961, Cuckmere Brick Co had received planning permission to build 100 flats each with a garage on a site of 2.65 acres (1.07 ha) near Maidstone, and received £50,000 mortgage financing from Mutual Finance who valued the land accordingly. By 1964, due to cash flow problems arising from other developments in which Cuckmere was involved, planning permission was subsequently received (with Mutual's approval) to build 35 houses, which would have incurred lower construction costs. Construction had still not commenced by 1966, and Mutual exercised power of sale under the mortgage, putting the land up for auction, and advertising that the property had planning permission for the houses, but not the flats. Cuckmere advised Mutual of the oversight, and the latter told the auctioneer to mention it. They got £44,000 at the auction, and Cuckmere argued that it should have been closer to £75,000 had the planning permission been mentioned properly in the advertisement, indeed had its existence, underpinning the bank's own valuation, been imparted to prospective buyers.

Cuckmere sued, asking for an account to be taken on the basis that the defendants should be debited with the price which they could and should have obtained for the site. Mutual counter-claimed for the balance of all moneys due under the mortgage with interest after crediting the plaintiffs with the proceeds of the sale. Plowman J found for the plaintiffs on the claim so as to eclipse the value of the counterclaim, accepting credible evidence that £65,000 was the price that could and should have been obtained for the land but for the defendants' default or failure to take reasonable precautions in relation to the sale.

Both parties appealed to the Court of Appeal.

Judgment

The appeal was allowed in part, being sent back to an inquiry as to damages, potentially to lower those awarded. The respondent borrower was awarded 34 of the costs of the appeal.

Generally agreeing on the applicable test, two Lord Justices of Appeal saw the case was returned for an inquiry as to damages, on the basis that the price at which the land could probably have been sold was still unclear (one judge used the fading language, "at large"), the third would have fully upheld the original damages award.

Salmon LJ held that Mutual Finance had breached its duty of care to Cuckmere. The duty is not to get the best or proper price, whatever that means, but ‘the true market value.’ [1] This was the proposition of earlier High Court decision in Tomlin v Luce (1890) (the case was "followed"). [2]

It is well settled that a mortgagee is not a trustee of the power of sale for the mortgagor. Once the power has accrued, the mortgagee is entitled to exercise it for his own purposes whenever he chooses to do so. It matters not that the moment may be unpropitious and that by waiting a higher price could be obtained. He has the right to realise his security by turning it into money when he likes. Nor, in my view, is there anything to prevent a mortgagee from accepting the best bid he can get at an auction, even though the auction is badly attended and the bidding exceptionally low, Providing none of those adverse factors is due to any fault of the mortgagee, he can do as he likes. If the mortgagee's interests, as he sees them, conflict with those of the mortgagor, the mortgagee can give preference to his own interests, which of course he could not do were he a trustee of the power of sale for the mortgagor.

[...]

The mortgagor is vitally affected by the result of the sale but its preparation and conduct is left entirely in the hands of the mortgagee. The proximity between them could scarcely be closer. Surely they are "neighbours".

[...]

I accordingly conclude...that a mortgagee in exercising his power of sale does owe a duty to take reasonable precaution to obtain the true market value of the mortgaged property at the date on which he decides to sell it. No doubt in deciding whether he has fallen short of that duty, the facts must be looked at broadly and he will not be adjudged to be in default unless he is plainly on the wrong side of the line.

Cross LJ agreed that the lender was also responsible for the conduct of its agent (the auctioneer) and either or both were negligent:

...Counsel for the appellants further submitted that even if we should be of opinion that a mortgagee was liable to account to the mortgagor for loss occasioned by his own negligence in the exercise of his power of sale, it was not right that he should be liable for the negligence of an agent reasonably employed by him. It may well be that this point is not open to him in view of the way the argument proceeded below - but in any case I do not accept the submission. In support of it, counsel pointed out that a trustee is not liable for the default of an agent whom it is reasonable for him to employ. But the position of a mortgagee is quite different from that of a trustee. A trustee has not, qua [in his capacity as] trustee, any interest in the trust property, and if an agent employed by him is negligent his right of action against the agent is an asset of the trust. A mortgagee, on the other hand, is not a trustee and if he sues the agent for negligence any damages which he can recover belong to him....

Equally Cairns LJ:

The issues in this appeal are:

  1. Does the duty of a mortgagee to a mortgagor on the sale of the mortgaged property include a duty to take reasonable care to obtain a proper price or is it sufficient for the mortgagee to act honestly and without a reckless disregard of the interests of the mortgagor?
  2. Was the advertising of the auction without reference to the planning permission for flats
    (a) right
    (b) an error of judgment
    (c) negligent or
    (d) reckless?
  3. A similar question in relation to the refusal to postpone the auction.
  4. If anybody on the defendants' side was at fault, was the fault that of the defendants themselves or of their agents Geering & Colyer, or both?
  5. If the fault was that of the agents only, can it be attributed to the defendants?
  6. If there was negligence for which the defendants are responsible did the plaintiffs suffer any damage thereby?
  7. If so, what value is to be attributed to the land in assessing the damages?
  1. ...I therefore consider that Tomlin v. Luce is the stronger authority and I would hold that the present defendants had a duty to take reasonable care to obtain a proper price for the land in the interest of the mortgagors.
  2. ...There was no deliberate decision not to mention flats. There was simply a failure to consider the desirability of doing so. On the evidence of Mr. Dann and Mr. St.John this was at least an error of judgment
    ...It would have been the simplest thing in the world to mention the flats permission in the brochure. It could have done no harm. It might have attracted a purchaser whose ideas of the prospects of disposing of flats...I conclude that there was negligence in omitting it.
    Whatever lapse there may have been in the exercise of skill and judgment, I cannot think that the evidence pointed to a reckless disregard of the interests of either party.
  3. ...And if it was negligent not to advertise the permission in the first instance then it was negligent not to postpone the auction and re-advertise. Not that there were no good reasons for pressing on with the sale: interest was accruing every day...
  4. ...In my view there was at both stages negligence on the part of both the defendants and their agents.
  5. ... If it were open [to argue the lender is not liable for any negligence of their agents] I should need more argument to satisfy me that Mr. Justice Kekewich and Lord Justice Cotton were wrong.
  6. ...in the court below there was a failure to distinguish between the question of whether there was a reasonable chance that people interested in buying for flats would have attended...from the general evidence of [experts for the plaintiff]...if people had come to the sale with a view to buying for flats somebody would have thought that the land was worth more than £44,000 and would have raised that bid. So...the plaintiffs suffered some damage...
  7. ...They called no flat-developer to say he would have offered £65,000 for the land. No doubt if Mr. Dann or Mr. St. John had been consulted they would have advised paying that price but it may well be that other advisers would have been more cautious or that the developers would have realised how shaky that valuation was and would have refrained from bidding so high. To establish the figure of £65,000 it is necessary to assume the presence at the auction of at least two flat-developers who would have bid against each other to push up the price to that extent.

In my view the learned judge was wrong to accede to the request to assess the figure on the materials before him, though I can well understand his doing so as the request was a joint one....there should be an inquiry as to damages on the footing that the price at which the land could probably have been sold is at large. I would so direct.

Followed or applied in

Dictum followed in

Considered in

Explained by the Privy Council in

See also

Notes

  1. Cuckmere [1971] Ch 949, 965 [ full citation needed ]
  2. 1 2 3 4 5 "Index card Cuckmere Brick Co Ltd v Mutual Finance Ltd - ICLR".

Related Research Articles

Negligence is a failure to exercise appropriate and/or ethical ruled care expected to be exercised amongst specified circumstances. The area of tort law known as negligence involves harm caused by failing to act as a form of carelessness possibly with extenuating circumstances. The core concept of negligence is that people should exercise reasonable care in their actions, by taking account of the potential harm that they might foreseeably cause to other people or property.

This article addresses torts in United States law. As such, it covers primarily common law. Moreover, it provides general rules, as individual states all have separate civil codes. There are three general categories of torts: intentional torts, negligence, and strict liability torts.

<i>Hedley Byrne & Co Ltd v Heller & Partners Ltd</i>

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 is an English tort law case on economic loss in English tort law resulting from a negligent misstatement. Prior to the decision, the notion that a party may owe another a duty of care for statements made in reliance had been rejected, with the only remedy for such losses being in contract law. The House of Lords overruled the previous position, in recognising liability for pure economic loss not arising from a contractual relationship, applying to commercial negligence the principle of "assumption of responsibility".

In some common law jurisdictions, contributory negligence is a defense to a tort claim based on negligence. If it is available, the defense completely bars plaintiffs from any recovery if they contribute to their own injury through their own negligence.

<span class="mw-page-title-main">Misrepresentation</span> Untrue statement in contract negotiations

In common law jurisdictions, a misrepresentation is a false or misleading statement of fact made during negotiations by one party to another, the statement then inducing that other party to enter into a contract. The misled party may normally rescind the contract, and sometimes may be awarded damages as well.

Ex turpi causa non oritur actio is a legal doctrine which states that a plaintiff will be unable to pursue legal relief and damages if it arises in connection with their own tortious act. Particularly relevant in the law of contract, tort and trusts, ex turpi causa is also known as the illegality defence, since a defendant may plead that even though, for instance, he broke a contract, conducted himself negligently or broke an equitable duty, nevertheless a claimant by reason of his own illegality cannot sue. The UK Supreme Court provided a thorough reconsideration of the doctrine in 2016 in Patel v Mirza.

<i>Central Trust Co v Rafuse</i> Supreme Court of Canada case

Central Trust Co v Rafuse, [1986] 2 SCR 147 is a leading decision of the Supreme Court of Canada on liability of solicitors in negligence and breach of contract as well as the doctrine of discoverability under the Statute of Limitations.

Bristol and West Building Society v Mothew [1996] EWCA Civ 533 is a leading English fiduciary law and professional negligence case, concerning a solicitor's duty of care and skill, and the nature of fiduciary duties. The case is globally cited for its definition of a fiduciary and the circumstances in which a fiduciary relationship arises.

The following outline is provided as an overview of and introduction to tort law in common law jurisdictions:

<i>Smith v Eric S Bush</i>

Smith v Eric S Bush [1990] UKHL 1 is an English tort law and contract law case, heard by the House of Lords. First, it concerned the existence of a duty of care in tort for negligent misstatements, not made directly to someone relying on the statement. Second, it concerned the reasonableness of a term excluding liability under the Unfair Contract Terms Act 1977, s 2(2) and s 11.

<i>Candler v Crane, Christmas & Co</i>

Candler v Crane, Christmas & Co [1951] 2 KB 164 is an English tort law case on negligent misstatement.

<i>Medforth v Blake</i>

Medforth v Blake[1999] EWCA Civ 1482 is a UK insolvency law case concerning the duties of a receiver and manager in the United Kingdom, over and above a duty of good faith, as to the manner in which he conducts a business.

<i>Downsview Nominees Ltd v First City Corp Ltd</i>

Downsview Nominees Ltd v First City Corp Ltd [1992] UKPC 34 is a New Zealand insolvency law case decided by the Judicial Committee of the Privy Council concerning the nature and extent of the liability of a mortgagee, or a receiver and manager, to a mortgagor or a subsequent debenture holder for his actions.

<i>Tse Kwong Lam v Wong Chit Sen</i>

Tse Kwong Lam v Wong Chit Sen, is a land law case, concerning the rights and obligations of a mortgagee in the exercise of his power of sale under a mortgage.

Silven Properties Ltd v Royal Bank of Scotland[2003] EWCA Civ 1409 is an English land law case, concerning the behaviour of receivers appointed under mortgages. It affirmed the proposition that a lender are not required to incur expenses that would likely delay a sale beyond the normal period of marketing.

Mortgages in English law are a method of raising capital through a loan contract. Typically with a bank, the lender/mortgagee gives money to the borrower/mortgagor, who uses their property/land/home as security that they will repay the debt and any relevant interest. If the mortgagor fails to repay, then the mortgaged property which has been used as security may be subject to various mortgagee remedies allowing them to retrieve the debt. Mortgages are an important part of English land law and property law. These concern, first, the common law, statutory and regulatory rules to protect the mortgagor at the time of concluding the mortgage agreement. Second, English law defines and restricts the process for taking possession of property in the event of default. Third, it places duties on mortgagees on the price it achieves when selling property.

<i>Spring v Guardian Assurance plc</i> United Kingdom labour law court case

Spring v Guardian Assurance plc[1994] UKHL 7, [1995] 2 AC 296 is a UK labour law and English tort law case, concerning the duty to provide accurate information when writing an employee reference.

The civil liability of a recreational diver may include a duty of care to another diver during a dive. Breach of this duty that is a proximate cause of injury or loss to the other diver may lead to civil litigation for damages in compensation for the injury or loss suffered.

<i>Chapman v Hearse</i> Judgement of the High Court of Australia

Chapman v Hearse is a significant case in common law related to duty of care, reasonable foreseeability and novus actus interveniens within the tort of negligence. The case concerned three parties; Chapman who drove negligently, Dr Cherry who assisted him on the side of the road, and Hearse who, in driving negligently, killed Dr Cherry while he was assisting Chapman. In the Supreme Court of South Australia, Hearse was found liable for damages to Dr Cherry's estate under the Wrongs Act 1936. Hearse sought to reclaim damages from Chapman due to his alleged contributory negligence; Chapman was found liable to one quarter of the damages. Chapman appealed the case to the High Court of Australia on August 8, 1961 but it was dismissed as the results of his negligence were deemed reasonably foreseeable. A duty of care was established between Chapman and the deceased and his claim of novus actus interveniens was rejected. Dr Cherry was considered a ‘rescuer’ and his respective rights remained.

<i>Walsh v Jones Lang Lasalle Ltd</i> Irish Supreme Court case

Walsh v Jones Lang Lasalle Ltd [2017] IESC 38, is a decision of the Irish Supreme Court in which the court held that a purchaser bears the risk of reliance on erroneous information unless the vendor has clearly assumed responsibility for its accuracy. In reaching this decision, the court clarified the law in Ireland "in relation to the effect of statements disclaiming liability in actions claiming negligent misstatement."