Factual and Procedural Background
The Appellant was a businessman and property developer who, together with a co-owner, owned thirteen terrace/townhouse buildings in The City which had been converted into a total of 65 separate let units. Those properties had been charged to the Defendant to secure lending provided to acquire and improve them. Two of the buildings were vacant and one was a development site. After issuing a demand for repayment the Defendant initially appointed a fixed charge receiver but ultimately chose to realise its security by selling the properties as mortgagee.
The Defendant included the Appellant's properties within a larger portfolio (referred to in the materials as "Project Lanyon") which was marketed and sold to a purchaser for an aggregate consideration of approximately £43m in 2015. The portion attributed to the Appellant's properties from the portfolio sale proceeds was £2,168,867.
The Appellant sued, alleging that the Defendant sold the properties at an undervalue, mis‑attributed the proceeds to the properties and acted in bad faith. The trial judge dismissed the Appellant's claim and entered judgment on the Defendant's counterclaim; no issue arises on the counterclaim in the appeal. The Appellant appealed to the Court of Appeal. At the appeal hearing the Appellant appeared as a litigant in person; the Defendant was represented by Attorney Gowdy.
Legal Issues Presented
- Whether the Defendant, as mortgagee exercising powers of sale, breached its duties to the Appellant by including the Appellant's properties in a portfolio sale and/or by realising the properties at an undervalue.
- Whether the attribution of individual property prices from the portfolio sale to the Appellant's properties was incorrect or evidence of improper conduct by the Defendant.
- Whether the Defendant acted in bad faith in the sale process.
- Whether the Appellant was denied a fair trial by alleged non‑disclosure of documents.
- Whether the trial judge ought to have recused himself for apparent bias.
- Whether the trial judge erred in preferring the Defendant's expert valuation evidence over the Appellant's expert.
- Whether fresh evidence should be admitted on appeal.
Arguments of the Parties
Appellant's Arguments
- The portfolio sale resulted in the Appellant's properties being sold at a substantial undervalue; the true value of the Appellant's properties at the time of sale was pleaded at approximately £4.25m (the Appellant relied on an expert valuing them at about £4m).
- The Defendant mis‑attributed the proceeds from the portfolio sale and/or allocated the wrong amounts to the Appellant's properties.
- The sale process was conducted in bad faith and was rigged in favour of the successful purchaser.
- There was non‑disclosure of key documents which prejudiced the Appellant's ability to put his case at trial.
- The trial judge ought to have recused himself for apparent bias; connections between third parties and the judge gave rise to an appearance of bias.
- The judge should not have preferred the Defendant's expert evidence; the Defendant's valuer was said to have been instructed to fabricate valuations.
- Fresh evidence (various affidavits/statements) ought to have been admitted on appeal.
Defendant's Arguments
- The portfolio sale process was properly conducted: an agent was appointed to market the larger portfolio to institutional investors, multiple phases of bidding took place and the purchaser's bid produced the best price reasonably obtainable.
- Individual prices for properties within the portfolio were apportioned by the bidders (the purchaser included) and the Defendant did not itself determine those allocations; independent valuers had also been instructed.
- The Defendant took reasonable steps to achieve the best price available and acted in good faith; any assertion of rigging or fabrication had no evidential foundation.
- All relevant bid sheets and documents were disclosed; the Appellant suffered no unfairness from discovery as conducted and made no application at trial to adjourn on discovery grounds.
- The judge correctly assessed and preferred the Defendant's valuation evidence; challenges to experts should have been made in cross‑examination at trial.
- The additional material sought to be admitted on appeal could with reasonable diligence have been obtained for trial and would not probably have affected the outcome, so the Ladd v Marshall criteria for fresh evidence were not met.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Ladd v Marshall [1954] 1 WLR 1489 |
Conditions for admitting fresh evidence on appeal (documents/evidence admissible only if could not have been obtained with reasonable diligence, would probably have important influence, and appears credible). |
The court applied the Ladd v Marshall conditions and declined to admit the fresh evidence tendered on appeal, finding it could have been obtained for trial and would not probably have affected the outcome. |
| McDonagh v Bank of Scotland [2018] EWHC 3262 |
Guidance on portfolio sales by a receiver, including the requirement that a receiver ask whether inclusion of a particular mortgaged property in a portfolio sale is likely to be in the mortgagor's best interests. |
The court referred to McDonagh when considering the law on portfolio sales. It noted the Appellant's submission that the judge had not answered the "McDonagh question" but concluded the trial judge made adequate factual findings that no breach occurred and that any such issue, if raised, would not change the outcome on loss/valuation grounds. |
| Lion Nathan Ltd v C‑C Bottlers Ltd [1996] 1 WLR 1438; South Australia Asset Management Corp v York Montague Ltd [1997] AC 191; Michael v Miller [2004] 2 EGLR 151 |
Principles on valuation — the court must determine the most likely market value and not equate that value with the lowest figure in a bracket of valuations. |
These authorities were cited in McDonagh (and referenced in this judgment) for the proposition that, when assessing loss, the court must determine the most likely market value based on valuation evidence rather than simply taking the lowest figure. |
| Porter v Magill [2001] UKHL 67 |
Test for apparent bias: whether a fair‑minded and informed observer would conclude there was a real possibility of bias. |
The court applied the Porter test to the Appellant's recusal/ apparent bias arguments and concluded that the historical and limited connections relied upon could not give rise to a real possibility of bias. |
| Locabail v Bayfield [2000] QB 451 |
Guidance that ordinary social, professional or historical connections ordinarily will not found an objection of bias. |
The court relied on Locabail to support the conclusion that the historical connections identified did not justify recusal. |
| Re Medicaments [2001] 1 WLR 700 |
Observation that fair‑minded observers will expect a professional judge to discharge duties impartially. |
The principle was cited to emphasise that judges are expected to act impartially, supporting the court's rejection of the recusal argument. |
Court's Reasoning and Analysis
The Court of Appeal began by restating its appellate role: review for errors of law or unfairness, deference on findings of credibility and fact to the trial judge, and strict application of fresh evidence criteria (Ladd v Marshall). The court then reviewed the factual matrix and the trial judge's findings.
The trial judge had identified the duties of a mortgagee exercising a power of sale: once a mortgagee decides to sell it must take reasonable steps to achieve the best price reasonably available on the market at the time and must act in good faith and for a proper purpose. The trial judge considered the choice of a portfolio sale and the steps taken by the Defendant (appointment of agents, marketing to institutional bidders, multiple bid phases, engagement of independent valuers) and concluded that those steps fell within the discretion available to the Defendant and were consistent with the Defendant taking reasonable steps to obtain the best price.
On the central valuation dispute, the judge preferred the Defendant's valuation evidence (Expert Callan) to the Appellant's expert (Expert Furey). The judge explained the comparative reasons: Expert Callan used actual receipts for gross rent and a conservative opex deduction; Expert Furey used a higher rent figure (including sums not actually collected), a lower opex percentage and comparables that related to single‑unit sales rather than whole‑building investment sales. The judge found Expert Callan's application of the agreed investment approach (gross rents, opex adjustment, capitalisation) to be more persuasive and consistent with independent Red Book valuers. The Court of Appeal accepted that preference and held there was no basis to overturn the trial judge's assessment of expert evidence.
On attribution of individual prices, the contemporaneous bid sheets and witness evidence showed that bidders (not the Defendant) apportioned individual prices for the properties as part of their bids. The trial evidence established that the final spreadsheet with individual allocations came from the purchaser; the judge accepted the Defendant's evidence on this and the Court of Appeal noted that the Defendant's evidence on attribution went unchallenged at trial. The court observed that any post‑bid correspondence seeking to improve apportionment appeared to increase the sums attributable to the Appellant's properties and therefore, if anything, benefitted the Appellant.
As to allegations of conflict of interest (concerning a non‑executive director of the successful purchaser) and of bias by the trial judge, the court reviewed the evidence and found the connections to be historical and limited. Applying the Porter v Magill test (and Locabail guidance), the court concluded no real possibility of bias arose. The affidavit evidence relied on regarding the director's background was admissible and, together with oral evidence at trial, supported the trial judge's conclusion that no conflict affecting the fairness of the sale process had been shown.
On disclosure, the court found that a detailed amended list of documents had been provided before trial and the relevant bid sheets had been disclosed; no trial application was made to adjourn for further discovery and the Appellant had not shown he was prejudiced by disclosure as conducted.
Allegations that an independent valuer was instructed to fabricate valuations were not pleaded at trial and lacked evidential support in contemporaneous documents; the court found no basis to accept such a serious allegation.
Finally, the court considered the fresh evidence tendered on appeal and declined to admit it, applying the Ladd v Marshall criteria: the material could have been obtained for trial and would not probably have had an important influence on the outcome.
Holding and Implications
HOLDING: The appeal is dismissed and the order of Judge Huddleston at first instance is affirmed. The trial judge's conclusion that the Defendant took reasonable steps to achieve the best possible price and did not act in bad faith was upheld.
Implications: The direct effect is that the Appellant's claim against the Defendant is dismissed and the trial judge's judgment for the Defendant (including the previously entered counterclaim judgment) stands. The court did not overturn the trial judge's assessment of valuation evidence or procedure, declined to admit fresh evidence on appeal and rejected the Appellant's recusal and disclosure complaints. The opinion does not identify any broader legal principle being established as a new precedent; it affirms the trial judge's fact‑based conclusions on the particular evidence in this case.