Griffiths v W E & D T Cave Ltd

Where an agreement requires land to be valued at its open market value by reference to an existing use and subject to a tenancy, those words do not ordinarily exclude value arising from development potential. A court should not insert the word “only” or an equivalent restriction without sufficiently clear language. The valuer must take account of the existing use and tenancy, but may also consider the land’s real-world development value. The court should avoid speculating about an alleged commercial cut-off where the agreement is equally consistent with postponement of an unresolved valuation issue.

The personal representatives of Leonard Griffiths disputed the price payable under a call option granted to W E & D T Cave Ltd over land held subject to an agricultural tenancy. The option distinguished between exercise following planning permission and exercise after the expiry date. On the latter route, the price was stated to be 16 per cent of the land’s open market value “by reference to the existing agricultural use subject to the agricultural tenancy”.

Chadwick J held that the valuation was not confined to agricultural value and should include development potential. Cave appealed, contending that the words required an agricultural-only valuation. The central issue was the proper construction of the valuation clause.

The Court of Appeal unanimously dismissed the appeal, with costs. Aldous LJ delivered the leading judgment; Hutchison LJ and Morritt LJ agreed.

1. The words “by reference to the existing agricultural use subject to the agricultural tenancy” required the valuer to take account of two matters: the existing agricultural use at the date of exercise and the agricultural tenancy. They did not require the valuer to strip from the open market value any element attributable to potential development.
2. The expression “open market value” indicated a valuation of the land in the real world, subject to the express qualifications in the agreement. Cave’s construction would require an artificial valuation below the price the land might obtain on the open market.
3. The court should not interpolate the word “only” into the phrase “by reference to the existing agricultural use”. Nor should it attribute such an intention where the parties could readily have used clearer wording, such as “existing use value” or an express agricultural-only qualification.
4. The surrounding agreement supported the Griffiths construction. The provisions contemplated the possibility that development value would arise and did not clearly impose a ten-year cut-off on the grantor’s ability to share in that value. Alleged anomalies under either construction did not justify departing from the ordinary meaning of the words.
5. The court should not speculate whether the parties intended a cut-off or merely postponed an issue they had been unable to resolve in 1986. The judge below had reached the right result for the right reasons.

• Court of Appeal (Civil Division): dismissed Cave’s appeal with costs.
• High Court: Chadwick J, on 11 July 1997, held that the valuation included development potential.