Falmouth House Ltd & Anor v Rahmizadeh & Ors

Under a participation agreement providing for an expert to determine each leaseholder’s contribution to an acquisition price, the expert’s function includes apportioning that price between participating leaseholders. The nominee purchaser cannot make the apportionment itself.

Where the expert has made a final apportionment of an identified price, the contractual determination is ordinarily exhausted. The purchaser cannot invite the expert to make a second apportionment merely because errors are later discovered. A determination need not be formally manifested to the outside world if the evidence establishes that it was made. Confidential or without prejudice markings do not necessarily make it provisional.

The claimants, acting as nominee purchasers in a collective enfranchisement transaction, sought further payments from leaseholders after completion of the freehold acquisition and the grant of new leases. The County Court held that the relevant contribution had to be determined by the contractual surveyor, but found no binding determination in October or November 2003 and left open a later determination.

The claimants appealed aspects of that order. The leaseholders cross-appealed the findings that there had been no earlier determination and that a further determination remained possible. The central issue was whether the October 2003 calculations constituted a binding contractual apportionment.

1. Cross-appeal allowed; appeal dismissed. The issue of costs was reserved for further argument.
2. Clause 3.3.1 required the Company’s Surveyor to determine the apportionment of the acquisition price between participating leaseholders. It did not permit the nominee purchaser to determine the leaseholders’ contributions unilaterally.
3. The contemporaneous correspondence and the surveyor’s evidence showed that, in October 2003, he was asked to perform that contractual function and did so. The fact that the schedule also included costs and fees did not prevent it from containing an apportionment of the price.
4. The determination did not need to be separately manifested to the outside world. The court could decide from the evidence whether a determination had been made and what it was. The headings confidential and without prejudice did not make the figures provisional.
5. The appellate court was entitled to substitute its factual findings because the County Court’s conclusion was plainly wrong. Applying the approach in Assicurazioni Generali SPA v Arab Insurance Group [2003] 1 WLR 577, the October apportionment was treated as final.
6. Clause 3.3.1 contemplated one determination for a particular price. Since the price remained £3,180,231, the nominee purchaser could not require a second apportionment. Possible mistakes in the data or methodology did not, on the issues argued, justify reopening the determination.
7. The court made limited obiter observations that a settled demand might amount to performance and discharge of a leaseholder’s payment obligation, and that the April 2005 figures would prima facie require agreement or estoppel to bind the leaseholders.

• Central London County Court: following a trial, declared that the leaseholder contributions required determination by the contractual surveyor, that no determination had been made in October or November 2003, and that a further determination remained possible.
• High Court (Chancery Division): the leaseholders’ cross-appeal was allowed and the nominee purchaser’s appeal was dismissed.