Redlawn Land Ltd v Cowley & Anor

Where an option agreement requires valuation before the option can be exercised but does not specify the valuation date, the court should identify the date that best reflects the parties’ contractual structure and the transaction contemplated. Ordinarily, that will be the latest practicable date before exercise, namely the date on which the expert determines the relevant value. A valuation at the earlier date when the expert is appointed should not be adopted merely because it is fixed and certain or because delay might affect market values. The possibility of delay is generally neutral unless the agreement clearly allocates that risk.

The claimant held an option to purchase development land from the defendants. The agreement required the open market value and agricultural value to be determined before the consideration and option price could be fixed. It did not specify the valuation date.

The parties disputed whether valuation should occur at the date when an expert was required to be appointed, 21 April 2008, or at the date when the expert actually made his determination. A non-binding specialist had favoured the earlier date. The court was required to construe the agreement and determine the appropriate valuation date.

1. Construction of the agreement. Clause 7.5 was silent on the valuation date. The relevant question was what the valuer was being asked to determine. Since the option could not be exercised until the values and consideration had been determined, the agreement more naturally contemplated a current valuation than a retrospective valuation.
2. Effect of the valuation machinery. The expert was appointed for his expertise in valuing land. The contractual timetable indicated that the parties expected a relatively speedy determination. The possibility that an expert acting as an arbitrator might obtain an extension under Arbitration Act 1996, section 34(3), did not justify fixing the valuation date at appointment. The potential for delay was a neutral consideration and did not alter the proper construction.
3. Compulsory-purchase analogy. The reasoning in Birmingham Corporation v West Midland Baptist (Trust) Association Inc [1970] AC 874, concerning the date for assessing compensation under the Land Compensation Act 1961, section 5, supported selecting the date closest to the event giving rise to the relevant transaction. The analogy was not exact, but it was useful.
4. The Court of Appeal’s observations in W & S (Long Eaton) Limited v Derbyshire County Council (1975) 31 P & CR 99 answered the concern that evidence might pre-date the determination. If values changed materially, further evidence could be obtained before the award.
5. The valuation date was therefore the date of the expert’s actual determination, whether acting as expert or arbitrator. The claimant succeeded.