Estate agents — Duty to client — Agent acting for owners of two adjacent properties — Properties sold to same purchaser — Whether agents under duty to inform one vendor that potential purchaser also interested in adjacent property — Vendor claiming damages for alleged loss suffered by agents’ failure to provide such information — Trial judge holding that agents failed in duty and were liable in damages for difference in actual and potential price — Bermuda Court of Appeal reversing that decision and holding that agents under no duty to disclose information — Privy Council upholding appeal court decision
K was beneficial owner of Caliban, a house in Tucker’s Town, Bermuda, which was built on an oblong-shaped area of land measuring 2.85 acres fronting on to the ocean. Adjacent to Caliban, to the west, but separated by a small ravine which prevented access from one property to the other, was a house, Vertigo, built on a similar-shaped area of land measuring 2.742 acres also fronting onto the ocean. Vertigo belonged to B. Although direct access between the two properties was not possible because of the ravine, both properties fronted onto the same beach which, though public, was not much used by outsiders. Access from one property to the other was possible along that beach or along the road.
In 1979 K decided to sell Caliban and employed a number of estate agents for that purpose including C. He sought a price of $Ber3.5m or such sum as K might agree to accept. C was to be paid a commission of 5% of the selling price. Up to 1985 Caliban attracted limited interest and no offers acceptable to K had been made. C were also instructed by B as agents to sell Vertigo. Both Caliban and Vertigo were available for sale to expatriates with the consent of the Governor, who in practice did not permit an expatriate to purchase more than one property.
In April 1985, an American, P, arrived in Bermuda and approached C with a view to purchasing property. P made an offer of $Ber2m for Vertigo and $Ber2.5m for Caliban. C put the offer for Caliban to K but never told him of P’s proposed purchase of Vertigo. Both purchases went ahead, Caliban being purchased in the name of P’s son. After completion K discovered that P and his family had bought both properties and took the view that C as his agents had failed in their duty to him. He claimed that they should have told him of P’s interest because that was material information relating to his sale of Caliban. He refused to pay the commission of $Ber125,000 due to C and claimed damages from C on the basis that he could have obtained a higher price for Caliban had he known of P’s particular interest. C counterclaimed for the commission due to them.
The trial judge found in favour of K and assessed damages at $Ber200,000, being an increase of 8% on the actual sale price of $Ber2.5m on the basis that K should be compensated for the difference between the price he would probably have got if he had known the full facts and the actual sale price. The Court of Appeal allowed an appeal by C holding that C were not in breach of their duty and should not be deprived of their commission. K appealed to the Privy Council.
Held The appeal was dismissed.
1. If a purchaser was interested in buying two adjoining properties there was a special market in which the purchaser might, but not necessarily would, pay over the ordinary price to achieve its objective. Therefore, P’s interest in buying both the properties was a material factor which could have influenced the negotiations for the price at which Caliban was sold.
2. In a case where a principal instructed as selling agent for his property or goods, a person who to his knowledge acted and intended to act for other principals selling properties or goods of the same description, the terms to be implied into such agency contract must differ from those to be implied where an agent was not carrying on such general agency business.
In the case of an estate agent it was their business to act for numerous principals: where properties were of a similar description, there would be a conflict of interest between the principals each of whom would be concerned to attract potential purchasers to their property rather than that of another. Yet it was normally said that it was a breach of an agent’s duty to act for competing principals. In the course of acting for each of their principals, estate agents would acquire information confidential to that principal. It could not be sensibly suggested that an estate agent was contractually bound to disclose to any one of his principals information which was confidential to another of his principals.
3. Similar considerations applied to the fiduciary duties of agents. The existence and scope of those duties depended upon the terms on which they were acting. Thus, in the present case the scope of the fiduciary duties owed by C to K (and in particular the alleged duty not to put themselves in a position where their duty and their interest conflicted) were to be defined by the terms of their contract of agency.
4. Since K was aware that C would be acting also for other vendors of comparable properties and in so doing would receive confidential information from those other vendors, the agency contract between K and C could not have included: (a) a term requiring C to disclose such confidential information to K; or (b) a term precluding C from seeking to earn commission on the sale of the property of a rival vendor. Therefore, C committed no breach of duty, whether contractual or fiduciary, by failing to reveal to K P’s interest in buying Vertigo, since such information was confidential to B. Nor did the fact that C had a direct financial interest in securing a sale of Vertigo constitute a breach of fiduciary duty since the contract of agency envisaged that they might have such a conflict of interest: cf Lothian v Jenolite 1969 SC 111; Keppel v Wheeler [1927] 1 KB 577; and Dunton Properties Ltd v Coles Knapp & Kennedy Ltd (1959) 174 EG 723.
David Oliver QC and Robert Powell-Jones (instructed by Clifford Chance) appeared for K; Kenneth Rokison QC and Geoffrey Bell (Bermuda Bar) (instructed by Constant & Constant) appeared for C.
