Action against estate agents for breach of contract of management — Letting of furnished flat on behalf of client who had to take up a professional appointment abroad — Failures to verify references properly in respect of prospective tenants, to check inventories, to obtain rent in advance, to ensure payment by tenants of telephone bills, to arrange for services to property to be put into the names of tenants — Dilapidations caused by tenants who had damaged decorations and furnishings — Extent of defendants’ liability for breach of contract — Damages awarded of just short of £6,000
In this action
the plaintiff, Iain Murray, sued a firm of estate agents, Sturgis & Son,
practising in London W and SW, for alleged breaches of a contract to manage a
ground-floor flat owned by the plaintiff at 142 Southfield Road, Chiswick,
London W4. The defendant had been instructed to manage the flat during the
absence of the plaintiff, a chartered accountant, who had accepted a
professional appointment in Paris.
Michael G
Spencer (instructed by Compton Carr) appeared on behalf of the plaintiff; A W
Stevenson (instructed by Barlow, Lyde & Gilbert) represented the
defendants.
Giving
judgment, SIR DOUGLAS FRANK QC said: In November 1978 the plaintiff bought a
150-year lease of a ground-floor flat at 142 Southfield Road, Chiswick. It was
a two-storey building. Concurrently, he bought the freehold for which he paid
£1. He and his wife — they were newly married — decorated the flat themselves,
and then they put in furniture, new curtains and carpets. They occupied the
flat. They had not done so for long when the plaintiff, who is a chartered
accountant, was offered an appointment in Paris, which he decided to take. At
that time it was thought that the appointment would be short term and so he
decided to let his flat, hoping by doing so to cover the mortgage interest and
repayments, and he would then have a home to come back to.
He got in
touch with the defendants, who are a firm of surveyors and estate agents
practising in that part of London with a view to instructing them to manage the
flat in his absence. There he saw a Mrs Penny Long, who had not been employed
by the defendants for very long and who was not very experienced or, I am bound
to say, competent in her work. The manager of the furnished lettings department
was Mrs M R Peterson, and I think I should say in passing that both these
ladies gave their evidence fairly and candidly, in a way which was a credit to
them and therefore to the defendants, and that is notwithstanding that this
management was an unhappy affair.
Mrs Long
visited the flat on January 4 1979 and was much impressed with what she saw,
and thought that there would be no difficulty in letting the flat, certainly at
the price which the plaintiff had in mind, which was about £65 a week. Indeed
she later thought that it was worth £80 a week. A few days later the plaintiff
was asked to and did sign the defendants’ printed form of what is called the
‘Contract of Conditions of Management’, and that contract provided, among other
things, that the defendants were to find and vet prospective tenants, taking up
references as necessary, and to arrange for an inventory to be made of all
furnishings and fittings and general condition of the properties, with three
copies to be held. One was to be held by the defendants, one sent to the
plaintiff, and one to be retained by the tenant. They were to arrange for a
check-in and check-out at the commencement and termination of any tenancy.
Further, the contract provided that they were to collect a deposit from the
tenant, to be retained against any dilapidations; that they were to arrange for
all services to the property to be put into the names of the tenants; and
arrange for the accounts to be sent to the tenants for payment. The landlord
agreed to establish a sinking fund of £150 — it is called a sinking fund for
£150 — and for their services the defendants were to be paid a commission of 15
per cent of the total annual rent.
By February 12
the plaintiff had left the flat to live in Paris, and he had given his father,
Angus Murray, a power of attorney. Before leaving, or when leaving, the
plaintiff had also removed some furniture. When Mrs Long saw that, she spoke to
Mr Angus Murray about it, and in consequence Mr Angus Murray gave her authority
to buy certain items, and sent her a cheque for £150 for the contingency fund
out of which she would pay for the furniture. It was Mrs Long’s evidence that
at that time she thought that she might get rent of £80 a week.
The first
tenant was one John Barwiss. He was not British. I am not sure whether he was
American or African; it matters not. He had apparently spent many years in
Africa, where he had been a school-friend of Mrs Peterson’s husband. He was on
leave from his work on a North Sea oil rig and wished to have somewhere to
stay. Mrs Peterson telephoned his employer, with whom he was employed on a
contract basis, and although I do not know the terms of it as it was not
confirmed in writing, the employer gave a reference which Mrs Peterson found
satisfactory. She understood that he had no bank account in the United Kingdom
and that his account was with a Swiss bank. She obtained no other references.
On March 26 a tenancy was offered to Barwiss at £75 per week for two months and
he was required to pay a deposit of £300. He moved in on March 26 and out again
the next day. The reason he moved out was that the water was not turned on. It
is a matter of some surprise, first, that the water had not been turned on,
because the plaintiff had been in touch with the defendants about that matter
some time earlier and they seem to have done nothing about it. In any event,
they took no immediate steps to have the water turned on. Barwiss did not
return to the flat until April 10. No check-in was made before Barwiss’
tenancy. On June 29 Mrs Peterson visited the flat. Of course, Barwiss had
already overstayed his tenancy. She immediately became concerned at what she
saw. One example was there were burns on the dressing table. There were two other
men there and it was clear that Barwiss was reluctant to leave.
On the day
before, a Mrs Redding had telephoned Mrs Peterson saying that she was a friend
of Barwiss and of Mrs Peterson’s husband. On June 30 Mrs Redding asked for a
tenancy of the flat pending the buying of a house. It now appears that all
along she had been living with Barwiss at the flat. Mrs Peterson was given the
name of the solicitors to the executors of Mrs Redding’s mother’s estate. She
telephoned, and they said that it was the case that Mrs Redding would inherit
under her mother’s will, but it would be
character of Mrs Redding, nor was any confirmation in writing sought from the
solicitors concerned. No bank reference was obtained, although Mrs Peterson
overheard a conversation which Mrs Redding had with her bank, and it was clear
that Mrs Redding was in financial difficulties. A tenancy was granted to Mrs
Redding. A deposit was not taken, nor was any rent taken in advance.
One
astonishing feature of this case is that some time earlier two cheques — at
least two cheques — had been sent to the defendants. Apparently they went
straight to their accounts department. They had been presented but dishonoured
by Mrs Redding’s bank; they were marked ‘RD’. What is astonishing about that is
that the accounts department did not tell Mrs Peterson about those dishonoured
cheques until a long time later, and, of course, a tenancy, for that reason
alone, should never have been granted. But it was granted on July 1 for a term
of six months at £60 a week, with an option to renew for a further six months
from January 1 1980. There was no check-out at the end of Barwiss’ tenancy or
any check-in at the beginning of Mrs Redding’s tenancy.
About July 12
the defendants received complaints about noise from the flat. On that day Mrs
Peterson visited it. She was shocked by what she saw of the general state of
the flat. For example, there were numerous cigarette burns in the carpet; the
decorations had been spoilt, and so on, and it is quite clear that both Barwiss
and Mrs Redding were thoroughly undesirable persons. Mrs Peterson spoke to Mr
Angus Murray, and, with his concurrence, instructed the defendants’ solicitors
with a view to obtaining eviction, and those solicitors served a notice under
section 146 of the Law of Property Act 1925.
Later in July
the plaintiff, being disturbed by what he had heard, returned from France and
visited the property. Then he instructed new agents and also instructed his own
solicitors. On August 22 £780 was paid on behalf of Mrs Redding, and that was
equivalent to the payment of rent until the end of September. On January 25
1980 the writ in this action was served. On February 29 Mrs Redding gave up
possession. On March 3 the plaintiff’s solicitors suggested to the defendants
that there should be a joint inspection, and that suggestion was not taken up
until May 31. On June 30 the plaintiff contracted to sell the flat, and that
sale was not in fact completed until September.
Mrs Peterson
readily agreed that the handling of this property was not done in a
professional way. In her words, ‘it was totally and utterly messed up’,
particularly in relation to letting to Mrs Redding. Some liability by the
defendants is not now seriously disputed. What is disputed is the extent of
that liability, and I think I can best deal with that by reference to the
schedule quantifying the plaintiff’s damages. First of all, as to the Barwiss
letting generally, I bear in mind that the defendants well knew that the
plaintiff was going to live in Paris and that he was relying entirely on the
defendants to protect his interest, and I hold that in being satisfied with
only one telephone reference the defendants were in breach of clause 2 of the
contract with the plaintiff, and therefore damages flow from the fact that
Barwiss was an unsatisfactory tenant. I further hold that the defendants were
in breach in not taking rent in advance on March 26 and therefore liable for
the unpaid rent, less commission, from then until April 9, and therefore they
are liable for the amount claimed, £142.45. Similarly, they are liable for the
unpaid rent from May 10 to June 30, and that is £488.91. I further hold that
the evidence establishes that the telephone was kept in the plaintiff’s name by
the positive action of the defendants, and that in respect of that the
defendants are also in breach of clause 6. The plaintiff had to pay a telephone
bill incurred by Barwiss or Mrs Redding of no less than £310.97. That was
entirely due to the negligence of the defendants and I hold them to be liable
for it.
I turn now to
the letting to Mrs Redding. There is no doubt that the defendants were in
breach of all the clauses of the agreement to which I have referred. The defendants
say the plaintiff should have pursued an action for possession and evicted Mrs
Redding and thereby could have obtained possession by December 31. That is
theoretically possible, but the question is whether the plaintiff acted
reasonably, given all the circumstances, including the fact that Mrs Redding
had paid rent up to the end of September. The difficulties in getting not only
a court order for possession against a tenant but also enforcing such an order
are well known. It is particularly difficult in a case such as this where the
landlord cannot contend that he wants the premises for his own occupation.
There is also the added complication here that not only had the rent been paid
up to the end of September, but also under the terms of the tenancy agreement
Mrs Redding had the right to renew the lease for a further six months from
January 1 1980.
Generally,
what the plaintiff sought to do here was to recover as much rent as he could
and also to get Mrs Redding out. I cannot say that the course he took was
unreasonable in all the circumstances. He had nothing to gain and, indeed,
everything to lose by allowing Mrs Redding to stay there longer than necessary,
and I doubt whether, if he had pursued action in the courts, he would have got
possession any earlier. So under the circumstances, I do not find that the
plaintiff failed in his duty to mitigate his loss, and accordingly I hold the
defendants are liable for the rent unpaid from October 1 to December 1, which
is £645.45, and from January 1 to February 29, which is £473.33. And, of
course, the defendants were in breach of the agreement which was signed
concerning the transfer of named services. I also find them liable for £69.12,
which the plaintiff was called upon to pay in respect of gas.
I turn now to
the claim for dilapidations. In view of my finding that the defendants were in
breach of clause 2 in relation to the letting to Barwiss, the question of
apportionment as between the two tenants for dilapidations does not arise. What
the plaintiff’s surveyor did was to assess the cost of making good by reference
to a schedule. Some criticism was made of that in so far as some items of
realty were included as fittings, but it seems to me to matter not; of course,
whether an item of damage comes under the heading of realty or fittings, the
liability is the same. The plaintiff’s surveyor’s approach was to assess the
cost of making good the damage and that seems to me to be a perfectly
reasonable approach. It is said that some deduction should be made for
betterment. I have considered that, but it seems to me that the plaintiff was
deprived of having a flat in a spick-and-span condition, with new carpets and
curtains, and I do not think that under the circumstances the fact that they
would have had two years’ wear, or a year’s wear in any event, is really a
matter which I should take into account. I do, however, make a deduction of £75
in respect of the small bedroom which had not been redecorated and so the award
under that heading is £2,810.
I now turn to
loss of rent up to June 30 1980. In truth, Mrs Redding had taken up her option
to renew until June 30, because she stayed on after January 1, and so, again in
truth, the rent was unpaid up to that date. The question then is whether the
plaintiff acted unreasonably in not attempting to relet the flat immediately
following Mrs Redding’s departure. That largely, if not wholly, results from
the failure of the defendants to carry out inspections. It is said ‘Well, there
was nothing to stop the plaintiff going ahead and selling or reletting’. I am
not sure. When their letter of March was sent suggesting a joint inspection,
the defendants could have taken one of three courses: They could do nothing;
they could say, ‘We don’t want to inspect. Don’t hold things up on that
account. Go ahead and relet’; or they could have agreed to a joint inspection.
What they did was nothing — not even reply to that letter, not even reply to a
follow-up letter. It seems to me that it was perfectly reasonable for the
plaintiff to say ‘If I go ahead and redecorate, refurnish, recarpet, recurtain,
I am in danger that the defendants will contest what I say about the condition
of the furniture and the decorations’. It is further clear that the plaintiff
could not have relet the property in that condition, that he would have had to
refurnish and redecorate. Was it reasonable, then, that he should incur that
expense before he knew that he was going to recover it from the
defendants? There is a recent authority
that a plaintiff is not under an obligation necessarily to spend money which he
cannot afford in order to mitigate the claim which he has against a defendant.
So I have decided that the plaintiff is entitled to the rent unpaid up to June
30, and as there was a renewal of a lease to Mrs Redding it seems to me that
the most appropriate rental to take for
heading is £946.56.
Finally, I
turn to general damage. Undoubtedly the plaintiff suffered some anxiety and
inconvenience, although he was phlegmatic about it. Mr Spencer in response to
my invitation suggested £500, but in view of the fact that the plaintiff will
be fully compensated for his special damages, I think an award of £100 is
sufficient. So the net sum is £5,986; it is £75 off the total, and it is £100
on it for general damages.
