Surveyors’ fees — Claim by chartered surveyors for fees and disbursements for arranging funding for property development — Defendants, an individual and a company controlled by him (but the claim was pursued only against the latter), pleaded in defence that the plaintiffs had not in fact performed the task in question, that there had been a novation by which another company had been substituted and the defendants released from their obligation, and that the disbursements claimed were not payable — After considering the documentary evidence and the evidence of witnesses, the judge decided that the plaintiffs had carried out the agreed task of arranging finance for the development, rejecting a submission that the development was not going to be carried out by the particular company which had been contemplated — The judge found that there was no evidence substantiating the defence of novation — On the plaintiffs’ claim for disbursements, however, proof was lacking that the disbursements claimed had been expended in connection with the agreement in question — Judgment accordingly given in favour of the plaintiffs for the fees claimed, but not the disbursements
In this action
the plaintiffs, Kinney & Green, a firm of chartered surveyors with offices
in the City of London, sued Alastair Creswell Harlow Johns and a company,
Edglade Ltd, for fees and disbursements alleged to be due to the plaintiffs. In
the course of the trial the claim against the first defendant, Mr Johns, was
abandoned and the action was pursued against the second defendants, Edglade
Ltd, only.
Gabriel Moss
(instructed by Alsop Stevens Batesons & Co) appeared on behalf of the
plaintiffs; Nigel Tozzi (instructed by Amhurst Brown Martin & Nicholson)
represented the defendants.
Giving
judgment, ROSE J said: In this action the plaintiffs, who are a firm of
chartered surveyors, claim fees and disbursements said to be due to them for
arranging funding for property development at Beeston in Leeds by the Royal
London Mutual Insurance Society Ltd. In the statement of claim the claim is
made against the first defendant personally and/or against the second
defendants, a limited company, of which he is and was a director and the
dominant shareholder, but in the course of the trial the claim against the
first defendant personally was abandoned by Mr Moss who appears for the
plaintiffs. He realistically recognised that in the light of the evidence given
by Mrs Seymour-Taylor on behalf of the plaintiffs the claim could only viably
be pursued against the company who are the second defendants.
As the claim
was originally pleaded in the defence it was admitted that the second
defendants, though not the first defendant, were liable to pay the plaintiffs
by virtue of an agreement made at the end of February 1980, as evidenced in an
exchange of letters on the 28th of that month, but it was said that that
liability had been displaced by a subsequent novation involving the company
called Finalart Ltd which, so it is contended on behalf of the defendants, has
been substituted as debtor to the plaintiffs in place of the second defendants.
That was the only issue in relation to liability on the defence as originally
served, but on the first day of the trial, in the course of the opening, I gave
leave for an amended defence to be served which raised for the first time a
further issue as to whether the plaintiffs had ever done what they had agreed
to do in February 1980 and whether therefore they were entitled to any fee from
anybody. This issue apparently first saw the light of day so far as the plaintiffs
were concerned on September 26 1985 when, as I understand it, they were
notified of an intention to apply on the trial for leave to amend the defence.
So, as matters
stand, there are three issues for me to determine. The first is: did the
plaintiffs perform their obligation under the February 1980 agreement (the
existence and terms of which para 2 of even the amended defence admits), that
obligation being to obtain financial backing for the purchase of the property
in accordance with the terms of that agreement, whatever those terms may mean?;
second, if they did perform their obligation, are they entitled to their fees
from the second defendants under that agreement or did they by subsequent
novation release the second defendants from their obligation so that the
plaintiffs can now only look to Finalart Ltd?; third, there is a minor question
of quantum, namely, are the plaintiffs entitled, in addition to the scale fees
which they claim and about which no issue is raised, to certain disbursements
which are referred to in the statement of claim?
In relation to
the first of those questions, the burden of proving that the plaintiffs
performed the agreement in accordance with its plainly on them. In relation to
the second question, Mr Tozzi accepts that the burden of proving that a
novation took place is upon the second defendants, and in relation to the third
question, of course, the plaintiffs have to prove that the disbursements which
they made are attributable to this agreement rather than to some other.
In addition to
the plaintiffs, the defendants and the Royal, who became the source of the
funds, I should say a word about Finalart Ltd, to whom I have already briefly
referred. That is an off-the-shelf company in respect of which on June 13 1980
a directors’ meeting was held at which Mr Bowen and Mr Johns, among others,
became directors and the shareholders became Willment Holdings Ltd, a company
of which Mr Bowen was a director. That company, Willment, held 51% of the
shares and Mr Johns personally was to hold 49% of the shares. The date is of
some significance because by that stage the Royal London had already, by
letters dated May 30 1980 and June 9 1980, made an offer (albeit subject to
ultimate approval within the Royal itself) but an offer as between the parties,
amended in the second of those letters, to Edglade Ltd via the plaintiffs, in
particular Mr Seymour-Taylor, as is apparent from the first paragraph of the
letter of May 30 1980.
The
documentary evidence before me is of considerable importance, but of some
importance, too, is the oral evidence which I have heard on behalf of the
plaintiffs from Mr Seymour-Taylor and Mr L Kinney [partners in the plaintiff
firm] and on behalf of the defendants from Mr Johns and Mr Bowen.
Understandably, the recollection of all these witnesses of events which took
place up to five and a half years ago was in part sketchy and in some instances
non-existent, save where help was to be gained from the contemporary documents.
But both Mr Seymour-Taylor and Mr Kinney impressed me as being thoroughly
honest and, so far as their recollections enabled them to be, reliable
witnesses. I regret that I cannot say the same of either Mr Johns or Mr Bowen.
In my judgment Mr Johns was in particular evasive and Mr Bowen was in particular
inventive. Neither of them was an impressive witness, and in so far as
conflicts between their evidence and that of Mr Seymour-Taylor and Mr
Kinney are of significance in this case, where those conflicts exist I
unhesitatingly prefer the evidence of Mr Seymour-Taylor or Mr Kinney in
preference to that of Mr Johns or Mr Bowen.
In relation to
the first question, Mr Tozzi contends that in relation to the words at the end
of the letter from Mr Seymour-Taylor dated February 28 1980 ‘should a deal
result through my introduction’, the question has to be asked: A deal with
whom? And, says Mr Tozzi, when one looks
at the other letter, that from Mr Johns on behalf of Edglade, and one looks at
the second paragraph, the word ‘such’ which appears in the second sentence of
the second paragraph, when read by reference to the first sentence of the first
paragraph, must be construed in such a way as to identify the beneficiary of
such funding as was obtained as Edglade and no one but Edglade.* He says that, unless such a construction is
adopted, the terms of the agreement evidenced by those two letters are far too
vague and they could (he says by way of example) apply to a company like ICI.
Mr Moss, on the other hand, says that there are no grounds for any such limitation
in construing those documents, that in property development of this kind there
may be many different vehicles, to use the word which Mr Bowen used at one
stage, to carry out the ultimate development, and because of that the
provisions for remuneration are deliberately couched in wide terms. In any
event, contends Mr Moss, on the evidence which I have heard, what happened here
was that Edglade did indeed participate in the development, because Finalart
Ltd was merely a limited company owned in almost equal shares by Mr Johns of
Edglade and Willment Holdings Ltd, and they were indeed the joint developers.
*The first
two paragraphs of the letter are as follows: Proposed warehouse scheme,
Beeston, Leeds. Further to our meeting in your office I confirm that I have
left you drawings, specification and estimate together with a financial
appraisal for the proposed development of the above site and also a copy of the
detailed planning permission. I would confirm that at the present time I do not
have a building regulation permission but I do not anticipate this hindering a
prompt start on the site.
As you know I
require to obtain a forward commitment for the sale of the resultant freehold
investment created by the occupation of the warehouses with or without interim
funding. Should your firm be responsible for introducing an able purchaser who
enters into such a commitment I will be pleased to pay you the usual recognised
RICS scale fee.
In my judgment
in relation to this first question, the contention advanced on behalf of the
second defendants is wholly unacceptable. Mr Seymour-Taylor said, so far as
this is relevant: ‘Mr Johns said he had an option to buy a site in Leeds and
would like development finance to buy and build.’ Mr Johns himself said: ‘I was looking for
them’ — that is the plaintiffs — ‘to find funds. I wanted the plaintiffs to
produce funds for the development. I was also discussing sources with other
agents.’ Neither of these witnesses —
and they are the only two witnesses who relate to this initial agreement —
suggests that either of them contemplated that only Edglade would carry out
such development as took place, and it is in my judgment significant that no
such limiting word or phrase appears in either of the letters which both sides
agree accurately reflect the agreement which was made in the prior oral
discussions. On the contrary, Mr Johns himself in evidence said that he
contemplated from the outset that a company other than Edglade might carry out
the development; and he furthermore conceded that Edglade might well have had
to pay under the agreement with the plaintiffs if there was a joint venture
with another company. He said, however, that this would have depended on the
particular circumstances. Plainly, if funding were only obtained, to take Mr
Tozzi’s example, for ICI or some other body wholly remote from Mr Johns and
Edglade, different considerations might well apply. But, in my judgment, what
both parties intended here and what, so far as their agreement was reduced into
writing, the writing shows that they intended, was that funding should be
obtained for development by Mr Johns through Edglade or through such other
company as either he controlled or in which he had a substantial interest from
which in consequence he was likely to make a profit on the development. I have
no hesitation in finding that the precise identity of the company which
actually carried out the development was of no concern whatever to the
plaintiffs or to Mr Johns or, in consequence, to the second defendants. Mr
Johns’ concern was that funds for the development should be found to enable him
to make a profit in the way which I have indicated. Funding in the form of the
offers from the Royal, to which I have already referred, was found by the
plaintiffs. I accordingly reject the contention on behalf of the second
defendants that there should be implied into the February 1980 agreement any
such term as is alleged in para 4A of the amended defence. I am entirely satisfied
that the plaintiffs did just what they said they would do and just what it was
agreed they would do in February 1980.
In relation to
the second question, that of whether there was a novation, Mr Tozzi helpfully
referred to p 520 of the 6th edition of Treital’s textbook on the Law of
Contract in addition to an earlier page which had also been referred to by
Mr Moss, and Mr Tozzi also drew my attention to the case of Miller
(1876) 3 Ch D 391.† It is plain as a
matter of law that before there can be any novation there must be a contractual
intention on the part of all three, that is the creditor and the two debtors,
to substitute one debtor for the other, and there must, certainly in
circumstances such as the present, be an agreement by the creditor to release
the original debtor. I accept Mr Tozzi’s submission that no particular form of
words is necessary for such substitution and release. I accept, too, that
substitution and release can be inferred where the creditor’s behaviour is
sufficiently clear and unambiguous, as it was in Miller’s case, where
the insured ceased to pay premiums to one insurer and paid them to another who
accepted them. But I am quite unable to accept that in the present case the
behaviour of the plaintiffs on or after June 13 1980 or at any other time
supports any such inference. Indeed, it seems to me that if one asks the
question ‘When did this novation (as is alleged) take place?’ one is deafened by the silence of the answer.
The way in which it was put to Mr Seymour-Taylor in cross-examination was: ‘It
was quite clear in several conversations, and you said as much, you would
expect Finalart to pay your fees.’ To
that question Mr Seymour-Taylor’s answer was: ‘They would possibly come that
way.’ The evidence called on behalf of
the defendants was no more precise in identifying when and how, and in what
terms, the alleged novation occurred. Mr Tozzi says that the letter dated June
16 1980 from Mr Seymour-Taylor to Mr Bowen at Willment Holdings is crucial, and
he relies on it. If it is indeed the crucial plank of the defendants’ case on
this aspect it is, in my judgment, an unsafe plank, for, from beginning to end,
it makes no mention at all of Finalart who, according to the defendants’ case,
had by that time become both client of the plaintiffs and debtor to them.
Indeed, I find that from first to last both Mr Seymour-Taylor and Mr Kinney
regarded not Finalart but the second defendants as their client and also, in
consequence, as their debtor. It is true that provision was made in the funding
agreement on August 4 1980, to which the plaintiffs were not a party, for their
fees to be met out of funds drawn down from those provided by the Royal. It is
true also that at the suggestion, as I find, of Mr Johns or Mr Bowen, or both,
from time to time the plaintiffs looked to Finalart Ltd, and indeed sent
accounts to them, as being the most likely source of funds from which their
account might be discharged, for they believed, wrongly as it turns out, that
Finalart did have the money to pay. I say ‘wrongly as it turns out’ because
according to Mr Bowen — and this part of his evidence I do accept — from
October 1981 Finalart did not have the money to pay, although of course they
entertained hope. In my judgment, the fact that the plaintiffs hoped, and
indeed expected, that the route by which money would come to them was from the
Royal via Finalart is quite a different proposition from saying that the
plaintiffs ever released the second defendants from their obligation or ever
agreed to look solely to Finalart. I accept Mr Seymour-Taylor’s evidence in
cross-examination when he said: ‘I never accepted that Finalart were to be
responsible for my fee. We chased Finalart because we had been told by Bowen
and Johns to do so.’ That is entirely
consistent in my view with the letter which Mr Seymour-Taylor wrote to Mr Johns
on July 7 1982. The fact that Mr Johns was then, as it seems, being personally
addressed is, in my judgment, inconsistent with any suggestion that there had
by then taken place any such novation as the defendants allege. Similarly, I
accept Mr Kinney’s explanation of his reference to Finalart in the last
paragraph of his letter of August 13 1982 when he said: ‘I wanted settlement
from Finalart because they were the developer and would be receiving the money.
I never regarded Finalart as the client and the final account was sent to
Finalart because we had been asked to send it to them.’
† Editor’s
note: Re European Assurance Society (Miller’s Case).
Accepting that
evidence as I do, it follows that, although the plaintiffs’ solicitor’s letter
dated November 25 1982 is at best unfortunate from the plaintiffs’ point of
view, I am not persuaded that its terms vitiate the conclusions which I have
reached in the light of the other evidence. Indeed, there is a good deal of
other evidence which in my judgment far outweighs the impact which that letter
might otherwise have had upon my conclusions. I have in mind, for example, the
telephone conversation on February 18 1983 to which Mr Kinney’s memorandum,
which is part of P2, relates in which, according to Mr Seymour-Taylor, Mr Johns
asked Mr Kinney to
according to Mr Johns, even at that stage, in February 1983, owed it. That is
hardly consistent in my judgment with any belief on Mr Johns’ part in the
existence of any prior agreement substituting Finalart for Edglade.
Furthermore, the letter from the plaintiffs to Mr Johns on October 3 1980 and
the letter from Mr Johns to Mr Seymour-Taylor on October 16 1980 both, in my
view, make it clear that both the plaintiffs and the second defendants through
Mr Johns regarded the enterprise as a joint development for Willment and
Edglade. Furthermore, the evidence given by Mr Bowen as to what Mr Johns told
him in May 1980, namely that funding in principle might well be available for
the scheme and his, Mr Johns’, problem was basically a covenant by his company,
is, as it seems to me, entirely consistent with the conclusion which I have
already expressed, that the identity of the developing company was part of the
mechanics and that there should be a joint venture involving Edglade.
So far as Mr
Bowen’s evidence bears on the question of novation I reject it completely. It
was initially that on June 13 the plaintiffs would have been given instructions
to act for Finalart. It then became: ‘I instructed the plaintiffs to act for
Finalart and they accepted those instructions and wrote the letter which is at
p 87 in consequence.’ I have already
referred to that letter and its lack of any reference to Finalart. It is
pertinent when one looks at the letter which is at p 86 and the letter which is
at p 93 that not only is there no mention of Finalart but those letters are
still being addressed to Mr Johns at Edglade some days, if the defendants are
right, after the novation has occurred. I reject the contention, based as it is
on Mr Bowen’s evidence and deriving little if any support from Mr Johns’
evidence, that Finalart ever became the plaintiffs’ clients and that they ever
became the debtor in substitution for the first defendants. That being so, the
second question is answered in favour of the plaintiffs.
So far as the
third question is concerned, I only propose to say this, that it is a matter
which requires proof that the disbursements were expended in connection with
this agreement. Such proof, in my judgment, is lacking and accordingly there
will be deducted from the total of the claim the sum of £216.78 in relation to
disbursements and VAT. The consequence of these findings is that the
plaintiffs’ claim fails against the first defendants but succeeds against the
second defendants in the sum of £7,834.38.
The
plaintiffs were found to be entitled to the sum mentioned by the judge, and
interest, against the second defendants, Edglade Ltd, and were awarded costs
against them.
