Appeal by property company against dismissal by Latey J of their action against estate agents for alleged breach of authority as agents — Appellants wished to obtain possession of Rhodesia House in Manchester, a building owned by them and occupied by a number of business tenants — Appellants instructed respondent estate agents to negotiate with tenants to secure vacant possession and to arrange compensation for surrender of leases — By a misconception common to both appellants and respondents it was erroneously believed that any compensation agreements would, as a result of s 38 of the Landlord and Tenant Act 1954, be gentlemen’s agreements only, not binding in law — At first the respondents’ remit was not to commit the appellants even to a gentleman’s agreement with one tenant until agreements had been reached with the others, but in course of time this restriction was dropped — Respondents made an agreement, thought to be a commitment in honour only, with one tenant for payment of £25,000 on vacation — Tenant did vacate notwithstanding appellants’ refusal of a request for some security of payment — Subsequently tenant sued appellants for non-payment of the £25,000 and appellants on counsel’s advice settled that action by paying the full amount and costs — Appellants sued respondents for alleged breach of authority in concluding the agreement with the tenant, which was thought at the time to be a commitment in honour only but which turned out to be legally binding — Appellants claimed £31,494 and in addition the costs which they had had to pay in the tenant’s action (but this latter claim was abandoned) — Held, dismissing the appeal, that the respondents had not gone beyond their authority in concluding the agreement with the tenant
This was an
appeal from a decision of Latey J, fully reported at (1981) 260 EG 604, [1981]
2 EGLR 24, in which he dismissed a claim by Graylaw Investments Ltd against J R
Bridgford & Sons, estate agents, of Manchester and elsewhere, for damages
for alleged breach of authority as agents in connection with negotiations to
obtain vacant possession of Rhodesia House in Manchester.
T L G Cullen
QC and C P F Rimer (instructed by John Gorna & Co, of Manchester) appeared
on behalf of the appellants; Michael Morland QC and G E Barling (instructed by
Ward Bowie, agent for James Chapman & Co, of Manchester) represented the
respondents.
Giving
judgment, EVELEIGH LJ said: The facts of this case are thoroughly set out in
the judgment of the learned judge, and there is no need for me to repeat them.
Mr Roberts
wrote the letter of July 12 clearly under the impression at that time that the
letter was not legally binding. He and Mr Balmond had jointly heard from Mr
Eyres, the legal executive of the plaintiffs’ solicitors, that an agreement of
that nature could not be binding because of the provisions of the Landlord and
Tenant Act 1954. So the only effect that Mr Balmond and Mr Roberts thought the
letter could have would be one amounting to an agreement in honour; this is
borne out by the fact that there were subsequent negotiations in which
Nuttalls, who also shared the same view, were asking for some form of security
in case the agreement was not honoured, and the plaintiffs were refusing to
give that security. Nuttalls would never have needed to ask for security if
they had been in possession of a binding agreement.
Originally, Mr
Roberts was told not to conclude an agreement with any tenant until he was in a
position to conclude it simultaneously, binding them all. This, as the learned
judge pointed out in his judgment, was soon departed from, because a number of
agreements were entered into with tenants, and they were pursued through to
finality; the tenants vacated the premises and compensation was paid. So that
by the time July was reached there was, as I see it, a clear indication of
change of policy in these negotiations. That was to some extent in the
confidence that an agreement could not be binding. The defendant in this case
accepted in cross-examination that he had no authority to make a binding
agreement, but at no time did he say that he had no authority to write the
letter of July 12 which he wrote. Both he and the plaintiffs, and Nuttalls,
regarded that not as an agreement but, let us call it, an agreement binding at
the most in honour.
I myself am
completely satisfied, for the reasons which the learned judge gave, that he,
the learned judge, was right in arriving at the conclusion that whatever the
specific terms in which one might couch the authority of Mr Roberts, Mr Roberts
was authorised to do that which he did, namely, to write the letter. That which
he did turned out in law to amount to a binding agreement. This was recognised
ultimately by the plaintiffs when they settled with Nuttalls, and was never
denied by the defendant in this present case; so that, to the surprise of all,
this arrangement was a binding legal agreement.
But that does
not mean that because Mr Roberts had no authority to make a binding legal
agreement, he had no authority to write this letter. A copy of the letter was
sent to the plaintiffs. There was no letter in reply, saying ‘What on earth are
you doing?’; there was no letter asking if he had imposed a condition; there
was no specific reference to obtaining an agreement from Brothertons at the same
time. All that happened over the next two months or so was an exchange of
correspondence in relation to the provision of a security. I say ‘All that
happened’; that is to say that it is all that happened until September, when
there was a further change of policy, the plaintiffs now deciding to go slow
and to put off the day when they should pay any money.
It is argued
before us that the learned judge did not give sufficient weight to, or indeed
that he overlooked, specific answers given by Mr Roberts in cross-examination.
As Griffiths LJ pointed out during the course of the argument, some of those
answers cannot stand together; they depended on the question and the questioner
who elicited them. This is not surprising, because he is answering questions against
the background that admittedly he could not make a binding agreement but was
entitled to do what he did, so that his specific answers do not at the end of
the day, to my mind, help one in coming to the conclusion as to what the real
position is. The learned judge regarded Mr Roberts’ evidence as a whole, and in
my opinion he rightly assessed the effect of it.
Before this
court it has beeen argued, I suspect with greater emphasis than it was argued
below, although it was argued below, that at the time of July 12 the original
limitation on authority still
specific permission to enter into agreements with specific tenants; and it is
said that as Brothertons still remained a tenant the original agreement still
included them until specific exemption was given. So the position was that the
letter of July 12 was only authorised upon the condition that the defendant, in
the person of Mr Roberts, had specifically made it clear to Nuttalls that that
agreement, if agreement it were, was dependent on an agreement being made with
Brothertons.
The original
statement of claim in this action does not state the limit of the authority in
precisely those words. This is what is said: ‘. . . the plaintiffs instructed
the defendant that no deals were to be done with any tenants unless deals were
done with all the remaining tenants and that all individual agreements were to
be drawn up legally’ — in other words, it was pleading the original umbrella
restriction.
For myself, I
discern some change of course from the date of that pleading to the way in
which the case is now put. I do not think for one moment that Mr Balmond
expected a condition to be imposed before the letter of July 12 was sent. What
had been happening was that negotiations proceeded to arrive at a figure with
particular clients; when that figure was agreed between them, Mr Balmond was
told, and he then either approved or disapproved it. Once he approved it, that
was a signal to Mr Roberts to make an arrangement, as he regarded it, with the
tenant. That is what he did in this case; the arrangement turns out to be a
legally binding agreement and that is not the fault of Mr Roberts.
I would
dismiss this appeal.
GRIFFITHS LJ
and SIR ROGER ORMROD agreed and stated that they did not wish to add anything.
The appeal
was dismissed with costs.
