The perils of acting as an auctioneer
Penn v Bristol & West Building Society [1997] 3 All ER 470 highlights that conveyancers who purport to act for a seller impliedly warrant, by their conduct, that they are authorised to do so. If the warranty proves false, because a fraudster is masquerading as the landowner, the landowner will not be bound to a buyer or lender who relied on the warranty to their detriment. However, the conveyancer who acted for the fraudster may be personally liable for any losses caused.
Greenglade Estates Ltd v Chana [2012] EWHC 1913 (Ch) illustrates that auctioneers also risk an action for breach of warranty of authority if they enter into a contract to sell property on behalf of a fraudster. The auctioneers sold a house, which had been sub-divided into flats, by auction in September 2009. The property failed to reach its reserve price of £670,000, but the auctioneers sold it for that price immediately after the auction to a buyer who valued the property at around £1m. The auctioneers signed the memorandum of sale as agent for the seller before placing the transaction in legal hands.
The proprietor claimed that a third party had used his identity and refused to complete the transaction. This led to proceedings for specific performance. Alternatively, the buyer claimed damages from the auctioneers for breach of warranty of authority. At the trial, the parties agreed that the specific performance claim should be dismissed. The auctioneers also conceded liability for breach of warranty of authority.
Damages for breach of warranty of authority should put a claimant in the position that it would have occupied, had the warranty been accurate. In other words, the damages should reflect the difference between the value of the property and the price agreed. However, the parties were unable to agree the date that should be used to assess the damages (which will be particularly important if property values have changed dramatically).
The parties took their cue from Suleman v Shahsavari [1988] 1 WLR 1181. They agreed that the valuation date should be postponed for so long as the buyer had reasonably continued to seek completion of the sale. But had it been unreasonable for the buyer to pursue its claim for specific performance for as long as it had?
The judge thought that the correct valuation date might, in fact, be the contractual completion date. However, the parties had agreed to postpone the valuation date and, on the facts, the judge did not believe that the buyer had acted unreasonably. Consequently, the property should be valued as at the date of the trial.
Allyson Colby
Property Law Consultant
