Pleading application — Building society — Valuation — False representations of employee — Vicarious liability — Estate agents joined in action for repayment of loans as vicariously liable for actions of employee — Whether firm entitled to plead contributory negligence on part of building society — Defence not available
Hampton Residential (“Hamptons”) was a private unlimited company carrying on the business of estate agents, valuers and auctioneers. In about March 1988 Hamptons acquired a firm of estate agents in Maidenhead who employed L. Thereafter L became an employee of Hamptons and remained so until April 30 1989. During that time L signed written valuations of hotels for and on behalf of Hamptons. On April 15 1992 L was convicted of four offences of procuring the execution of a valuable security by deception and was sentenced to 15 months’ imprisonment. The valuable security in each case consisted of a document authorising the telegraphic transfer of a substantial sum of money from the building society to the client account of a firm of solicitors by making false representations to the society. The deception in each case included false representations made in 1989 in loan application forms as to the purchase price of an hotel to be acquired with the assistance of the loan from the society and also in a written valuation prepared by L as to the value of the hotel. This was all part of a massive mortgage fraud by L and others who were the defendants to actions brought by the society for repayment of loans, for reimbursement and for damages for deceit. The claims totalled almost £30m and Hamptons were defendants to each action. The claim against Hamptons was that they were vicariously liable for the deceit of L.
A question arose whether Hamptons were entitled in law to plead contributory negligence as a defence to the claims against them for vicarious liability. It was alleged that Hamptons was unaware of L’s activities at the material time, which were not within the scope of his authority from Hamptons.
Held: Hamptons were not entitled to plead that defence.
1. At common law contributory negligence of a plaintiff was no defence in the case of an intentional tort and deceit was a tort intentionally committed.
2. If the plea of contributory negligence were available to a person against whom deceit was established, he would escape all liability for his fraud.
3. The effect of false representations could not be got rid on the ground that the person to whom it was made had been guilty of negligence: see Redgrave v Hurd (1881) 20 ChD 1.
4. Neither the provisions of the Law Reform (Contributory Negligence) Act 1945 nor any decision on it affected the general principle on the unavailability of the defence of negligence to an action for deceit. A person liable for deceit, whether personally or vicariously, was not entitled as a matter of law to deny that his deceit was the sole effective cause of the damage suffered by his victim. Nothing in the Act in principle or authority, entitled a person liable for deceit to plead contributory negligence.
Charles Purle QC and Christopher Russell (instructed by Mackenzie Mills) appeared for Alliance & Leicester Building Society and Mercantile Credit Co; Simon Berry QC and James Behrens (instructed by Broughton Ross) appeared for Kenneth Robson; John Slater QC and Dominic Dowley (instructed by Davies Arnold Cooper) appeared for Hamptons; John Cherryman QC (instructed by Wright Son & Pepper) appeared for William Duckney and Kulvinder Dhaliwal; other defendants appeared in person.