Agency — Sale of flat — Subsale — Purchasers intending fraudulent scheme — Whether agent should have checked references — Nominal damages for vendor — Agent entitled to commission
The plaintiff bought a flat in February 1989 at 310 Clive Court, London W9, with a view to refurbishing and reselling it at a profit. The scheme was financed by an overdraft and the first defendant, W, was instructed to act as agents. The price dropped from £250,000 to £239,950 and it was advertised through subagents who would share commission in the event of a sale. In November 1989, an offer was made on behalf of Mrs B after the subagent had shown the flat to a Mr S. The landlords’ consent was needed for the assignment and they requested references from the purchasers. The subagent delivered by hand the two purported references to an employee of the first defendant, D.
Those references were for a Mrs K and were not acceptable to the landlords who requested information as to the correct assignee and bankers references for Mrs B. Their solicitors faxed a letter to the first defendant to that effect. However, no action was apparently taken with regard to the fax by the defendants. Contracts were exchanged without the landlords’ consent to assign and the plaintiff then learned of the apparent subsale of his property at a seemingly vast profit. Afterwards it emerged that the subsale was an entirely bogus transaction. Mrs K had borrowed £296,000 from Eagle Star on a purchase price said to have been £395,000 for the flat. The loan was drawn, but no payments were ever made and Mrs B, the purported purchaser, turned out to be a woman of straw. It was common ground that it was an implied term of the employment of W, that they would exercise all reasonable care in the provision of their agency services and use their best endeavours to secure the best possible price. The issue was whether there had been a breach of those duties.
Held Nominal damages awarded to plaintiff; judgment for the first defendant on their counterclaim for commission.
1. There was nothing unreasonable in D’s action in passing on the references, which he had received from the subagent to the landlords’ solicitors. He was merely acting as a postbox.
2. The fax sent to the first defendant had been either lost or ignored. That fell short of the ordinary standards of care to be expected from them. Hence, the court had to assess the more difficult questions of causation and damage to determine whether the first defendant’s liability extended to more than merely nominal damages.
3. The argument was that the subsale would have been uncovered had the fax been acted upon; however, the court could not accept that. The subsale was the creature of a fraud and no doubt convincing explanations would have been found for the change of name.
4. Further, the plaintiff would not have been quick to identify obstacles to the conclusion of the deal where he was under pressure to sell because of high bank interest.
5. If the plaintiff had become aware of the subsale price, it would have become immediately apparent that the deal was dishonest so no claim to damages could be made out and the plaintiff had sustained no loss in those circumstances.
6. No loss of the right to the defendants’ commission on the counterclaim arose: see Keppel v Wheeler [1927] 1 KB 577.
Jonathan Ferris (instructed by HM Rose & Co) appeared for the plaintiff; Christopher Russell (instructed by Berrymans) appeared for the defendants.
