Agency — Sale of flat — Subsale — Purchasers setting up fraudulent scheme — Agent failing to act on landlords’ request for name of proper assignee before contracts exchanged — Whether agent acting in breach of duty to vendor — Breach found at first instance — Vendor appealed on damages — Appeal dismissed — Agent’s cross-appeal on breach of duty allowed
The plaintiff instructed the defendant estate agents to sell a flat at an asking price of £250,000. The agent instructed subagents, V, who showed the flat to Mr S, who made an offer for Mrs B. The landlords’ consent was needed for the assignment and they requested references from the purchasers. Two purported references were given to the first defendant. Those references were for a Mrs K and were unacceptable to the landlords who, by fax, requested information as to the correct assignee and bankers’ references for Mrs B. The agreed price was £210,000. The defendants took no action regarding the fax. After the exchange of contracts, the vendor was astonished to discover that there was a subsale for £296,000 borrowed from Eagle Star. In order to borrow that sum Mrs K told Eagle Star that the flat had been bought for an asking price of £396,000. The vendor sued MW for breach of duty of care in the provision of agency services arguing, inter alia, that had MW acted on the fax, they would have been alerted to the subsale; that would have created a duty that it be brought to the vendor’s attention so creating an opportunity to negotiate an increase. At first instance he won damages of £5 for the breach, but the judge found that MW would not have concluded thereby that there was a subsale; the defendants were awarded their commission on the counterclaim: see [1993] 2 EGLR 39. The vendor appealed on the ground of insufficient damages insufficient and the defendants cross-appealed on the ground that there had been no breach of duty.
Held The appeal was dismissed.
1. If the defendants had acted on the fax there might have been some further delay in obtaining the landlord’s consent for assignment. However, such delay could not have been laid at the vendor’s door.
2. The court disagreed with the judge’s finding that failure to act on the fax would have constituted a breach of duty.
3. Further, even if there had been a breach, it would not have caused the vendor any loss. The agents could not have been liable for loss of a subsale which was a fraudulent transaction. The relevant documentation only came into existence for the purpose of that transaction.
4. The only real transaction was the sale of the flat for £210,000, for which the vendor had been paid.
5. It would also be wrong in fact or in law for a court to allow a vendor, who was armed with knowledge of the subsale, to have squeezed more out of the fraudsters. Damages could not be awarded in compensation of a right to share in stolen money.
6. While it was true that if the vendor had negotiated a sale at a higher price he could have kept the money, it did not follow that the vendor ought to have a share in fraudulent profits. The court was acting with the benefit of hindsight and had to take public policy into account.
Phillip Kremen (who did not appear below) (instructed by HM Rose & Co) appeared for the appellant vendor; Christopher Russell (instructed by Berrymans) appeared for the estate agents.
