Action for rescission of conveyance and damages, alternatively for damages only, for misrepresentation, alternatively for an account of profits by reason of non-disclosure–Sale of a property consisting of under 4 acres containing a bungalow and garage–Application for planning permission for a limited development of the property made in the name of the vendors but without their knowledge or permission by purchasers’ agent before exchange of contracts–Purchasers liable to account for profits–Categories of fiduciary relationship not closed–Order for payment of sum due on taking of account
This was an
action begun by Thomas English and his wife, Elsie English, and continued by
the latter after the death of her husband, for relief on the grounds of
misrepresentation and/or non-disclosure in connection with the sale of a
property known as Rusty Tiles, Coggeshall Road, Dedham, Essex. The cause of
action was based on an application for planning permission made in the names of
the plaintiffs, but without their knowledge, before the exchange of contracts.
The detailed allegations in the statement of claim and the history of the
events are dealt with fully in the judgment of Slade J.
A Scrivener QC
and T Thomas (instructed by H T Bowles & Co, of Manningtree) appeared for
the plaintiff; L Joseph (instructed by David Cohen & Goldsobel) represented
the defendant company.
Giving
judgment SLADE J said: At the beginning of 1971 the two persons named as
plaintiffs in this action, Thomas English and his wife, Elsie English, were the
joint legal and beneficial owners of a property known as Rusty Tiles,
Coggeshall Road, Dedham, Essex, which I will call ‘the property.’ They were an elderly couple, who had owned it
since about 1955 and had lived there since about 1957. On July 21 1971 they
exchanged contracts for the sale of the property at the price of £7,750 to the
defendant company, Dedham Vale Properties Ltd. This is a property-developing
company which has at all material times been controlled and managed by a Mr
Harrington, who is a qualified architect with long experience in planning
matters. By a conveyance on sale dated December 9 1971 Mr and Mrs English
conveyed the property to the defendant.
By the writ in
this action, which was issued on March 30 1972 Mr and Mrs English claimed, as
the primary head of relief sought, rescission of the conveyance and damages,
and, alternatively, damages for misrepresentation. Mr English subsequently died
on January 6 1974, but, the cause of action being a joint one which survived to
Mrs English, she has continued the action on her own. The statement of claim
had been amended before the trial began. I propose to read it as originally
amended and then to refer to the reamendments made at the trial, because its
precise form may be of some significance for certain purposes. As first
amended, it read as follows:
1. Until the
conveyance referred to hereafter the plaintiffs were the beneficial owners of
the property known as Rusty Tiles, Coggeshall Road, Dedham, in the County of
Essex.
2. Between
February 1971 and July 1971 the defendants by their servants or agents were
negotiating with the plaintiffs for the purchase of the said property.
3. During the
said negotiations the defendants’ servant or agent one Harrington made the
following oral representations to the plaintiffs:
(a) That he the said Harrington had found out
that there was ‘No planning permission going’ in respect of the said property.
(b) That there was no immediate possibility or
prospect of planning permission being granted for housing in respect of the
said property.
4. In
reliance upon these said representations the plaintiffs agreed to accept the
sum of £7,750 from the defendants for the said property instead of a higher sum
had there been permitted development potential for the same.
5. The said
sale was concluded by an exchange of written contracts on July 21 1971 and
completed by a conveyance dated December 9 1971.
6. On July 14
1971 the defendants’ servant or agent one Mead without the authority, consent
or knowledge of the plaintiffs made an application for planning permission in
respect of the said property. The said application was false in the following
particulars:
(a) The said Mead falsely held himself out as
being the authorised agent of the plaintiffs for the purpose of making the said
application.
(b) The said Mead falsely gave a certificate
under section 16 of the Town and Country Planning Act 1962 to the planning
authority purporting to show that he was acting as the authorised agent of the
plaintiffs and therefore by implication that they knew of and consented to the
said application being made.
7. On October
20 1971 the planning authority, the Lexden and Winstree Rural District Council,
gave permission for the development of the said property by the building of a
dwelling house and garage thereon. The document giving the said permission was
sent to the said Mead who received the same as the defendants’ servant or
agent. The defendants did not inform the plaintiffs of the said application or
the said permission being granted.
8. In the
aforesaid premises the representations set out in paragraph 3 thereof were made
falsely to the knowledge of the said Harrington and thereby to the knowledge of
the defendants.
9. By reason
of the said false representations and/or the said failure to disclose the
matters set out in paragraph 7 hereof, the plaintiffs have suffered damage and
loss in that they were induced in selling the said property for £7,750 whereas
the true value of the same was in excess of £18,000.
10. Further
or in the alternative by making the said application for planning permission of
the plaintiffs’ said property as aforesaid and/or by receiving notification of
the grant of planning permission as aforesaid the defendants became trustees
for the plaintiffs and were under a duty to inform the plaintiffs of the said
application and of the said grant of planning permission.
11. In breach
of the said duties the defendants failed to inform the plaintiffs of the said
application and of the said grant of planning permission thereby causing the
plaintiffs damage and loss in that they did not know of the true value of their
said property and sold the same for £7,750 instead of at least £18,000. And the
plaintiffs claim:
(1) Rescission of the said conveyance and
damages.
(2) Alternatively, damages under paragraph 9 or
alternatively under paragraph 11 hereof.
(3) A declaration that the planning permission
granted on October 20 1971 by the planning authority in respect of the said
property is null and void.
(4) Costs.
(5) Further or other relief.
At the trial I
gave leave for the reamendment of the statement of claim, so as to introduce a
new cause of action, though one substantially based on the facts alleged in the
statement of claim in its original form. A new paragraph 12 was added, reading
as follows:
12. Further
or in the alternative by reason of the matters set out in paragraphs 6 and 7
hereof, the defendants were able to make profits out of the purchase and subsequent
development of the said plot and are accountable to the plaintiffs for such
profits as are found to have been made.
The
reamendments also involved the incorporation of the following two new
paragraphs in the prayer:
(4) An account of the profits accruing to the
defendants by reason of the non-disclosure to the plaintiffs of their
application for and subsequent grant of planning permission in their name.
(5) An order for the payment by the defendants to
the plaintiffs of all moneys found to be due to them on the taking of such
account.
I now proceed
to a more detailed recital of the facts of the case. The property consists of a
site comprising a little under 4 acres of land. The width of the site towards
the road frontage is substantially narrower than the width at the rear. On the
narrow front portion there has at all material times been situate a modest
bungalow and garage. The wider rear portion has at all material times been
rough grassland. Adjoining the site, on its northern side, is a site of similar
size and shape known as ‘Shorelands.’
In 1964 the
Essex County Council approved a non-statutory ‘Dedham Village Plan,’ embracing
Dedham Village itself
and includes the property. On that plan the property was within one of three
areas allocated for residential development. Such development was, however,
dependent upon the provision of adequate drainage and sewage disposal
facilities. Mrs English at all material times knew of the substance of the plan
and that the property had thereby been zoned as a site for some 30 houses. She
had in her possession a copy of an article in a newspaper dated February 21
1964 in which the relevant map and proposals were reported and reproduced. In
or about November 1968 the Essex County Council withdrew the Dedham Village
plan because it was thought that the development as originally proposed would
be detrimental to the amenity and rural character of the area, part of which
was designated as being of great landscape value.
The owners of
‘Shorelands’ have at all material times been a Mr and Mrs Coe. In 1968 Mr
English and a Mr McCarthy, who was the son of Mrs Coe, jointly applied to the
Essex County Council for planning permission for residential development of the
property and ‘Shorelands,’ which together comprised about 7 1/2 acres. On
February 17 1969 the council refused this permission. The refusal, however, was
expressed to be based on the following single ground: ‘The site is at present
without means of sewage disposal and the development of the site at the present
time is therefore considered to be premature.’
The very terms of this refusal thus gave some grounds for inferring
that, if means of sewage disposal were made available thereafter, development
might perhaps be permitted.
Early in 1970
Mrs English, realising the importance of sewerage if there were to be any hope
of developing the property, paid a visit to the advice bureau of her Member of
Parliament, Mr Anthony Buck, with regard to the sewerage scheme at Dedham
Heath. Mr Buck made certain enquiries with the Lexden and Winstree Rural
District Council and on March 4 1970 sent her a copy of a letter which he had
received from the clerk of that council, in which he said that tenders for the
sewerage scheme would be opened within the next two months and it remained to
be seen whether they would be accepted. A tender was in fact accepted in June
1970 and work on the scheme began on September 1 1970 on the basis of an
80-week contract. On September 7 1970 following some intermediate
correspondence with her, Mr Buck wrote to Mrs English to say that he had
received a letter from the council telling him that work on the sewerage scheme
was to start at the beginning of that month and that it was scheduled to take
80 weeks to complete. Accordingly Mrs English learned from this letter that if
the work were done according to schedule it would be completed in March 1972
and that she would have a chance of obtaining planning approval for her desired
development at any time after that. She accepted in her evidence that she
appreciated that planning permission might become obtainable in respect of her
property in 1972.
Meantime,
however, she and her husband had decided that they must try and dispose of the
property. He had unfortunately become ill in 1969 or 1970. In view of this and
in view of her age, Mrs English felt that she could not cope with looking after
him and so large a property at the same time. The correspondence before me
reveals that a number of persons were interested as potential purchasers of the
property. Between August and October Mr and Mrs English were negotiating with a
company known as Hey & Croft Ltd and negotiations reached an advanced stage
for the possible sale of the property at a price of £14,000. By October 1970,
however, this proposed sale, which had been negotiated in conjunction with the
proposed sale of ‘Shorelands’ to the same purchaser by Mr and Mrs Coe, had
fallen through. It may be mentioned that, during the course of negotiations for
this sale, namely on August 13 1970, Fenn Wright & Co, estate agents acting
for Mr and Mrs English, wrote to Mrs English saying that, because the contract
had been placed for the new sewerage scheme, they had visited the Lexden and
Winstree Rural District Council offices to discover whether any planning
application for residential development of the property, if submitted at that
time, would be likely to be granted. They reported that the official whom they
had seen had given his opinion that a further application at the present time
would be considered premature, but that the council would have no objection to
the land being developed when the new sewage works were in operation, though he
could not say whether the county planning authority would take the same view.
It is in fact common ground between the parties in the present case that it was
at all times the Essex County Council which presented the main opposition to
the development proposals, rather than the local council, which was sympathetic.
By August 1970
Mrs English was also negotiating with a Mr Noonan acting on behalf of a company
known as Gough Cooper (South East) Ltd. By November 1970 she was also
negotiating with a Mr N H Norrington, who has given evidence in these
proceedings. He is an estate agent but was acting at that time on his own
behalf, as he was interested in purchasing the property for his own occupation.
On November 2 1970 he wrote saying that he had made enquiries with the local
council and that, since they would give no indication as to the possibilities
of gaining planning permission for the property, he could not offer her asking
price of £16,000. However, he made two alternative propositions to her; either
he would pay her the current market valuation of the property to be assessed by
an independent valuer, would further undertake to apply for planning permission
and, if that application were successful, would make up the purchase price to a
total of £18,500; alternatively, he would pay her the current market value of
the property plus £2,000 for the possible potential and complete the deal on
that basis.
On December 11
1970 Mrs English, who had not accepted either of Mr Norrington’s alternative
offers, wrote to the Department of the Environment, which, on December 21 1970,
wrote to her saying that it understood that permission to develop the land two
years ago had been refused because of the absence of main drainage in the area
and suggested that she should reapply for planning permission to the rural
district council.
On January 19
1971 Mr Norrington wrote to Mrs English asking if she was in a position to
reply to the offer previously made by him, this referring to his letter of
November 2 1970. By that date, she had received an offer of £13,500 from Gough
Cooper (South East) Ltd through Mr Noonan, but had not accepted it. Mrs English
did not reply to this letter. By the end of January 1971 Mr Norrington, as he
told me in evidence, had for the time being lost interest in the property. He
therefore told Mr Harrington about it. Mr Norrington had previously acted as an
estate agent for the defendant company in various transactions, and had by then
become a personal friend of Mr Harrington. As Mr Harrington put it, Mr
Norrington passed on the information to him as a ‘tip.’
On January 29
1971 Mr Harrington went to see the property and spoke to Mrs English, with whom
he dealt throughout the subsequent negotiations, in which her husband took no
part. He was naturally very interested in the planning position. She herself
showed him the press cutting to which I have referred and the correspondence
with Mr Buck. At a very early stage he visited the offices of the rural
district council to investigate the planning position. He discovered that the
Dedham Vale proposals referred to in the newspaper cutting were non-statutory.
He also discovered from the planning list that an application for the
development of the whole site had already been made and refused, on the grounds
that it was premature, and that there had been a reference to the sewage
situation. He also discovered that the sewerage
impression that, while the rural district council were sympathetic, the county
council were unlikely to give permission. He considered, however, that there
was some chance of obtaining permission on appeal to the minister, because of
the use of the word ‘premature’ in the previous refusal.
Mr Harrington
had subsequent meetings with Mrs English on February 26 and April 24 1971. It
is common ground that on one or more of the three meetings to which I have
referred he made her an unconditional offer of £9,000 for the property, not
linked to obtaining planning permission, and that she refused this offer. She
says that at one of the meetings he also made her an unconditional offer of
£10,000, but he denies this. He says that at one of these meetings he made her
an offer of £18,000 conditional on the obtaining of planning permission, but
she denies this. I think nothing really turns on these two disputed points.
On March 9
1971 Mr H W Whybrow, of Fenn Wright & Co, wrote to Mrs English informing
her that Gough Cooper (South East) Ltd were not prepared to go ahead with the
purchase and that they had also decided not to proceed with the acquisition of
‘Shorelands,’ because they appeared to be ‘less confident of obtaining planning
consent for building than they were some months ago.’
On March 29
1971 Mr Norrington wrote to Mrs English in effect repeating the offer made in
his letter of November 2 1970, but nothing came of this and he faded out of the
picture.
On April 16
1971 Mr Whybrow wrote to her informing her that Hey & Croft Ltd were no
longer interested in making an offer for the property or for Shorelands. He
therefore advised her to submit to the rural district council a fresh planning
application, in conjunction with Shorelands, similar to that made about two
years before. Mrs English did not take up this suggestion. It appears that by
the middle of May the best offer she was left with was one of £7,500, because
all other proposals had fallen through.
On or shortly
before May 21 1971 Mrs English telephoned Mr Harrington asking him to go and
see her at her house, which he did on May 21. Mrs English’s version of this
crucial meeting, as given in her evidence in chief and under cross-examination,
was substantially as follows. He told her that there was ‘no building
obtainable’ for the land at the moment, or words to that effect, having
obviously recently visited the planning authority. They did not have a long
conversation. He offered her £7,750 for the property, representing a little bit
more than the only other offer that was available to her at the time, of which
she had informed him. She accepted this offer. He told her that he contemplated
altering the bungalow by converting the loft into a room and by putting in
dormer windows. He also said he would put the 3 acres at the back of it under
rye to get thatching material for it. There was some discussion as to the date
of completion and he agreed that this should be deferred for six months in
order that she and her husband might find somewhere else to live. This was, I
think, substantially Mrs English’s account of this conversation.
Mr
Harrington’s version of it was rather different, being substantially as
follows. She told him that the best offer left to her was £7,500, that she was
most anxious to sell and leave because her husband was ill and she wanted to
move to the coast to live and that the land was more than they could manage. He
accordingly offered her £7,750, which she accepted. Though they had on previous
occasions discussed the planning position, the situation was probably discussed
that day as well. She knew as well as he did (according to his evidence) that
the Essex County Council was not in favour of development of the land at the
time. He told her that he was of the opinion that in the long run permission
for development would be granted. He told her in particular that he thought the
minister might in the end reverse the county council on appeal, but he thought
all this would take some time. She said she was not prepared to wait. He did
not recall specifically saying anything about altering the bungalow, but he saw
no reason to dispute that he had said it, even though that was not his motive
for buying the property. He did not remember saying anything to Mrs English
about setting the 3 acres with rye and denied the precise words attributed to
him by further and better particulars of the statement of claim, which alleged
that he had said that he would do this to get the ‘hay’ for thatching, since he
would have referred to it as ‘straw.’ He
could not, however, remember even referring to straw. He accepted that they
discussed the date of completion and said that they agreed that the time should
be six months, with an option for her to call for completion at any time after
three months. He also undertook to help her find alternative accommodation. She
asked him to suggest a firm of solicitors whom she might instruct, and he
suggested Elwes Witty & Co. Then, according to his evidence, after the
agreement had been reached, he told her that he would like, on behalf of the
defendant company, to make an application for planning permission for a single
plot, as opposed to residential development of the whole site, on the small
narrow strip of land adjacent to the road frontage and to the existing bungalow
on the property, which I will call ‘the small plot.’ According to his evidence, he told her that he
would like to make the application in the plaintiffs’ names, since they would
continue to be the theoretical owners of the property for some period of time,
and this she readily agreed to. Mr Harrington explained in evidence that he
particularly wished to make the application in their names rather than his own
or that of the defendant company, because he had had a brush of personalities
with a person who at that time held a responsible position with the Essex
County Council, and he believed that this brush had previously led to 12
consecutive refusals of applications for outline planning permission made by
him or his company, most of which were in the event subsequently allowed on
appeal. He explained in evidence, though he did not suggest that he told Mrs
English this, that it was this pattern of refusals, which he regarded as
unreasonable, and the belief that he was the victim of discrimination which
made him particularly wish to use Mr and Mrs English’s names. At the meeting of
May 21 1971, according to his evidence, being delighted to have concluded the
deal and not anxious to delay further, she readily agreed to his making the
application in their names, using words to the effect, ‘Do what you like; I am
not interested.’
Mrs English
absolutely denies that, at this meeting of May 21 1971, Mr Harrington made any
mention to her whatsoever of any intention on his part to make a planning
application in respect of the small plot. She said that she never agreed to
lend her name to such an application and that, if he had mentioned it, she
would have wanted more money. As she put it, ‘That would not have gone past
unnoticed.’
There is thus
a stark conflict between her evidence and that of Mr Harrington on this very
important point. They were the only two persons who could give evidence as to
what occurred at this meeting, and this will be a convenient moment to state my
assessment of them as witnesses. Mr Harrington, no doubt assisted by his
experience in giving evidence in planning applications and such like, gave his
evidence very clearly and well. I do not think there is any point of
straightforward fact on which it can be shown to have been demonstrably
incorrect; nor did I gain the impression that he was attempting to mislead the
court in any respect. Mrs English, on the other hand, was a much less good
witness. She is a lady of 82 years and, though I think her mental faculties
seem essentially unimpaired, she appeared in the witness box somewhat
excitable, angry and abrasive. Her bitterness over the whole transaction, and
in regard to
generally trivial and pointless, misstatements of fact on matters of detail.
She could hardly bear to admit anything that might be thought to show Mr
Harrington even in a slightly favourable light. I therefore accept the
submission, made by Mr Joseph on behalf of the defendant company, that her
evidence, coloured as it was by obvious rancour in some instances, should be
treated with some reserve. I would also accept that, where her evidence
conflicted with that of Mr Harrington on detailed questions of fact, his
evidence should, in general, be preferred. Nevertheless, I think due allowances
must be made for her age; and I certainly did not get the impression that she
was a person who was deliberately fabricating the principal points of her
evidence for the purpose of bolstering up her case. On a number of important
points, as will appear, I thought her evidence carried conviction, even
allowing for the fact that some elderly persons may come sincerely to believe
that certain things have been done and said in the past, when such belief has
no foundation in truth.
One point was
freely admitted by Mr Harrington in relation to the meeting of May 21 1971.
Though he and Mrs English had had at least three meetings before that day and
had discussed the question of planning permission at one or more of these
earlier meetings, they had never previously discussed the possibility of a
limited application being made for permission in respect of the building of one
house on the small plot. I am prepared to accept from his evidence that at the
meeting of May 21 he did very briefly mention to her that he was proposing to
put in an application in respect of the small plot in the names of her and her
husband. As will appear, however, he did not mention that he was even
considering doing this before exchange of contracts. Furthermore, since the
proposition mooted involved not only the use of their names but also a
completely different form of application from that ever discussed between him
and Mrs English before, I think it was incumbent on him to make it quite clear
to her at that meeting, first, precisely what form of application he had in
mind and, secondly, that he intended to use the names of Mr and Mrs English for
the purpose of making the application. I do not think he did make these two
matters sufficiently clear. All the evidence in this case indicated that Mrs
English has at all material times been a lady with a keen business sense, who
would assuredly have asked for some additional quid pro quo beyond a
price of £7,750 if she had been made fully aware that Mr Harrington was
contemplating a different, more limited, form of planning application, which
inherently had a greater chance of success than the wider form previously
discussed between them, and that he particularly wished to use the names of her
husband and herself for this purpose. She herself said in evidence that she
would have done so, and on this point I believe her. Mrs English, I am
satisfied on the evidence, gave no true consent to the use of the plaintiffs’
names in regard to this application, because Mr Harrington had not sufficiently
explained to her what he wanted to do. The fact that he did not do so, coupled
with his admitted failure subsequently to inform her or her solicitors either
of the making or of the result of the application, has, I think, become the
principal reason for the intense bitterness which she obviously now feels in
relation to the transaction.
However, I
entirely reject the allegation that at this meeting of May 21 1971 Mr
Harrington made any representations to her in relation to the planning position
which he knew to be untrue. It was common ground between the two of them in
their evidence that, in the course of one or more of the four meetings between
them to which I have referred, Mr Harrington had told her, in effect, that he
had formed the view, as a result of his visit to the council offices, that
while it might take a considerable time before any planning permission would be
granted for any housing in respect of the property, he himself thought that
permission would be granted in the end. In the light of the planning situation
as I have already described it, I do not think statements to this effect
misrepresented the factual position in any way. Nor, in my judgment, did Mrs
English’s oral evidence reveal any other respect in which Mr Harrington had
misrepresented either the current planning position or the prospects of
obtaining planning permission. Nor do I think she was actually misled in any
way by anything that was said to her. As a result of her long previous
experience and interest in the subject, she knew the position and the prospects
in relation to the obtaining of permission for a full-scale development of the
property more or less as well as Mr Harrington. If he said anything as to the
prospects of obtaining permission on the limited application–and the evidence
does not suggest that he did–she would not have been misled, because, as I have
found, she did not realise that a limited application was under contemplation.
For these reasons, in my judgment, the claim that representations were made to
her at the meeting of May 21 which at that date were untrue and were known by
Mr Harrington to be untrue, fails. I wholly acquit Mr Harrington of any charges
of fraud in relation to this incident, and indeed in relation to any other
incidents in this case. This is, however, far from the end of the matter and I
must revert to its history.
After the
meeting of May 21 1971 the plaintiffs’ solicitors proceeded to draw up a formal
contract. A draft was sent to the defendant’s solicitors on May 25 1971.
Preliminary inquiries were made and answered. The draft contract was returned
by them, in amended form, on June 29 1971. On July 12 1971 the defendant’s
solicitors wrote to the plaintiffs’ solicitors saying that they had engrossed
the contract for signature by the defendant. On July 13 the plaintiffs’
solicitors wrote to them saying that they agreed their amendments to the draft
contract and that they had their part engrossed and were ready to exchange.
Then on July 14 1971 before contracts had been exchanged Mr Harrington caused
an employee of the defendant company, a Mr J C Mead, to sign and submit to the
Essex County Council an application to carry out development on the property by
the erection of one detached house with a garage on the small plot. On this
application form, the applicants were shown as Mr and Mrs English, their
address being given as Rusty Tiles; Mr Mead purported to sign the form as the
‘agent’ of Mr and Mrs English and the form, as completed, requested that the
decision notice should be sent to his address. In the usual way, the form had
to be accompanied by a certificate of the nature referred to in section 16(1)
of the Town and Country Planning Act 1962. The form as completed by Mr Mead, on
Mr Harrington’s instructions, was in the form specified in section 16(1)(a),
namely that ‘The applicant is the estate owner in respect of the fee simple of
every part of the land to which the accompanying application dated July 14 1971
relates.’ If this form of certificate
had not been given, then, in order to comply with the requirements of section
16, it would have been necessary for the application to be accompanied by a
certificate in the form specified in section 16(1)(b), certifying that the
requisite notice of the application had been given to all persons who, at the
beginning of the period of 21 days ending with the date of the application,
were owners of the land and setting out the names of those persons, their
addresses and the date of service of such notice.
Mr Harrington
was quite frank in telling me that he asked Mr Mead to sign the application
form, rather than signing it himself, because, for reasons which I have already
mentioned, he did not wish the council planning authority to know that he or
the defendant company were concerned with it. Though the defendant’s own expert
witness, L J Trott, a chartered surveyor, said under cross-examination that he
would not have been a party to a planning application which
whether it was a proper course, either in relation to planning law or to the
planning authority, for Mr Harrington to procure Mr Mead to submit an
application in this particular form in these particular circumstances. In
relation to Mr and Mrs English, however, Mr Harrington was in my judgment at
fault in causing this application to be submitted in this form at this time. As
he admitted in his oral evidence, at the meeting of May 21 1971 it had at all
times been contemplated by both sides that there would in due course be an
exchange of formal contracts and the arrangement reached was to be subject to
such exchange. Mr Harrington accepted in evidence that he never informed Mrs
English whether he would be making the planning application before or after the
exchange of formal contracts. In these circumstances, I think, as he himself
more or less accepted, that even if, contrary to my view, he had made it
sufficiently clear that he did intend to make a planning application in her
name, Mrs English could reasonably have assumed that he would not do so until
after contracts had been exchanged. It is one thing for A to make a planning
application in B’s name in relation to a house after he has actually contracted
to buy the house from B and thus become the beneficial owner of it in equity;
it is quite another thing for A to do this at a time when A and B are merely in
an advanced stage of negotiation and A as yet has no legal or equitable
interest whatsoever in the house. Mr Harrington explained in evidence that he
thought he was justified in making the application before exchange of contracts
because his solicitors had heard from Mr and Mrs English’s solicitors saying
that they were ready to exchange contracts. This explains what he did and
absolves him from any charges of dishonesty in this particular context: but I
do not think it justifies the action he took before the exchange of contracts
without her consent. If, contrary to my conclusion, he did make it sufficiently
clear to her that he wished to make a planning application in the names of Mr
and Mrs English in respect of the small plot, any consent which she gave to the
making of such application must, in my judgment, be regarded as having been
given subject to contract, as much as all other consents given by her at the
meeting of May 21 1971.
In these
circumstances, I think that, on any footing, Mrs English cannot be regarded as
having consented to the making of the application at the time and in the
circumstances in which it was made, before exchange of formal contracts. Mr
Harrington should, I think, on any footing, have either waited until contracts
were actually exchanged or obtained her express consent to the making of the
application before exchange. He could very easily have sought confirmation
through the respective solicitors that she did consent. Whether the consent
would have been given is another matter; I think it would not, at least if the
contract were to proceed on the basis of a £7,750 purchase price. It is common
ground that no one told the plaintiffs or their solicitors that the application
had been made before contracts were exchanged and that such exchange took place
on July 21 1971, although the part of the contract which I have seen, signed on
behalf of the defendant, inexplicably bears the date July 23. The contract, of
course, contained no mention of the planning application, which, unknown to the
plaintiffs, had already been made in the name of Mr and Mrs English. The date
for completion specified in the contract was on or before October 23 1971.
On September 7
1971 Mrs English asked Mr Harrington to go to see her. She told him that she had
changed her mind, that her husband was too ill to move and that she wanted to
cancel the contract. Mr Harrington refused to cancel it. By that time he was in
active negotiation with Mr and Mrs Coe for the purchase of ‘Shorelands.’ It seems not unlikely that Mrs English would
have been aware of these negotiations. On September 21 1971 the defendant’s
solicitors wrote to the plaintiffs’ solicitors saying that if Mr and Mrs
English needed a deferment of the completion date the defendant would consider
it, but there could be no question of their being released from the contract.
They also referred to certain assistance which Mr Harrington had given her in
attempts to find alternative accommodation. On October 12 1971 the defendant’s
solicitors offered on behalf of the defendant what they described as an ‘ex
gratia’ payment, upon completion, of £150 towards the plaintiffs’ legal and
removal expenses, and said that, without prejudice to the provisions of the
contract, the defendant would agree to defer completion for the time being.
On October 20
1971 outline planning permission was granted in respect of the proposed
building on the small plot. A copy of the permission was sent addressed to Mr
Mead at the address given by him on the application form; no copy was sent to
Mr and Mrs English in view of the form which the application had taken.
On November 8
1971 the plaintiffs’ solicitors wrote acknowledging the offer of £150 and
offering to complete at the end of that month. A completion date was
subsequently arranged for December 9.
Between
October 20 and December 1 1971 Mrs English and Mr Harrington did not meet. Then
on December 1 he visited her. By this time, according to his evidence, which I
accept on this point, she was very bitter, because he had in September insisted
on holding her to the contract. At that meeting, also according to his
evidence, she used words in conversation which made it clear that she knew of
the grant of the planning permission which had been given in September. Mrs
English, on the other hand, was adamant in her evidence that this was not so,
because she did not hear of the permission until January or February 1972. If
she had known, she said, she would not have completed the transaction as she
did a few days later. Once again, there is a direct conflict of evidence
between Mrs English and Mr Harrington. In the end, however, I have not been
satisfied that Mrs English in fact knew of the planning permission at that
time. It is common ground that neither Mr Harrington nor anyone else on his behalf
actually told her of the permission either at this meeting or at any time
before. Though he could suggest no other way in which she might have learned
it, he suggested in his evidence that she could have discovered by means of a
direct inquiry of the planning authority. This is no doubt theoretically so,
but I can see no good reason why she should have made such inquiry, and I think
it inherently improbable that she did so. Mr Harrington told me that at the
meeting of December 1 she was sarcastic and used words to the effect ‘You are
doing very well out of this, aren’t you?’
He could not, however, recall in any further detail what she said. The
inference which I draw is that he wrongly attributed her bitterness and sarcasm
to a knowledge of the permission, whereas in fact it was at that time due to
her general dissatisfaction with a transaction which she had already come to
regret for other reasons. Having seen her in the witness box, I accept her
evidence that, if she had known of the permission, she would not have completed
the transaction a few days later without any further demur or complaint. I
think that at very least she would have instructed her solicitors to raise the
point in correspondence, but this she obviously did not do at this stage. Significantly,
though there are in evidence a quite large number of letters written in 1971 by
her solicitors or by her personally, or by the defendant’s solicitors, not one
of them refers to the planning application in any way. On this point as to
knowledge, or lack of it, her evidence, though inaccurate in other details,
carried conviction.
If, however,
as is possible, I have drawn an incorrect inference as to this point, or,
indeed, on the question whether Mr Harrington made it sufficiently clear to Mrs
English at the meeting of May 21 1971 what he proposed to do in
has himself to blame. This was an important part of the transaction as far as
he was concerned. It would have been so easy for him, for the avoidance of any
possible doubts or misunderstandings, to instruct his solicitors to inform the
solicitors instructed on behalf of Mr and Mrs English precisely what he
proposed to do in relation to the application, what he had done, and, indeed,
what the result of it was. If misunderstandings have occurred, his failure to
put anything in black and white for the benefit of an old lady, such as Mrs
English, must be partly responsible.
I therefore
find that at the date when completion took place, namely on December 9 1971 Mrs
English and her husband still did not know that an application for planning
permission had been made or that it had been granted. Then in January or
February 1972, according to her evidence which I accept on this point, Mrs
English learned for the first time that a house was to be built on the
property. She consulted her solicitors, who obtained a copy of the planning
application, and on March 7 1972 wrote to Mr Mead saying that Mr and Mrs
English had never heard of him and had given him no authority to make an
application or to certify on their behalf. This letter was handed to the
defendant’s solicitors who, on March 14 1972 replied saying that, at the time
of the application, Mr Mead was an employee of the defendant. They continued:
Shortly
before exchange of contracts, our client, Mr Harrington, asked your clients
whether they would object to an application for planning consent being made by
him on their behalf. Your clients confirmed that they had no objection to this
and Mr Mead was accordingly instructed by our clients.
On March 21
1972 the plaintiffs’ solicitors wrote to the defendant’s solicitors saying, inter
alia, that Mrs English absolutely denied having given permission to Mr
Harrington to apply for planning permission. This letter was answered on March
22 1972 by a letter in which the defendant’s solicitors said, inter alia:
Our client
reiterates that he sought and obtained your client’s permission to make a
planning application. The matter was discussed between our respective clients
in or about July 1971, as your clients had requested an extended completion
date. The application for planning consent was in respect of one dwelling-house
by the side of Rusty Tiles.
It is thus to
be noted that the two letters of March 14 and March 22 1972 from the
defendant’s solicitors referred to the conversation in which Mrs English is
alleged to have given her consent to the planning application, as having taken
place either ‘shortly before exchange of contracts’ or ‘in or about July
1971′–a rather different version from the defendant’s present case, which is
that everything was arranged on May 21 of that year. It is obvious that the
defendant’s solicitors had taken Mr Harrington’s instructions before writing
those two letters. Since it is possible that they misunderstood his
instructions, I do not attach very great significance to this point. It is,
however, one further indication that the evidence that Mrs English gave
permission for the plaintiffs’ name to be used is neither clear nor conclusive,
and one further reason why, in my judgment, she should be given the benefit of
the doubt on this point.
The letter of
March 22 1972 was followed by the issue of the writ in the present action on
behalf of the plaintiffs on March 30 1972. The only other facts to which I
think I need refer at the present stage are these. In January 1972 the
defendant had entered into a conditional contract for the purchase of
‘Shorelands.’ In March 1972 Mr Harrington,
on the defendant’s behalf, applied for development of the whole site, that is
to say the property and ‘Shorelands.’ As
anticipated, there was a refusal by the county council. There was then an
appeal to the minister which, after some delay, was allowed. On April 23 1974
planning permission was granted. Long before that, the sewerage scheme had, of
course, been completed. In the event, there can be no doubt that the
transactions entered into by Mr Harrington or his company, the defendant, in
relation to the property and ‘Shorelands’ have proved very profitable for them.
Various figures were mentioned to me in evidence, but I do not think I am
concerned with the details. It was accepted by both sides that if I were to
hold that Mrs English was entitled to damages or an account of profits, the
question of quantum should, in default of agreement, be remitted to an inquiry
in chambers.
Mrs English is
not now seeking rescission of the conveyance, nor have her counsel pursued
before me the claim in the prayer to her statement of claim for a declaration
that the planning permission granted on October 20 1971 is null and void. Her
claim now is limited to a claim for damages and/or an account of profits. It
should also be observed in passing that she has at no time sought rescission of
the conveyance on the grounds of alleged undue influence or alleged
unconscionable bargain. Her claim for rescission was at all times made simply
on the footing that Mr Harrington had positively misled her or alternatively
had failed to disclose to her what he should have disclosed.
The grounds
upon which Mr Scrivener, on behalf of Mrs English, claims that she is entitled
to damages and/or an account of profits may, I think, fairly be summarised
under five headings, though I do not reproduce the submissions in precisely the
same order as that in which they were made.
First, it was
submitted that the defendant is liable to Mrs English for damages for
fraudulent misrepresentation on the grounds that the representations referred
to in paragraph 3 of the statement of claim were false to Mr Harrington’s
knowledge at the date when they were made and that Mrs English acted on them to
her detriment. I have already dealt with this submission and unhesitatingly
rejected it. I do not think that, at or before the meeting of May 21 1971, Mr
Harrington misrepresented the planning prospects in respect of the property.
Still less do I think that he deliberately misrepresented them or that Mrs
English was misled by anything he said in relation to such prospects. As she
said in her evidence, she ‘knew it all already.’
Secondly, and
alternatively, it was submitted that the defendant is liable to Mrs English in
damages for fraudulent misrepresentation on the grounds that, even if the
representations made to her by Mr Harrington in relation to the prospects of
planning permission at or before the meeting of May 21 1971 were not false to
his knowledge at the date when they were made, he acquired knowledge that they
were false either when he made the planning application in July 1971 or,
alternatively, when planning permission was obtained in October 1971; he thus,
it was submitted, became under a duty to disclose the change of circumstances.
In this context, Mr Scrivener referred me to the decision of the Court of
Appeal in With v O’Flanagan [1936] 1 All ER 727. This case
illustrates that if, during the course of negotiations for a contract, one of
the parties has made a statement which is at the time false in fact, but which
he believes to be true and which is material to the contract, and during the
course of the negotiations he discovers the falsity of the statement, he
becomes under an obligation to correct his erroneous representation. It further
shows that if during such negotiations a party makes a material statement which
was true at the time it was made, but which before the conclusion of any
contract becomes untrue, then if the person who made it discovers before
conclusion of any contract that it has become untrue, he becomes under an
obligation to disclose to the other the change in circumstances. In either
situation, his wrongful failure to disclose may be treated as a deemed
misrepresentation.
I do not,
however, think that the principle of With v O’Flanagan has any
relevance to the facts of this particular
representation to her of any kind in relation to the prospects of obtaining
planning permission for building on the small plot. The representations
which she says he made related to a quite different matter, namely, planning
permission for the development of the three acres at the back of the property.
These were the only representations which she claims to have induced her to
enter into the contract. The making of the planning application in relation to
the small plot on July 14 1971 did not affect the truth of the latter
representations in any way. They did not cause the statements which Mr
Harrington had made in relation to the prospects of obtaining planning
permission for the whole plot to be any less true than they had been at the
time when they were made. In these circumstances, the principle of With
v O’Flanagan did not, in my judgment, itself impose any obligation on
him to disclose to her the making of the planning application, though, as I
have already indicated, I think he was under an obligation to obtain her
consent to the making of the application before contract for other reasons. A
fortiori, in my judgment, the principle of With v O’Flanagan
did not itself impose on Mr Harrington or the defendant any obligation to
disclose in October 1971 the fact that planning permission had been obtained;
for by that time Mrs English was already committed to the contract.
Thirdly, it
was submitted on Mrs English’s behalf that the defendant is liable in damages
on the grounds that, since it placed itself in the position of a self-appointed
agent in making the planning application, without the plaintiffs’ authority, an
implied contract must be deemed to have arisen between the defendant and the
plaintiffs, and the defendant was in breach of the duties arising from such
implied contract in failing to disclose the making and result of the planning
application. If this duty had been fulfilled, it was submitted, Mr and Mrs
English would not have concluded the contract or, alternatively, would with
proper justification have refused to complete it and would thereby have been
saved from a transaction which caused them substantial damage. However, no
reported case was cited to support the proposition that where A, without B’s authority
or knowledge, purports to act as agent for B, a contractual relationship may
thereby arise between A and B. It seems to me that, just as an express contract
must be founded on the express mutual consent of the contracting parties, so an
implied contract must be founded on the implied mutual consent of the parties
interested. Mutuality is ex hypothesi lacking in a case where the
relevant acts of A are done without B’s knowledge or consent. In these
circumstances, I reject the argument based on any implied contract in relation
to the application for planning permission.
The fourth
proposition put forward on behalf of Mrs English by Mr Scrivener is in my view
of much the greatest substance. This is that in all the circumstances of the
case the defendant became and is accountable in equity to Mrs English in
respect of the profit derived by it from the planning application made in July
1971. Mr Scrivener advanced this submission in a number of alternative ways.
His basic points, however, were I think these: The defendant had, without the
plaintiffs’ authority, put itself into the position of a self-appointed agent
for them in making the planning application. It thereby placed itself in a
fiduciary relationship with the plaintiffs; in the course of this relationship
it used their names and their property without their authority in making the
planning application; also in the course of this relationship it acquired
information which it should have disclosed to them, namely, the making and the
grant of the planning application; as a result of this unauthorised use of the
plaintiffs’ property and names, and of the defendant’s breach of duty in
failing to disclose to them the information to which I have referred, the
defendant made a substantial profit through the obtaining of the planning
permission and is liable to account to Mrs English in equity for that profit.
These
submissions, which are reflected in the reamendments to the statement of claim,
raise some difficult and to some extent novel points of law. Before considering
them further, it will be convenient to rehearse my interpretation of the basic
relevant facts of this case. On May 14 1971 Mr Mead, by the direction or
authority of the defendant, but without the plaintiffs’ consent or knowledge,
made an application for planning permission in respect of the plaintiffs’
property. The form of application showed the plaintiffs as the applicants, Mr
Mead as their agent, and made no mention whatsoever of the defendant. The
application was made at a time when contracts between the plaintiffs and the
defendant had not yet been exchanged and the defendant thus had as yet no legal
or beneficial interest in the property. Pausing there, it seems to me that,
although the form of application had been presented by the authority or
direction of the defendant or Mr Harrington, it was nevertheless the
application of the persons on whose behalf it purported to have been made,
namely the plaintiffs, in the sense that, at least at any time before exchange
of contracts, the plaintiffs (on ordinary principles relating to agency) would
have been free to ratify what Mr Mead had done purportedly on their behalf and
to take over the full benefit of the application for themselves, to the
complete exclusion of Mr Mead, or the defendant, or Mr Harrington. I infer
that, if they had known of the making of the application, this is precisely
what they would have done. I also infer that they would have declined to
proceed with the exchange of contracts, at least at a price of £7,750, because
they would have wished to see what became of the application. This course they
were, in the event, unable to adopt, because neither Mr Harrington nor Mr Mead
had informed them of the application. In the result, this non-disclosure,
coupled with the making of the application, has resulted in the defendant
obtaining a substantial profit which it would not otherwise have obtained.
In the
circumstances, it is hardly surprising that Mr Scrivener has placed
non-disclosure in the forefront of his reasons for submitting that the
defendant should be made to account for the profit obtained by it from the
permission. Apart from other relevant considerations, he pointed to section 16
of the Town and Country Planning Act 1962 which, in ordinary circumstances,
precludes a local planning authority from entertaining an application for
planning permission unless it is acompanied by either (i) a certificate stating
that, in respect of every part of the land concerned, the applicant is either
the freeholder or is entitled to a tenancy thereof, or (ii) a certificate
stating that the applicant has given the requisite notice of the application to
all the persons (other than the applicant) who, at the beginning of the period
of 21 days ending with the date of the application, were owners of any of the
relevant land. Section 16(5) imposes penalties in respect of false or
misleading certificates, and section 17 obliges a local planning authority, in
determining applications for planning permission for development, to take into
account representations received by them within a stated period. One of the
clear purposes of section 16 is to confer protection on an owner of land, in
respect of whose property an application for planning permission is being made
by another person, by providing for notice of the application to be given to
him. Mr Scrivener did not submit that the section itself operated to confer on
Mrs English the statutory right to receive a notice, enforceable by damages in
the present case. He did however submit, in my judgment correctly, that if the
ordinary and proper procedure had been adopted which should be adopted under
the statute, in a case where an application is being made in respect of the
land of a person other than the signatory of the application and the owner has
not consented to the signatory making the application as his agent, Mrs English
would have received notice of the application before it was made on July 14
1971 in the present case. If she had received
have proceeded to exchange contracts in the form which they actually took as to
price and other matters.
I now proceed
to consider whether all or any of these various points operate to confer on Mrs
English the right to an account of the profits received by the defendant from
the relevant planning permission. In this context it was emphasised on her
behalf that she is not seeking recovery of the profit obtained by the defendant
from the wider permission which it subsequently obtained in respect of the
whole property and Shorelands. Her claim is in respect of the permission
obtained in her name without her knowledge by means of an application made
before exchange of contracts.
On behalf of
Mrs English, strong reliance was placed on a passage from the judgment of Lord
Denning MR in the Court of Appeal decision in Phipps v Boardman
[1965] Ch 992. In that case a beneficiary under a will trust claimed an account
of profits made by the appellants as the result of purchasing shares in a
company in which the trust had a substantial holding. One of the appellants was
solicitor to the trustees and the other was a beneficiary. They were
dissatisfied with the company’s accounts and, on behalf of the trust, attended
a meeting of the company in December 1956 with proxy forms signed by the other
two trustees. Early in 1957 they decided to make a take-over bid personally for
further shares in the company so as to obtain control and by a liquidation of
assets make a repayment of capital to the shareholders. During the negotiations
for the purchase, they referred to their representative capacity and made use
of the information which they had received at the meeting as representatives of
the trustees. Further detailed knowledge of the assets of the company and their
value was obtained during negotiations, the information being acquired upon the
basis of their representation of the shareholding of the trust. Eventually, the
proposed purchase was effected and it proved profitable to the appellants
personally. The Court of Appeal held that they were accountable for this
profit, substantially on the grounds that they had assumed the character of self-appointed
agents for the trustees and had used the knowledge of the company which they
had acquired and which was the property of the trust to make a profit for
themselves. Lord Denning said this at p 1017 of the report:
I think the
judge put the position right when he said that ‘in 1956 they assumed the
character of self-appointed agents for the trustees, for the purpose of
extracting information as to the company’s business from its directors.’ The word ‘self-appointed’ was criticised by
Mr Bagnall, but its meaning is clear enough. These two gentlemen took upon
themselves an authority which they did not truly possess: and, by virtue of
this assumed authority, they obtained information and knowledge which they
would not otherwise have got. This sort of thing has happened often enough
before. There are many cases in the books where a person has assumed to have
authority when in truth he has none. It has always been held that he is
accountable just as if he had in fact the authority which he assumed. The classic
instance is an executor de son tort. If a person intermeddles with the
assets of an estate in such a way as to denote an assumption of the authority
of an executor, he is accountable just as if he were an executor, see Stamford’s
case, Read’s case. Likewise with a man who assumes to act as bailiff
without authority. Thus in Gawton v Lord Dacres, Anderson CJ
said: ‘If one becomes my bailiff of his own wrong, without my appointment, he
is accomptable to me.’ So with a person
who assumes to act as trustee. In Rackham v Siddall, Lord
Cottenham LC held a lady who took on herself to act as trustee was just as
liable as if she were in truth a trustee; similarly in Lyell v Kennedy,
the House of Lords held that a person who took upon himself to receive the rents
of property which to his knowledge belonged to others was chargeable in a
fiduciary character with the rents he had received. In most of these cases the
person had already some position or connection which gave him the opportunity
of assuming authority to himself. So here Boardman was the solicitor to the
estate. Tom Phipps was one of the chief beneficiaries. This gave them the
opportunity of assuming authority to act as agents to the estate. They did
assume it in their negotiations with Smith and are accountable just as if they
were agents. That is how the judge regarded them. . . .
Treating them
as agents, to what extent are they accountable?
We have been through once again the cases where an agent makes a profit
for himself out of his agency. It is quite clear that if an agent uses property
with which he has been entrusted by his principal, so as to make a profit for
himself out of it, without his principal’s consent, then he is accountable for
it to his principal, see Shallcross v Oldham. So also if he uses
a position of authority, to which he has been appointed by his
principal, so as to gain money by means of it for himself, then also he is
accountable to the principal for it, see Reading v Attorney-General.
Likewise, with information or knowledge which he has been employed by
his principal to collect or discover, or which he has otherwise acquired,
for the use of his principal, then again if he turns it to his own use, so as
to make a profit by means of it for himself, he is accountable, see Lamb
v Evans. Regal (Hastings) Ltd v Gulliver,
for such information or knowledge is the property of his principal just as much
as an invention is. . . .
Pearson LJ (at
p 1030 ibid) said:
It was
contended that the defendants could not appoint themselves agents. . . . It
seems to me, however, that as the defendants assumed the character of agents
and acted in that character over a long period with resulting profits to
themselves, they can be held accountable on the basis of agency: Lyell v
Kennedy.
Mr Scrivener
submitted that the passage from the judgment of Lord Denning which I have read
is an accurate summary of the relevant rule and precisely covers the present
case. The defendant assumed an authority which it did not truly possess,
namely, the authority as the plaintiffs’ agent (through Mr Mead) to make the
application for planning permission. By virtue of this assumed authority, it
obtained information, namely, information as to the making and result of the
planning application, which it would not otherwise have got. It also obtained a
benefit which it would not otherwise have got, namely the permission itself;
therefore, it is submitted, it is accountable to Mrs English just as if it had
in fact made the application solely and simply as the plaintiffs’ agent.
Mr Joseph, on
behalf of the defendant, submitted in effect that there is no general principle
of English law which obliges a self-appointed agent, acting without authority
from his purported principal, to account to such principal for any profit
acquired by him by virtue or during the course of the assumed authority. He
pointed out that the Court of Appeal’s decision in Phipps v Boardman,
though upheld by the majority in the House of Lords (under the name Boardman
v Phipps [1967] 2 AC 46) was upheld by the majority on somewhat
different, broader grounds, namely, the rule of equity that a person in a
fiduciary capacity must not make a profit out of his position which is part of
the wider rule that a person in a fiduciary capacity must not place himself in
a position where his duty and his interest may conflict. If a person, without
any preceding authority, purports to enter into a contract with a third party
for and on behalf of an alleged named principal and the named principal later
ratifies and adopts the contract, the relationship of principal and agent will
usually be treated as arising between the two parties concerned with all the
normal consequences attaching to such relationship: see Bowstead on Agency
14th ed at pp 37 et seq. In the present case, however, the defendant
cannot be said to be a self-appointed agent of the plaintiffs in respect of any
contract entered on their behalf. In these circumstances, Mr Joseph, in
the course of a helpful analysis of the authorities, in effect submitted that
the defendant could be made liable to account to the plaintiffs if, but only
if, the case fell within one or more of three well-recognised categories where
a liability to account falls upon a self-appointed agent:
(1) Mr Joseph accepted that if, at the date when
the planning application was made, there already subsisted between the
plaintiffs and the defendant a relationship of a fiduciary nature and the
defendant had used this relationship to obtain the planning permission, then it
would be accountable to the plaintiffs for any profit so derived. By way of
illustration he referred me to Reading v Attorney-General [1951]
AC 507, where a soldier was held to be accountable to the Crown for money
obtained by him by the use, or rather the abuse, of his military status. Mr
Joseph, however, pointed out that in the present case there was no fiduciary
relationship which existed before the date when the planning application was
made and enabled it to be made.
(2) Secondly, he recognised that the defendant
could be made liable to account as self-appointed agent, if it could be said
that it had meddled with a pre-existing trust or with trust assets with
knowledge of the existence of the trust. Examples of this principle are Rackham
v Siddall (1849) 1 Mac & G 607 and Soar v Ashwell
[1893] 2 QB 390. This principle clearly has no application on the facts of the
present case.
(3) Thirdly, Mr Joseph recognised that the
defendant could be liable to account if, at the date when the planning
application was made, there already existed some kind of fiduciary relationship
between the plaintiffs and the defendant, and the defendant, in making the
application, could be said to have been placing himself in a position where its
interest and its duty conflicted. One example of such a situation would be that
in Phipps v Boardman. Another would be that in Parker v McKenna
(1874) 10 Ch App 96, where trustees were held accountable for profits made by
them personally out of dealings with trust property on the grounds that ‘no
agent in the course of his agency in the matter of his agency can be allowed to
make any profit without the knowledge and consent of his principal’: (ibid
at p 124 per Sir W M James LJ).
Mr Joseph,
however, submitted that these were the only three situations in which the
defendant could have been made accountable on the present facts and that the
present case fell within none of the three categories. He referred to the
sentence of Lord Denning’s judgment in Phipps v Boardman in which
it had been said, in relation to self-appointed agents, ‘in most of these cases
the person had already some position or connection which gave him the
opportunity of assuming authority to himself.’
Mr Joseph submitted that the sentence could more aptly have read ‘In all
of these cases. . . .’ He submitted
that, because the defendant at the time that it made the application did not
already have any position or connection which gave it the opportunity of
assuming authority to itself, this was really fatal to any claim of the plaintiff
to an account of profits in equity.
In my
judgment, in the end the question of the liability, if any, of the defendant to
account must depend on the view which the court takes as to the nature of the
relationship subsisting between it and the plaintiffs at the date when the
planning application was made. The liability to account would, in my judgment,
arise if, though only if, the relationship was in the eyes of equity a
fiduciary one in the sense that it imposed relevant fiduciary duties on the defendant
towards the plaintiffs. In this context, I regard one point as being of great
significance. As I have indicated, if the plaintiffs had learned of the
application which had been made in their names and in respect of their property
before contracts had been exchanged, they would have been entitled to say to
the defendant and Mr Mead ‘We ratify and adopt this application, which has been
made in our names, as our own application and neither of you are to have
anything more to do with it.’
Furthermore, this is, I think, effectively the course which the
plaintiffs would have actually adopted, unless a more favourable form of
contract had then been offered to them. This being so, I do not think that a
court of equity should or will allow the defendant to be in a better position
than that in which it would have found itself if, before exchange of contracts,
the defendant or Mr Mead had told the plaintiffs of the application which had
been made in their names, as I think it or he should have told them. I do not
think that the categories of fiduciary relationships which give rise to a
constructive trusteeship should be regarded as falling into a limited number of
strait-jackets or as being necessarily closed. They are, after all, no more
than formulae for equitable relief. As Ungoed-Thomas J said in Selangor
United Rubber Estates Ltd v Cradock (No 3) [1968] 1 WLR 1555 at p
1582:
The court of
equity says that the defendant shall be liable in equity, as though he were a
trustee. He is made liable in equity as trustee by the imposition or
construction of the court of equity. This is done because in accordance with
equitable principles applied by the court of equity it is equitable that he
should be held liable as though he were a trustee. Trusteeship and constructive
trusteeship are equitable conceptions.
Mr Joseph drew
my attention to the judgment of Buckley LJ in re Coomber [1911] 1 Ch 723
at p 730 in which it was observed that the doctrine of equity which induces a
court of equity to set aside a gift does not rest upon the existence of a
fiduciary relationship whatever be its nature. He said: ‘It rests upon the
existence of such a fiduciary relationship as will lead the court to infer
undue influence or knowledge in the one party concealed from the other or other
circumstances into which I need not go.’
It has not
been submitted that, but for the making of the planning permission, any
fiduciary relationship could be said to have arisen between Mrs English and the
defendant or Mr Harrington before exchange of contracts. Mr Joseph in effect
submitted that the mere making of a planning application could not by itself
have given rise to any such relationship, when none would have otherwise
existed. I see the force of this submission but am not in the end convinced by
it. My reasons may be in the form of two general propositions:
(1) Where during the course of negotiations for a
contract for the sale and purchase of property, the proposed purchaser, in the
name of and purportedly as agent on behalf of the vendor, but without the
consent or authority of the vendor, takes some action in regard to the property
(whether it be the making of a planning application, a contract for the sale of
the property, or anything else) which, if disclosed to the vendor, might
reasonably be supposed to be likely to influence him in deciding whether or not
to conclude the contract, a fiduciary relationship in my judgment arises
between the two parties.
(2) Such fiduciary relationship arises in the
sense that there is a duty on the proposed purchaser to disclose to the vendor
before the conclusion of the contract what he has done as the vendor’s
purported agent, and correspondingly, in the event of non-disclosure, there is
a duty on him to account to him for any profit made in the course of the purported
agency, unless the vendor consents to his retaining it. In such circumstances,
the person who, for his own private purposes, uses the vendor’s name and
purports to act as his agent cannot reasonably complain if the law subjects him
to the same consequences vis-a-vis his alleged principal as if he had
actually had the authority which he purported to have.
On my analysis
of the facts of the present case, the plaintiffs never consented to the
defendant, or Mr Harrington, or Mr Mead purporting to make the planning
application as their agent before contract; the fact that this had been done
was never disclosed to them before the exchange of contracts;
received by it as a result of the making of the planning application. In these
circumstances, it is, in my judgment, accountable for such profit.
Mr Scrivener
submitted that Mrs English would at her option be entitled to damages in lieu
of an account of profits. In this context he referred me to the decision of the
Court of Appeal in Seager v Copydex Ltd [1967] 2 All ER 415. This
was a case where the defendant company had made use, albeit honestly, of
information which had been received in confidence and was not available to the
public. The remedy ultimately granted by the Court of Appeal was not an account
of profits nor an injunction, but damages to be assessed by the master. It is I
think clear that, since the Judicature Act, each division of the High Court has
full power to grant either an injunction or damages. I read this case as being
an instance where the court granted damages in lieu of an injunction. I am not
convinced that it illustrates or establishes any general principle that the
court has power to grant damages in lieu of an account of profits; and no other
case has been cited to me which suggests that the court has any such
jurisdiction.
Whether or not
such jurisdiction exists, however, I am satisfied that the present case would
not be an appropriate occasion on which to exercise it. The whole essence of my
reasoning, if it be correct, is that, while the defendant and Mr Harrington are
absolved from the charges of fraud made against them, the defendant has
received a profit which, in all the circumstances of the case, equity requires
that it should repay. In legal terms, it seems to me it is the profit to the
defendant which is the relevant factor, rather than the plaintiff’s loss.
In these
circumstances, I propose to grant relief in the terms of paragraphs (4) and (5)
of the prayer to the reamended statement of claim, that is to say an account of
the profits accruing to the defendant by reason of the non-disclosure to Mrs
English of its application for, and subsequent grant of, planning permission in
the plaintiff’s name, and an order for the payment by the defendant to her of
all moneys found to be due to her on the taking of such an account. I will
remit such account to be taken in chambers in default of agreement, but I think
it will be desirable that, so far as possible, the relevant principles upon
which it should be taken should be determined at the present stage. I will,
therefore, hear any further submissions which counsel may wish to make in this
context and as to the form of my order generally.
[The sum of
£3,000 was later agreed and an order made accordingly.]
