Claim by plaintiff estate agents against defendant purchasers for an introductory and retaining fee of 2% for acting on behalf of the defendants in the purchase of a large property to be used for the provision of shelter and nursing services — Defendants, in resisting the claim, alleged that the plaintiffs were disentitled to commission by reason of breaches of professional society and common law rules — It was alleged that the plaintiffs, without the defendants’ consent, had been acting at the same time for other clients interested in the property, that this had forced up the price and had consequently enhanced the sum claimed as commission — It was submitted that there was thus a conflict of interest situation contrary to the rules of the plaintiffs’ professional society (Incorporated Society of Valuers and Auctioneers) and to a term implied at common law — After reviewing the evidence the judge found that no actual conflict of law situation had arisen — Plaintiffs had been in touch with two other persons possibly interested in the property but neither had evinced any firm intention of proceeding — As soon as the defendants had shown a definite interest in purchasing the property the plaintiffs regarded themselves as acting for the defendants and no one else — The judge found as a fact that the defendants had been fully aware that other persons might be interested in the property and had indeed arranged to view it on the same day as the defendants — He held further, however, that the duty to disclose the existence and position of other parties arose only if they had shown an ‘active interest’, ie had evinced a real determination to instruct the agent to act for them in the matter, which was not the case here — Plaintiffs had acted in good faith and were not in breach of professional society or common law rules — Professional society rules considered and conflict of interest discussed — Authorities on disentitlement to commission mentioned — Plaintiffs entitled to commission — Defendants’ counterclaim for damages abandoned
In this action
Eric V Stansfield FSVA, a firm of estate agents, sued South East Nursing Home
Services Ltd under an agreement in writing for an introductory and retaining
fee of 2% of the purchase price, in respect of the purchase by the defendants
of Edith Edwards House, Park Road, Banstead, Surrey, for £284,284.
L Marsh
(instructed by John Smythe & Co, of Sutton) appeared on behalf of the
plaintiffs; J W Haines (instructed by Brand & Co, of Cheam) represented the
defendants.
Giving
judgment, MR CHARLES WHITBY QC said: In this interesting case the plaintiffs
are a firm of estate agents and valuers carrying on practice in Carshalton,
Surrey, under the title of Eric V Stansfield (a firm) and as appears from a
document on p 10 of the agreed bundle, and as is demonstrated by their headed
notepaper, they practise under the style of Eric V Stansfield FSVA (Fellow of
the Incorporated Society of Valuers and Auctioneers). By their statement of
claim, which was endorsed on the writ of summons, they claim the sum of
£6,538-odd for an introductory and retaining fee of 2% of the purchase price
plus VAT arising out of an agreement in writing dated November 3 1982 in
respect of the purchase by the defendants of premises known as Edith Edwards
House, Park Road, Banstead, Surrey, for the sum of £284,284 freehold. The
purchase took place in or about the spring of 1983.
The defendants
by their defence in the action admit the written agreement but say it was
subject to implied terms: first, that the plaintiffs’ conduct would at all
times be governed by the relevant rules of the ISVA. After a slight hiccup as
to which were the relevant rules, it appears that they were those set out in
the society’s year book for the year 1977-78. It is conceded that such an
implied term existed. They also maintained in their defence that there was a
further term to be implied at common law to give business efficacy to the
contract, that the plaintiffs would not act for any party in the transaction in
addition to the defendants or their associated companies and that in breach of
those terms, or one of them, the plaintiffs had acted for a Mr Pitman and a Dr
Madina without the consent of the defendants.
The defendants
maintained by their defence and counterclaim as originally served that by
reason of those breaches they took over the burden of the negotiations with the
vendors of the property as from about November 5 1982, that the plaintiffs’
conduct was unprofessional and unethical in so far as it was likely to result
and did result in an increased interest in the premises with a higher purchase
price having to be paid than would otherwise have been the case and hence a
corresponding increase in the 2% fee claimed by the plaintiffs, and they stated
in that defence and counterclaim that in the premises no fee was payable and,
by the counterclaim, now abandoned, that they had sustained damage as a result
of the said breaches to the tune of £74,284, being the difference between a bid
of £210,000 which they had originally made early in November, which they said
would have fructified, and the ultimate purchase price paid by them of
£284,284.
That
counterclaim has been abandoned, but it is instructive to see how the defence
was first put. The defendants now restrict their defence to the proposition
that the plaintiffs’ breach of duty in acting for Mr Pitman and Dr Madina
without the full knowledge and consent of the defendants was so serious as to
disentitle the plaintiffs to their fees. It is to be noted from the agreed
bundle D1, and from copied extracts from the plaintiffs’ day book P1, that the
plaintiffs were as active on behalf of the defendants in and about the
negotiations for the purchase of the property as, in effect, the defendants
allowed them to be. The defendants took over direct negotiations themselves
with Cluttons, agents for the vendors of the property, in or about the middle
of November, rather later than was alleged in the pleadings, but the day book
P1 demonstrates that the plaintiffs were continuing to act on the defendants’
behalf. Nevertheless, the defendants say that the plaintiffs were not entitled
to their fees.
The matter
came about, as I find, in this way. The defendants and their associated company
AKQ Enterprises Ltd were interested in purchasing large premises in the
Banstead-Cheam area which might prove useful to them in their business of
providing shelter and nursing services for the sick and advising others
thereon. Dr Madina and his partner Dr Kurwa were also interested in buying
property which might be suitable as a nursing home provided that the size and
type of the building suited their purposes and pockets. Mr Pitman,
who was the managing proprietor of homes for the elderly in the Sutton area,
was a possible interested party also. The plaintiffs by their employee, Mr
Vickers, knew about this and were aware of these matters. All these gentlemen
gave evidence before me in the hearing.
The property
ultimately purchased by the defendants was advertised in the national press on
October 27 1982. This was Edith Edwards House School, Park Road, Banstead,
Surrey. Messrs Cluttons, chartered surveyors of Grosvenor Street in London,
were the agents for the vendors and they disclosed details of the property to
the plaintiffs on the understanding that they, the plaintiffs, would not be
entitled to any commission from the vendors or from Cluttons if they introduced
a purchaser. The plaintiffs had to look for their remuneration in this matter
elsewhere and when Cluttons sent details of the property Cluttons had written
on the documents ‘For retained clients only’.
Mr Vickers
proceeded to approach Dr Madina, Mr Pitman and Mr Cole of the defendant
company, who had previously been employed by the plaintiffs for about two
years, from 1975 to 1977 or thereabouts, and was a highly experienced man in
the estate agency world. What Mr Vickers said to these parties came in effect
to this, in my judgment, although no doubt he expressed himself in different
language, particularly to Mr Cole, who literally spoke his own language: ‘I
will disclose the details of this property which might interest you but I am
getting no commission or sub-commission from the vendors or their agents so I
shall have to ask you to sign a document which will entitle us to act for you
if you decide to buy the property and sets out the commission which will be
payable to us if you succeed in purchasing the property and if you wish to go
ahead with purchasing the property we will of course act for you.’
Each signed
the relevant document. Mr Pitman signed it on November 2, Dr Madina on November
3 and Mr Walker, a director of the defendant company, also on November 3. There
is a dispute as to whether Mr Vickers informed each signatory of the existence
and possible interest, or potential interest, of the other signatories, or
potential signatories, as the case may be, for he did not approach them all at
once. I will come to that later. Suffice it to say that in my judgment the
plaintiffs were saying: ‘We will act for you as your agents for the purchase of
this property if you wish. You must not ask anybody else to act for you. If you
purchase the property these are our terms of commission: 2% etc to be payable
if you succeed in a desire to purchase’. I am quite satisfied that the plaintiffs
did not regard the signatories to that document as being under any obligation
whatsoever to follow up the matter but that if they did proceed to negotiate
for purchase they must act through the agency of the plaintiffs and pay the
agreed fees, if successful in purchasing. This in my view was a purely
introductory and preliminary step which envisaged a situation when the
defendants, for example, might take active steps to purchase the property, or
that some other signatory might do so. In fact Dr Madina never did instruct the
plaintiffs to act for him in that sense. When he gave evidence he said: ‘After
seeing the property on November 3’ — I quote him exactly — ‘I had no further
dealings with the estate agents’, for the simple reason that the property was
too big and too ambitious a project for him and his partner. It is in my view
significant that there is no evidence that he ever took any steps to retrieve
his so-called retainer, nor is there any evidence that the plaintiffs felt in
any way aggrieved at his unheralded and unannounced withdrawal from the scene.
I do not believe that the plaintiffs ever acted for Dr Madina within the
meaning of either of the terms which the defendants say ought to be implied
into this agreement.
Mr Pitman,
whose recollections of this and other matters was vague, perhaps understandably
so, and hazy, thought that he might have mentioned to Mr Vickers what figure he
might go to but could not remember giving him any specific instructions to bid
for the property, and indeed no bid was ever put forward by him or on his
behalf. I am entirely satisfied that no situation arose whereby, by acting for
the defendants in the purchase of the property, the plaintiffs created an
actual conflict of interest situation vis-a-vis the other two signatories to
the document dated November 2 1982. I accept Mr Vickers’ evidence that about a
week later Mr Pitman was on the telephone testing out the temperature of the
water and trying to discover the amount of any other bids made and that he was
told by Mr Vickers that he could not possibly divulge to him any bid made by
the defendants. The reason for that was that in Mr Vickers’ mind the plaintiffs
now regarded themselves as acting in and about the purchase of the property
solely for the defendants, whom they knew meant business, because, as is shown
by a letter sent by Mr Cole to Mr Vickers, whom he addressed as ‘Dear Doug,’
the defendants had made a firm bid of £210,000, subject to contract, for that
property. This is what Mr Vickers said in evidence about that conversation: ‘I
did not regard Mr Pitman as our client once we were dealing with the offer from
the defendants’. Again, I do not accept that the plaintiffs acted for Mr Pitman
in this transaction within the meaning of the terms to be implied into the
agreement, or said to be implied into it, at any time. Mr Vickers, Mr Graham
Stansfield, and Mr K W Forbes, a chartered surveyor who gave expert evidence on
behalf of the plaintiffs in his capacity as professional services officer of
the ISVA, accepted, as is indeed obvious when one thinks about it, that an
estate agent cannot act for more than one party when a conflict of interest
situation arises, or may arise if the two clients start bidding against each
other, except in what appears to me to be the unlikely event that each party
agrees to him so acting, or, to put it in more homely language, once you are
definitely acting for a client on instructions to negotiate for the purchase of
a property you cannot in practice act for anybody else without the consent of
all concerned.
The
defendants, who, like I suspect most people in this type of business, are
highly sensitive to the leakage of information, suspected that information was
being leaked in respect of their bids for the property; they had bid £210,000,
as I have stated, and their bid was improved to one of £258,000 on December 3,
and ultimately by means of an informal tender in a sealed envelope, to
£284,284. Mr Walker told me that Cheam and its environs is something of a
village. The buzz gets around; there is a lot of gossip. The defendants’ own
letters betrayed that they were very keen indeed to buy this property. Each
letter to Cluttons making an offer contained an entreaty that they should be
told if the offer proved to be unacceptable so that they could consider bidding
more. So anxious were they to clinch the deal that on December 3 Mr Cole and a
colleague, Mr Trotman, actually visited Cluttons’ offices and saw Mr De
Boinville — who gave evidence before me, which I accept, that this was an unusual
thing — armed with several letters metaphorically up Mr Cole’s sleeve, whereby
he might hoist the offer if necessary or desirable, if it meant finalising the
transaction. There may well have been leakage about the defendants’ bids, it
would not surprise me at all if there was, and it may have come from more than
one source, but one thing is clear on the evidence, that there is absolutely no
evidence that the plaintiffs either deliberately or inadvertently, by a partner
or by any employee, leaked any information confidential to their clients, the
defendants.
The defendants
decided that they would conduct the negotiations themselves direct with
Cluttons because they thought this would be more efficient, there would be less
delay, there would be less chance of leakage of information and, according to
Mr Cole and Mr Walker, because they suspected that the plaintiffs were acting
for others. In fact by then they were not doing so in any meaningful sense of
the term. The defendants never taxed them with the matter because, if I may use
the expression, ‘they did not want to rock the boat’; they did not want
anything to happen which might interfere with their strong desire to get these
premises. Because they undertook the burden of the negotiations (although, as I
have said, the plaintiffs’ documents show that they did all that was required
of them and were ready to do more) the defendants began to harbour and nourish
a grievance that the amount of commission claimed was unreasonably high, and,
because I assume in the defendants’ favour that the counterclaim as originally
framed was a bona fide one, they thought that by acting for other
parties the plaintiffs had caused the price to be forced up and hence the
amount of their commission to get to the substantial amount that it did. So
when the sealed offer of £284,284 carried the day and in due course the
plaintiffs presented their bill for their fees in or about March 1983,
contracts having been exchanged and completion imminent, the defendants were in
no mood to pay it.
By this time
Mr Cole had already been sent, on February 25, to talk to Mr Graham Stansfield,
a partner in the plaintiff firm, about this matter. A note made by Mr
Stansfield of that conversation is as follows:
Phoned re
Edith Edwards School House
that is to say
Mr Cole phoned re Edith Edwards School House
and advised
that contracts exchanged. Wished to see me to discuss a few matters.
Appointment arranged for 4.15 today. Later called: We can erect boards.
Completion March 31. Sale price £284,284. Liaise on newspaper features.
That note did
not represent a precis of all the conversation that took place, as both Mr Cole
and Mr Stansfield agree. Mr Cole certainly
on the premises, there was a conversation too about possible publicity
campaigns in the press, there was some conversation about the wisdom of the
tactical approach of Cluttons to the whole matter in originally pitching the
guide price at the comparatively low sum of £180,000, and there was some
discussion about the plaintiffs’ fees. Mr Cole says that he criticised the
plaintiffs for having more than one retaining client and that as a result the
defendants felt bound to take over the negotiations, doing a lot of extra work,
and that in the circumstances a proportion of the fee ought to be waived. Mr
Stansfield, whom I regard as a most reliable, careful and completely honest
witness, said all that happened was that his former employee or colleague
attempted to beat him down on the fees and tried to put pressure on him by
suggesting that the plaintiffs might have difficulty in enforcing their claim
to fees because the document dated November 2 was signed on behalf of one
company and the purchase of the property would be in the name of another. This
was a thoroughly bad point as well as being an unmeritorious one, because a
glance at the document shows that the fee was payable if an associated company
completed. When Mr Cole was shown the document in question he abandoned that
argument. When asked ‘Were you put up to this by Mr Walker?’ he smiled.
However, I am not prepared to find that Mr Walker was a party to that unsavoury
manoeuvre. I believe the reason why it does not find its way into the book is
that Mr Stansfield did not bother to put it down; he regarded it as a hopeless
attempt to beat him down on his fees, and I do not believe that Mr Cole at the
meeting made any criticism of the conduct of the plaintiffs in this matter.
On March 21 Mr
Walker spoke to Mr Stansfield on the telephone and took a different tack,
suggesting on behalf of the defendants, as I find, for the first time that the
plaintiffs had acted unethically in acting for more than one party as they had
signed forms from two other applicants. Mr Stansfield’s response at that time,
and his response till as recently as yesterday when he was giving evidence, was
that in his view his firm had not acted unprofessionally in any way as no other
party evinced any firm intention in the matter and no conflict situation arose
even on the horizon. Mr Stansfield’s note of the conversation I believe to be
an accurate one and that states that as soon as the plaintiffs realised that
the defendants were interested in purchasing the property and negotiating for
it they had acted for the defendants and no one else and had not divulged to
any other party any of the defendants’ business. He then consulted Mr Forbes to
see if his reading of the situation could be sustained and after speaking to Mr
Forbes he refused to reduce his fees.
Mr Vickers
gave evidence for the plaintiffs. He was not a good witness in the lawyers’
sense of the term in so far as evincing any natural aptitude for that exacting
role, but he impressed me as being a most honest one. I was impressed by the
fact that at one time he thought that Mr Cole attended a meeting at the
premises to view on November 3. Particulars of the reply and defence to
counterclaim were delivered nailing the colours of the plaintiffs to that mast
and a certain amount was made of this during the trial. As soon as Mr Vickers
realised he had been in error he withdrew the suggestion that Mr Cole had been
present and apologised. I am entirely satisfied that this was the reaction of
an honest man and not a ploy to try to get favour with the court. He told me
that he told Mr Cole on November 2 that he was contacting two of their clients,
Mr Pitman and Dr Madina. This is what he said:
Mr Cole said
if the premises were right he would discuss fees with Mr Walker. He phoned back
and said they wanted to look at the premises. I told him that a meeting had
been set up, or a view had been set up with Cluttons for the next day. I told
him that I had introduced the property to two others who would be wanting to
view that day. Mr Cole said ‘Who are they?’ I said ‘Mr Pitman and Dr Madina’. I
said I had introduced the property to them as clients. He said that the
defendants were keen and they could come at the same time the next day.
He said:
I told Mr
Cole about Dr Madina and Mr Pitman. He said he had no objection to them being
present. He said he knew of them.
Mr Cole says
that he was never told any such thing and that he was unaware of the interest
of Dr Madina and Mr Pitman, that he was unaware that they were also clients.
Having seen
and heard the rival contestants on this issue, I prefer the evidence of Mr
Vickers who, as I say, was an honest witness and a reliable one. I do not
believe that Mr Cole was at all surprised to hear that these two other clients
were interested parties and were coming to the meeting, and indeed I think he
might have thought that it was such a commonplace matter that he never even
bothered to tell Mr Walker about it. Mr Vickers also said that he believes that
he told Dr Madina and Mr Pitman about it too. I am not so sure that he did.
After all, Doug Cole was an old friend of his and a fellow estate agent, or
worked in an estate agent’s office, and he may well have told him more about
the matter, I do not know. He may well have told Mr Pitman and Dr Madina as
well. Dr Madina was very vague about it. He knew there were other interested
parties there but I do not think it really bothered him. Mr Pitman’s attitude
is coloured by some hostility to the plaintiffs, whom he regarded as having
exhibited some dilatoriness in their dealings with him, unreasonably so in my
view because I am quite satisfied that he never gave them any firm
instructions. Indeed, there is some irony in a situation where the defendants
say they need not pay because the plaintiffs were acting, contrary to their
interests, for Mr Pitman, and Mr Pitman criticises the plaintiffs because they
were not acting for him. However that may be, I have no doubt that Mr Cole knew
that when Mr Walker visited the premises on the 3rd (Mr Cole could not do so
because of a previous engagement) there were going to be, or likely to be, two
other clients of the plaintiffs viewing as well. I am not satisfied that Mr
Walker knew that. But whether Mr Cole was a director of the defendant company,
as Mr Walker says, or whether he became so later, he had sufficient standing in
the company for his knowledge to be that of the company.
These, then,
are the basic facts of the matter either agreed or found by me on the written
and oral evidence. In the circumstances the defendants resist the plaintiffs’
claim on the basis that from the moment when the form was signed they were
fully active as agents in and about the purchase of the property and that a
duty arose there and then, under the rules and under the implied term at common
law, to disclose to each signatory the full position, interest and identity of
the others, and that they should not have continued to act for any of them
except with full consent. They say that if Mr Walker had known of the existence
and interest of Dr Madina and Mr Pitman he would not have signed the document.
I do not accept that, although I do accept that in hindsight Mr Walker may have
convinced himself of it. This is all to some extent speculative, but it seems
to me the probabilities are that if Mr Walker had said ‘I am not signing this
if you have got two other clients’, and had convinced the plaintiffs, as was
indeed the fact, that he really meant business, they would have acted for him
and acted for him alone, as indeed transpired. The defendants say that there
was a duty to disclose and that the breach of it was so serious a matter that
it went to the root of the contract so as to disentitle the plaintiffs to their
fees.
Since I have
found that Mr Cole knew perfectly well that Mr Vickers had two other clients
viewing the property with the defendants or likely to view the property with
the defendants on November 3 and knew of the existence of Mr Pitman and Dr
Madina, this really disposes of the defence in this case and the plaintiffs are
entitled to judgment. However, in deference to the cogent arguments ably
addressed to me by both counsel, I will approach the case on the hypothesis
that the disclosure was not made to the defendants and consider the position
which would have arisen in that contingency, in particular: 1. Were the
plaintiffs in breach of an implied term in failing to make full disclosure of
the existence and position of Dr Madina and Mr Pitman to the defendants? 2. If so, was that breach so grave as to
disentitle them to their commission? As
to (1), it is necessary to look at the relevant rules of the society, which are
conveniently set out in the amended defence and counterclaim under the general
heading 1(i):
It is at all
times the first duty of a member to protect and promote the legitimate and
ethical interests of his client to the utmost of his ability consistent with a
professional standard of behaviour towards the other parties in any
transaction. (ii) No member shall act for two parties in the same transaction
save with the full knowledge and consent of both parties.
It seems to me
that if anybody acts as is forbidden by (ii) he is also in breach of (i). No
doubt (ii) is set out separately because to put oneself in the position of
acting, for example, for vendor and purchaser is a temptation to which many
have fallen and is an obvious example of getting into a conflict of interest
situation. There has indeed been some discussion as to whether (ii) does deal
with the position whereby if an agent acts for two competing parties, eg two
purchasers as opposed to vendor and purchaser, he is in breach. I think that he
is, and even if he was not he would be in breach of (i) if he acts for both
parties in the same transaction in circumstances which might lead to a
conflict of interests. As I say, the plaintiffs accept that a term was to be
implied that the plaintiffs’ actions would be governed by the rules prevailing.
I have no doubt that it would be a breach of those rules for an agent to act
for more than one party who had evinced a definite determination to bid for the
purchase of property, and indeed the evidence for that is really not in
dispute, unless with full disclosure to both parties, if there were two, they
nevertheless consented to his so acting, which I have said seems to me to be
normally a most unlikely event to occur. When did the duty arise to make that
disclosure: before asking for Mr Walker’s signature; immediately after it; and,
if so, when? On this topic, which
involves the construction of the rules, I have been helped by the evidence of
Mr Stansfield and Mr Vickers and by the expert evidence of Mr Forbes. I have
come to the conclusion that that duty arises as soon as a client demonstrates a
real intent to buy; for example, in this case, takes up the option afforded to
him in the written agreement and, in effect, instructs the agents to go ahead
with the purchase. At that moment the agents must not act for any other party
unless they make full disclosure of it and get permission to do so. I do not
think that that stage had been reached in this case on November 3, and I do not
believe that the plaintiffs were in breach of the professional rules. On a
proper construction of the written document of November 2, signed by Mr Walker
on November 3, the defendants, in consideration of being given details of
property in which they might be interested, were bound to instruct the
plaintiffs to act if indeed they decided to purchase the property and not in
any other circumstances. The further and better particulars of the reply to the
defence and counterclaim put the point aptly where it is said:
Mr Vickers, a
manager employed by the plaintiffs, telephoned a Mr Cole and informed him there
was a property for sale.
I paraphrase:
Mr Vickers
informed Mr Cole: (1) that the plaintiffs would require the defendants to retain
the plaintiffs in the event of the defendants deciding to purchase the property
and that the plaintiffs’ fees would be 2% of the amount of the purchase price
plus VAT; and (2) that Mr Vickers had already contacted two other prospective
clients, namely Mr Pitman and Dr Madina.
It may well be
that in hindsight it would have been prudent as well as courteous for the
plaintiffs to have disclosed to Mr Cole or to Mr Walker what the position was
with regard to Mr Pitman and Dr Madina (I think that Mr Stansfield probably in
his heart of hearts will accept that now), just as it would have been I think
prudent and sensible to have told Mr Pitman formally that they were no longer
concerned with any possible interest he might have in the premises when he
spoke to them a few days after November 3, but I do not believe they were in
breach of their professional duty in the circumstances. I do not think that
they did act for Mr Pitman or Dr Madina within the meaning of the rules or the
implied terms said to be in the contract. Mr Forbes said this:
It would be
prudent to let everybody know what is happening even if, as in this situation,
a conflict did not arise. A man who enters into a retaining agreement such as
that set out in the agreed bundle may be or may become actively interested.
There is no duty to disclose at that stage unless the client has shown active
interest. Then the agent must not act for the others without consent.
By ‘active
interest’, as I say, he is evincing a real determination to instruct the agent
to act for him in and about the matter. It would be strange if the plaintiffs
in a situation like this in effect had to play a game of a sort of musical
chairs, pirouetting, asking one possibly interested client, waiting to see how
interested he was, then, finding that he was not, pass to a second, possibly to
a third and fourth before finding anybody who was really interested and by
then, contrary to the plaintiffs’ interest and the interest of that client, the
property might have gone elsewhere. I think that the construction I have put on
the rule is a sensible one and helps to give business efficacy rather than
remove it.
As for the
common law position, it was pleaded as being an implied term of the agreement
to give business efficacy thereto that the plaintiffs would not act for any
party in the transaction in addition to the defendants or their associated
companies. Counsel for the plaintiffs, Mr Marsh, said that that was much too
wide, and I agree with him. For example, it does not even accept that they
would be entitled to act provided there was disclosure and consent. However
that may be, I do not think there is any important difference here between the
term to be applied at common law and under the rules, and in any event I do not
accept that the plaintiffs did act within the meaning of any term to be implied
for anybody in addition to the defendants or their associated companies.
Supposing I am
wrong, however, and not only, contrary to my findings, did the plaintiffs fail
to give full disclosure to the defendants of the possible interest of Mr Pitman
and Dr Madina but also they were in breach of the implied terms or one of them.
If so, was that breach sufficiently serious to disentitle them to their
fees? If they were in breach it would be
because the principle of disclosure is so potentially important that it must be
imported into this written agreement even at that early stage. That
demonstrates the importance of the principle but not necessarily the
seriousness of the breach. I entirely acquit the plaintiffs in this case of any
mala fides whatsoever in their whole conduct of this affair and from the
authorities which have been cited to me this is an important, possibly crucial,
point. My attention has been drawn in particular to the case of Andrews
v Ramsay & Co [1903] 2 KB 635, to Hippisley v Knee
Brothers [1905] 1 KB 1, to Keppel v Wheeler [1927] 1 KB 577,
to Bowstead on Agency, and to a recent case of Robinson Scammell
& Co v Ansell reported in [1985] 7 CL 466.* The general principle which seems to me to
emerge from these authorities is that an agent who has acted in good faith is
normally entitled to his commission for work done. There is clearly a world of
difference from the situation that obtained in Andrews v Ramsay,
where an agent took a secret profit, and this case, or from a situation where
an agent otherwise sets out to act against his principal’s interest, although
circumstances I think may obtain where a breach made even in good faith may be
so grave as to go to the root of the contract and disentitle the agent to his
fees. The facts in this case do not, in my judgment, come into that category
and in my view the plaintiffs are entitled to their commission.
*Editor’s
note: This case is fully reported at [1985] 2 EGLR 41; (1985) 275 EG 369.
An alternative
claim that the defendants were entitled to damages for such breaches really was
abandoned in this case when the counterclaim was abandoned. Mr Haines submitted
at one stage that he was entitled to a diminution, to pay an introductory fee
only of 1% perhaps, by reason of the breaches of the implied term, but he was
constrained finally to concede that he could not succeed in that context.
Accordingly
there must be judgment for the plaintiffs for the amount claimed.
Judgment was
given for the plaintiffs for £8,536.62, including interest, and for costs. The
defendants’ counterclaim for damages had been abandoned.
