Readers are
unlikely to need reminding of the prominence given during the past few years to
professional negligence actions involving valuers and, to a slightly lesser
extent, surveyors. Both the number of reported claims and the awesome amounts
of money which are sometimes at stake have helped to ensure that the legal
spotlight has kept shining brightly on this side of the property world. Indeed,
so intense has been that spotlight that it would be all too easy to forget that
surveyors and valuers are not the only professionals involved in property
transactions. Agents and intermediaries of one type or another usually have a
part to play in arranging deals in the residential and commercial sectors, and
they, too, are under a legal obligation to carry out their clients’
instructions with reasonable care and skill.
Negligence by
estate agents and other middlemen may have been somewhat overshadowed recently,
but it has not disappeared altogether. Three recent cases indicate that in this
area, as in so many others, clients who are dissatisfied with a professional
person’s performance are increasingly ready to take their complaints to court.
other agents’ particulars
The first of
these cases, Hunt v Beasley Drake [1995] NPC 35, arose when the
defendants, who knew that the plaintiff was interested in investing in
property, informed him that certain potentially suitable properties were
available and sent him particulars (issued by the vendors’ estate agents) which
included details of floor areas and rents. As so often happens in such
circumstances, the defendants were not retained by the vendors of the relevant
properties, and they accordingly sought a fee from the plaintiff in the event
of a successful introduction. The plaintiff wrote to the defendants, agreeing
to pay this fee on condition that they would give an ‘assurance’ that the
figures in the particulars were correct. The defendants replied to this letter,
stating that they had inspected the properties concerned and confirming the
figures given. Unfortunately, the floor areas of two properties had been
overstated; the defendants’ inspection of one had negligently failed to
discover this and they had not inspected the other property at all.
In dealing
with the plaintiff’s claim, the judge acknowledged that, in normal
circumstances, a purchaser’s agent would not be expected to check the figures
put out on behalf of the vendor. But in this case such a duty had been
expressly undertaken in return for a fee, and the defendants were accordingly
liable for the reduction in price which the plaintiff would have been able to
negotiate for these properties.
eye on resales
The second
case, Berkowitz v MW (St John’s Wood) Ltd [1995] 1 EGLR 29;
[1995] 14 EG 138, arose out of the sale of a flat in Maida Vale in early 1990.
The plaintiff acquired this flat, which was on a long lease, in September 1989
and, having carried out various renovation works on the property, instructed
the defendant estate agents (who traded under the name of Winkworths) to put it
on the market. The defendants were unable themselves to generate any serious
interest in the property; however, a subagent whom they had appointed
introduced a Mr Sabargi, who viewed the flat for a Mrs Bhoutross and
subsequently made an acceptable offer on her behalf.
The lease on
which this flat was held required the landlord’s consent (which was not to be
unreasonably withheld) for an assignment, and the defendants accordingly sought
references for the purchaser. When these arrived from the subagents, the defendants
simply passed them on to the landlord’s solicitors without reading them. Had
they done so, they would undoubtedly have noticed that the references related,
not to Mrs Bhoutross, but to a Miss De Brovolska, of whom they knew nothing.
This discrepancy was, in fact, picked up by the landlord’s solicitors, who
asked the defendants to investigate. However, the solicitors’ request arrived
just as negotiations with Mrs Bhoutross’ solicitors reached crisis point (over
their demand for a reduction in the price) and it was unfortunately overlooked.
In the event, therefore, contracts were exchanged with Mrs Bhoutross at a price
of £210,000.
As the sale
approached completion, the normal conveyancing procedures revealed to the
plaintiff that the flat had been resold by Mrs Bhoutross to Miss De Brovolska.
They also revealed that the price at which this resale had taken place was
£395,000! The plaintiff thereupon turned on the defendants, alleging that they
should have alerted him to what was going on and that, armed with that
knowledge, he would have been able to negotiate a substantially higher price
for the property.
The trial
judge ([1993] 2 EGLR 39) held that the defendants were not negligent in passing
on the purchaser’s references to the solicitors without reading them, but that
they were negligent in failing to act on the solicitors’ request to find
out who the purchaser was to be. The Court of Appeal, however, took a more
charitable view of the agents’ conduct. According to Hoffmann LJ, the
circumstances in which that request was received, notably the fact that
negotiations appeared to be falling through, provided a reasonable excuse for
the defendants’ inaction.
The
defendants were no doubt delighted to be thus absolved from the charge of
negligence. In practical terms, however, it made little difference to the
outcome of the case. This was because the Court of Appeal agreed with the trial
judge’s finding that, even if there was a breach of duty, it had caused the
plaintiff no recoverable loss.
This
finding, which might at first sight appear somewhat surprising, was based on
the fact that the ‘resale’ of the property to Miss De Brovolska was in truth an
entirely bogus transaction, created for the sole purpose of defrauding the
mortgagees (Eagle Star) out of a large sum of money. The trial judge concluded
that, if the defendants had indeed uncovered the truth about the resale, it
would immediately have collapsed. To this the Court of Appeal added that ‘it
would be wrong to award damages to the plaintiff as compensation for being
deprived of the right to share in what turns out to have been stolen money’.
leases
The third of
the recent cases in this area, Candle Services Ltd v Warren Reid
Meadowcroft [1995] EGCS 8, arose out of the plaintiffs’ decision in 1991 to
move their offices out of London. This decision was based on advice from the
defendant agents to the effect that a rent review on the property, which was
due the following year, was likely to lead to a steep increase in the
plaintiffs’ rent. As things turned out this did not happen but, with the
collapse of the property market, it proved impossible for the plaintiffs to
find an assignee for the lease. The plaintiffs ultimately negotiated a
surrender of the lease at a reverse premium of £800,000, and sued the
defendants for their advice.
Having
carried out a detailed review of the evidence, the judge concluded that there
was no substance in the plaintiffs’ allegations. The defendants’ advice to
leave London was perfectly sound and sensible at the time it was given; the
subsequent catastrophic fall in the market was not something which a reasonably
competent agent would be expected to predict. Nor were the plaintiffs’ other
complaints (as to the way the defendants handled negotiations for their new offices)
any more successful. The evidence showed that the rent which they had
negotiated was a perfectly reasonable one and, moreover, that the ‘onerous’
lease terms about which they had failed to warn their clients were not really
onerous at all. As a result, while the plaintiffs were quite entitled to
dispense with the defendants’ services (an occupational hazard for estate
agents), they were not entitled to claim damages from them for breach of duty.
