Agency — Sole letting agency — Dispute between two property companies — Appointment of plaintiff company as sole letting agent — Whether breach of agreement — Preliminary issue as to liability
litigation concerned an agreement between two property companies — The
agreement provided that, in consideration of the plaintiff company’s
introducing a leasehold property to the defendant company, the latter
irrevocably appointed the former sole letting agent of rooms on certain floors
of the property for a period of 12 months from the date of completion of the
acquisition — This agreement was slightly varied by a supplemental agreement,
made a few months later, which provided that the 12-month period should run
from the date of possession of the floors in question instead of the date of
completion of the purchase — The agreement contained a vital clause by which
the defendants agreed not to assign the property without first procuring that
the proposed assignee should enter into a sole letting agency agreement similar
to that entered into by the defendants with the plaintiffs — Subsequently,
however, the defendants entered into a contract to sell the leasehold property
to a third company and gave the plaintiffs notice purporting to terminate their
appointment as sole letting agents — This resulted in the present action by the
plaintiffs, claiming initially specific performance and damages for breach of
contract, but subsequently damages only
defendants relied on two submissions — The first was a claim that the contract
was revocable — They drew attention to the fact that the word ‘irrevocably’
appeared in the original agreement but not in the supplemental agreement — This
argument was dismissed by the judge on the ground that the latter agreement was
directed to varying the commencement of the 12-month period and not to the
revocability of the sole letting agreement
argument was that the defendants had agreed not to assign without procuring a
sole-letting-agency agreement by the assignee, but that there had only been a
contract to sell to the third party, not a completed assignment — This argument
was also rejected by the judge on the ground that the contract amounted to an
assignment in equity — The case of Oakacre Ltd v Claire Cleaners (Holdings)
Ltd, cited by the defendants, was distinguishable
defendants were accordingly liable for breach of contract and an inquiry as to
damages was ordered
The following
case is referred to in this report.
Oakacre
Ltd v Claire Cleaners (Holdings) Ltd [1982]
Ch 197; [1981] 3 WLR 761; [1981] 3 All ER 667; (1982) 43 P&CR 48
The plaintiffs
in this case were Folioshield Ltd and the defendants Pleamere Ltd. The property
was a leasehold property at 52 Evelyn Gardens, London SW7. Both parties were
property companies. The present proceedings were concerned only with the
preliminary issue of liability.
Stephen
Lennard (instructed by Sherwin Oliver, of Fareham) appeared on behalf of the
plaintiffs; R G Lamb (instructed by Julian Holy) represented the defendants.
Giving
judgment, His Honour ANDREW BLACKETT-ORD said The plaintiff and the
defendant in this case are both property companies. The plaintiff found a
property at no 52 Evelyn Gardens (a leasehold property) which it arranged for
the defendant to buy on the footing that the plaintiff would have the right to
let the rooms on certain floors. The plaintiff agreed to pay £17,500 for that
right.
The background
is said to be that the plaintiff was seeking to obtain vacant possession of
another property which it owned in Vicarage Gate in order to realise it at a
profit, and it hoped, by this arrangement with the defendant, to be able to
rehouse some of the Vicarage Gate tenants. So the defendant agreed to buy the
leasehold interest and, by an agreement of the same date, the parties entered
into the sort of arrangement which I have mentioned.
The agreement,
dated April 24 1985, was made between Pleamere Ltd of the one part and
Folioshield Ltd of the other part, and I think I can go straight to clause 1:
In consideration
of Folioshield introducing Evelyn
— she is not a
lady but is the abbreviated form of 52 Evelyn Gardens
—
to Pleamere,
and in consideration of Folioshield’s agreement to pay the sum of £17,500 to
Pleamere to assist in the purchase of Evelyn, Pleamere hereby irrevocably
appoints Folioshield as its sole letting agent of all those rooms on the ground
mezzanine and first floors of Evelyn for a period of 12 months from the date of
completion of Pleamere’s purchase.
I think I need
not read any more of that clause. In clause 2 Pleamere, I think, does little
more than confirm the agreement in clause 1. Then clause 3:
Pleamere
hereby agrees and undertakes that it will not assign, underlet, part with or
otherwise deal with Evelyn without first procuring that the assignee, under
lessee, purchaser or otherwise, shall enter into a sole agency agreement with
Folioshield in terms similar to this agreement.
And in clause 4
there is a provision for an extension of the agreement in certain circumstances
for a further 12 months. Although there are a number of provisions in the
agreement, I do not think I need read any more.
There was a
variation of the terms of purchase between Pleamere and the vendor of Evelyn,
and to meet the slightly changed circumstances Pleamere and Folioshield entered
into a supplemental agreement on August 2 1985. It is quite short, so I will
read most of it. It begins reciting:
Whereas:
1. This agreement is supplemental to an
agreement dated 24th April 1985 (the principal agreement) made between the same
parties as the parties hereto, whereby Folioshield agreed to assist Pleamere in
its purchase of 52 Evelyn Gardens in consideration of Pleamere granting a sole
agency to Folioshield to let the rooms on the ground, mezzanine and first
floors of the said property.
2. In this agreement the words and expressions
herein contained have the same meanings as described (sic) to them in
the principal agreement.
3. The contract referred to in the principal
agreement has, by an agreement of even date made between the parties to the
contract, been varied and the parties hereto have agreed to vary the principal
agreement to accord with the variations to the contract.
Now it is
agreed:
1. Clause 1 of the principal agreement shall
be deemed to be varied so that Pleamere shall be deemed to appoint Folioshield
as its sole letting agency of all those rooms on the ground, mezzanine and
first floors of Evelyn for a period of 12 months from the date that possession
of the ground, mezzanine and first floors of Evelyn are given to Pleamere,
pursuant to the provisions of the contract as amended by the supplemental
agreement on even date herewith.
I pause to
comment that the change is that the 12 months is to run not from the date of
the completion of the purchase but from the date of possession of these various
floors being obtained.
Clause 2 deals
with the payment of the purchase price, and I need not read that. Clause 3:
Pleamere
agrees and undertakes to Folioshield to comply in all respects with its
obligations contained in the contract as amended by the agreement of even date.
Clause 4:
Save as
herein varied, the principal agreement shall remain in full force and effect.
There was
considerable delay over the completion of the purchase by Pleamere. There were
difficulties with its vendor and the landlords, which I need not go into. They
were, however, overcome and on May 21 1986 Pleamere signed a contract selling
52 Evelyn Gardens to a company called Idlevale Ltd for £120,000. The next day
the defendants, by what is probably their alter ego, a Mr Malcolm
Fraser, wrote to the plaintiff’s solicitor a letter of May 22 1986, which says
in the fourth paragraph:
It is clear
that Folioshield are anxious to determine any relationship that they may
hitherto have enjoyed with my company and, on balance, I share that view. In
the circumstances I should be grateful if you would kindly accept this letter
on behalf of Folioshield Limited as a notice of revocation of the appointment
of Folioshield Limited as my company’s sole letting agent within the
contemplation of the agreements between us on 24th April 1985 as subsequently
amended.
That led to
the issue of a writ in the present proceedings by Folioshield, claiming
initially specific performance and damages, and now damages. The matter of
liability has been directed to be tried as a preliminary issue.
The defendant,
Pleamere, says, first, that the agency contract was revocable by it — I think
at will — and, therefore, the letter of May 22 was not a breach of it. It
refers to the first paragraph of the agreement of April 24 1985, which says:
Pleamere
hereby irrevocably appoints Folioshield as its sole letting agent.
And it
compares that with the first paragraph of the supplemental agreement of August
2, which provides:
Clause 1 of
the principal agreement shall be deemed to be varied so that Pleamere shall be
deemed to appoint Folioshield as its sole letting agency of all those rooms on
the ground
— and so on —
for a period
of 12 months from the date that possession . . . [is] given to Pleamere. . .
In the
supplemental agreement the word ‘irrevocable’ or ‘irrevocably’ does not appear.
It is said, on behalf of the defendant, that that means that the agreement had
ceased to be irrevocable as a result of the variation and was, therefore,
revocable and was duly revoked. But, in my judgment, it is quite clear that the
supplemental agreement, as appears indeed from its terms, was intended to vary
the date of the commencement of the 12-month period and was not directed to the
question of revocability or irrevocability; and, in any event, looking at
clause 1 of the supplemental agreement, it specifies that the agency is to be
for a period of 12 months and does not, in terms, say ‘subject to revocation’
by either side during that period. I do not accept the argument for the
defendant that the result of the variation was to make the principal agreement,
as varied, revocable in the manner contended for.
Second, the
defendant says that there has been no breach of clause 3 of the principal
agreement, which is the one precluding Pleamere from making any assignment or
underletting, parting with or otherwise dealing with Evelyn without first
procuring an agency agreement with Folioshield from the purchaser. All, it is
said, that has been done is that Pleamere has contracted to sell the property
to Idlevale and there is no evidence of any completion, and it is said that the
restrictions are applicable only to completed transactions. But the contract
amounted to an assignment in equity, subject of course to the usual conditions,
and could have been — and, I understand, was — protected by caution. So, in my
judgment, it did amount to a breach by Pleamere of clause 3.
I was referred
to the case of Oakacre Ltd v Claire Cleaners (Holdings) Ltd, a
decision of Judge Mervyn Davies QC (as he then was), sitting as a judge of the
Chancery Division, and reported at [1982] Ch 197, on the question of damages
and the liability of the defendant for damages. But that was a case in which
the writ was issued before there was any breach of contract. In the present
case the letter of May 22 1986 was a clear repudiation by the defendant of its
obligations. Although it was not accepted as such at once, it gave rise to
these proceedings in which the plaintiff claimed, as it was entitled to do,
specific performance and also damages.
I do not
accept that the claim for specific performance would have been put out of court
by the nature of the relief sought, which was an order requiring the defendant
to permit the
Plaintiff to carry out its duties as the Defendant’s sole letting agent for the
rooms on the ground, mezzanine and first floors of the property in accordance
with the contract of the 24th April as varied on the 2nd August.
(It says ‘1989’,
but that obviously is a slip.) I think
that the court would have had jurisdiction to make such an order and that it
was, in any event, open to the plaintiff to make its claim in the alternative
and to decide later which avenue to pursue.
In my judgment,
therefore, the defendant is liable for breach of the contract of April 24 1985
as varied on August 2 1985, and there should be an inquiry as to damages. I
should say that that inquiry will not be limited in any way.
