Estate agents’ claim for commission fails — Instructions to agents to find an assignee of a lease of business premises at a premium in excess of £20,000 and at a rental of £10,000 a year — Potential purchaser found at £24,000 — Agents’ employee then alleged that a third party had intimated that there was another purchaser who might be prepared to offer more — Vendors agreed that they would pay the third party, if his purchaser completed, a commission equal to half of any excess over £24,000 or the agents’ scale fee, whichever was the smaller — Lease purchased for £29,000 by a firm who had in fact been one to whom the agents had sent the initial particulars — Agents claimed commission for themselves of £2,450 and also claimed £2,450 on behalf of the third party (the scale fee being less than one half of £5,000) — Suspicions were aroused in the minds of the vendors by various circumstances and they refused to pay the commission claimed on the ground of breach of fiduciary duty by the agents — During the proceedings the claim on behalf of the third party, who had not been identified, was dropped — Judge found that the agents were in serious breach of their fiduciary duty to their principals by seeking to extract a large sum of extra commission to which they were not entitled — Agents accordingly were not entitled to any commission at all on the transaction — Judgment for vendors with costs on common fund basis
This was an
action by Ian Scott & Co, estate agents, of 20 Berkeley Street, London W1,
plaintiffs, against Medical Installations Co Ltd, defendants, for commission in
respect of the disposal of a lease of one floor of premises at 25 Buckingham
Palace Road, London SW1, on the instructions of the defendants.
Miss J Beale
(instructed by Manches & Co) appeared on behalf of the plaintiffs; Miss P
Baxendale (instructed by Herbert Oppenheimer, Nathan & Vandyk) represented
the defendants.
Giving
judgment, JUDGE STABB said: In this action, the plaintiffs, Ian Scott & Co,
a firm of estate agents carrying on business at 20 Berkeley Street, London W1,
sought by their writ issued in January 1980 to recover from the defendants the
sum of £5,267.50, made up of their own commission of £2,450 and an equal sum
representing the commission of a third party, together with value added tax.
That sum of £5,267.50 was subsequently reduced to £4,867.50 owing to what was
said to be an error of £700 in the computation of the third party’s commission.
At the hearing, Miss Beale, on behalf of the plaintiffs, abandoned the claim
for the commission alleged to be due to the third party, because in September
1980 the third party was said to have indicated that he was no longer asking
for the money which was said to be due to him.
The story, as
related by Mr Rodman, an employee of the plaintiffs, who had the conduct of the
matter on their behalf which gives rise to this claim, can be briefly
summarised as follows. The defendants wished to dispose of their lease of one
floor of premises at 25 Buckingham Palace Road, SW1. They instructed the
plaintiffs to find an assignee of the lease on payment of a premium in excess
of £20,000, and at a rental of £10,000 a year. The plaintiffs found a buyer at
a figure of £24,000, which was acceptable to the defendants, but at that moment
a third party contacted them indicating that he knew of a buyer who might be
prepared to purchase the lease for more and asking whether, if he revealed the
name and the purchase went through, he could expect a commission. Mr Rodman
reported this to the defendants, who agreed to pay this third party a
commission equal to half the amount of the excess over and above the £24,000
for which the lease was sold, or the estate agents’ scale fee, whichever was
the lower. This was reported to the third party, who thereupon revealed the
name of the interested buyer, who eventually purchased the lease for £29,000.
This was £5,000 in excess of the original offer of £24,000. In the result, the
plaintiffs presented the defendants with an account of their commission
amounting to £2,450 based upon the RICS scale of fees, and £2,450 payable to
the third party, since half the excess of £5,000 would have been more than the
scale fee.
On that bare
statement of the facts there would seem to be nothing untoward, and indeed the
defendants were happy with the outcome, since they were to receive £29,000 less
the double commission of £4,900, that is some £24,100, as against £24,000 less
the one commission of the plaintiffs of £2,450, which would only have been some
£21,550, so that they would be £2,550 better off. But when they received a copy
of the third party’s account, their suspicions were aroused, mostly because the
account was on the printed notepaper of Misty Days Management Ltd, who turned
out to have been business management agents for musicians, who knew nothing of
the transaction and who had never heard of the purchasers, who equally had
never heard of them. In the light of this, the defendants had reason to doubt
the integrity of the plaintiffs, whom they had instructed to act as estate
agents on their behalf, and who accordingly owed them fiduciary duties of
various kinds. When in January 1980 the plaintiffs commenced this action to
recover the double commission, the defendants refused to pay on the ground that
the plaintiffs were in breach of those fiduciary duties, and, indeed, by a late
amendment, alleged that the plaintiffs had acted fraudulently.
Having now
heard what I regard as the quite unacceptable account of the events as given by
Mr Rodman, the young employee who had the conduct of this transaction on behalf
of the plaintiffs, I am driven to the conclusion that not only were the
plaintiffs, as agents, in breach of their fiduciary duties towards their
principals, the defendants, but that his whole account of the alleged events
smacks of fraud.
This is his
account. At the beginning of August his firm were instructed to find a buyer of
the lease, and one finds, in a letter dated August 2 from the defendants to Mr
Rodman at the plaintiff firm’s address, a letter which reads as follows:
I refer to our
previous correspondence on the lease of the above property and your valuation
last year of some £10,000. It now seems unlikely that our two direct contacts
are interested in taking over this property, and we therefore wish to put the
offices and suite on the market. I am enclosing a copy of the lease.
Before I can
give you instructions to proceed with the marketing of these offices I would be
grateful if you could telephone me advising me of your terms of business.
On August 8
one finds a letter addressed to the defendants over the signature of Mr Rodman,
which reads as follows:
Following our
telephone conversation, I write to confirm and thank you for your kind
instructions for my company to act on your behalf in the disposal of your
offices held in the above. I confirm we are to invite premium offers in excess
of £20,000 for the benefit of your lease, fixtures and fittings and all the
furniture, for your lease which expires on August 15 2002, which carries a rental
of £10,000 a year.
I confirm
that our fees will be in accordance with the scales as laid down by the Royal
Institution of Chartered Surveyors.
He enclosed a
set of letting particulars for the defendants’ attention.
Having
received those instructions. Mr Rodman then set about to draw up particulars of
the premises under the lease. He circularised various prospective customers and
in particular circularised all the other tenants who were in that same
building, sending each of them particulars of these premises, and among those
tenants, be it noted, was the ultimate purchaser. Messrs Watermeyer Legge, a
firm of
estate agents who might be interested.
Mr Rodman says
the chronology of the events that followed was this. First, an offer from a
concern known as Wedge International through some estate agents known as Clive
Lewis & Partners, and that offer was in the sum of £24,000. He says he then
informed Mr Hatfield of the defendants, who said that the offer was acceptable.
But within 24 hours of that, he said he had a phone call from a man who called
himself Peters, who said that he knew someone who would be prepared to pay more
than £24,000. It apparently seems that Mr Rodman had disclosed to this
gentleman on the telephone that that was the offer that had been received up to
that time. Mr Peters asked whether, if the person that he knew of subsequently
purchased, he, Mr Peters, could expect some commission. Mr Rodman says that he
told him that he would enquire of his clients and see what they were prepared
to do. Accordingly, he says that he then phoned Mr Hatfield again, told him
that a person or a party had made this proposition, and Mr Hatfield agreed to
pay half the excess or the scale fees, whichever were the lower, so that they,
the defendants, would in any event derive some benefit.
I pause at
this juncture to say that Mr Rodman could not have let Mr Peters know the
result, because he did not then or subsequently ascertain, nor has he to this
day ascertained, who Mr Peters was, where he lived or worked, or what was his
phone number. He just had to wait for Mr Peters to ring back.
Mr Rodman said
that he then told Wedge International that they would have to make a higher
offer, or at least make their highest offer, and in the result, by letter dated
August 23, they did send in another offer which was higher, namely in the sum
of £25,500. Then Mr Rodman said Mr Peters phoned back and he was told about the
commission agreement that the defendants had reached with the plaintiffs, and
Mr Peters then revealed his prospective purchaser as being Watermeyer Legge.
One would have thought that Mr Rodman’s immediate reaction would have been to
say that he had already introduced Watermeyer Legge to this proposal to acquire
the lease of these premises, but not a bit. He merely sent Messrs Watermeyer Legge
another set of particulars, which he had already sent them previously, and made
no enquiries of them about Mr Peters. It is quite in keeping with this wholly
unacceptable account given by Mr Rodman that Watermeyer Legge had never heard
of Mr Peters. Indeed, to this day, no one, not even Mr Rodman, knows who Peters
is, and in the light of what followed, one is tempted to wonder whether he ever
existed.
Watermeyer
Legge eventually purchased the lease for £29,000, and on the wholly unsupported
assumption that it was Mr Peters’ information which led to the plaintiff
sending a second set of particulars that was instrumental in bringing about the
sale, the plaintiffs sought to extract for their principals a second commission
of £2,450. This was supported — if ‘supported’ is the right word — by an
invoice which Mr Rodman says was subsequently received from Misty Days
Management Ltd. Mr Rodman confessed that he had never heard of that company,
but he blithely assumed that the account must have emanated from Mr Peters
because the details in the account were right. How that account on that
notepaper came to the plaintiffs it is difficult to understand. Mr Wright, a
director of Misty Days Management Ltd, said that he had never heard of anybody
called Peters, had never heard of Watermeyer Legge, and simply had no
explanation for the fact that his company’s notepaper had been used for the
purpose of an invoice. So far as Mr Rodman is concerned, if and when he
received this account from Misty Days Management Ltd, here at least was the
golden opportunity to track down the shadowy figure of Mr Peters. From an
honest agent it demanded an immediate enquiry as to what Misty Days Management
Ltd was, how they had come into the affair, and what their connection with Mr
Peters was. But Mr Rodman did nothing, except to ask the defendants for the
money to pay the account, and as soon as the defendants saw a copy of the
account which had been omitted from the first communication (Mr Rodman says in
error) the defendants’ suspicions were rightly aroused, and enquiries which
they made of Misty Days Management Ltd only served to confirm those suspicions.
I have heard
Mr Hatfield give evidence on behalf of the defendants, and his recollection is
usefully supported by contemporaneous notes. From what he says — and which is
confirmed by those notes — it is perfectly plain that when Mr Rodman telephoned
him on August 24 and put the ‘Peters” proposition to him, he falsely told Mr
Hatfield that the highest offer to date was £24,000. In point of fact, a letter
dated August 23 addressed from Clive Lewis & Partners to the plaintiff
company and to Mr Rodman in particular, which is stamped as having been
received on August 23, showed that an offer was being made by Wedge
International Holdings amounting to £25,500. By telling Mr Hatfield that
£24,000 was the highest offer they had had to date he thereby obviously
increased the excess of the final purchase price from £3,500, which it would
have been if the offer of £25,500 had been disclosed, to £5,000, which was the
excess over the figure of £24,000, and, therefore, by doing that, the second
commission was increased from £1,750 to £2,450.
I really need
add little more. As I have said, I find the evidence of Mr Rodman wholly
unacceptable. He had been put forward by Miss Beale on behalf of the plaintiffs
as a person who might well have been gullible and mistaken but not dishonest. I
did not find him to display the characteristics of gullibility. He seemed to me
to demonstrate a measure of self-assurance, and so far as his truthfulness is
concerned, all I can say is that in one respect at least he was demonstrated to
be telling what was not the truth with regard to the telephone conversation
with Mr Hatfield, which he said took place well before August 23. By his
conduct, the plaintiffs were in breach of their fiduciary duties to their
principal by seeking to extract from them a large sum by way of extra
commission to which I do not think anyone was entitled, and it was not
surprising that in September of 1980, when these proceedings were well
advanced, Mr Rodman reported that the still unknown and unseen Mr Peters had
telephoned to say that he was withdrawing his claim. This at least enabled the
plaintiffs to say that they were now only advancing their own entitlement to
commission; but such a retraction is, in my judgment, too late. It does not
purge the plaintiffs of their previous breaches of their fiduciary duties
towards the defendants, and the law is clear on this point. I was helpfully
referred to a number of authorities. I need refer to only one, the case of Andrews
v Ramsay & Co [1903] 2 KB 635, where Lord Alverstone CJ in the
course of his judgment had this to say, after referring to the case of Salomons
v Pender (1865) 3 H&C 639:
The principle
there laid down is that, when a person who purports to act as an agent is not
in a position to say to his principal, ‘I have been acting as your agent, and I
have done my duty by you’, he is not entitled to recover any commission from
that principal. In Salomons v Pender, Bramwell B said, ‘It is
true that . . . the defendant has had the benefit (if it be one) of the
plaintiff’s services. But the defendant is in a position to say, ‘What you have
done has been done as a volunteer, and does not come within the line of your
duties as agent”.
And then later
in his judgment he said:
It seems to me
that this case is only an instance of an agent who has acted improperly being
unable to recover his commission from his principal. It is impossible to say
what the result might have been if the agent in this case had acted honestly.
It is clear that the purchaser was willing to give £20 more than the price
which the plaintiff received, and it may well be that he would have given more
than that. It is impossible to gauge in any way what the plaintiff has lost by
the improper conduct of the defendants. I think, therefore, that the interest
of the agents here was adverse to that of the principal.
A principal,
is entitled to have an honest agent, and it is only the honest agent who is
entitled to any commission. In my opinion, if any agent directly or indirectly
colludes with the other side, and so acts in opposition to the interest of his
principal, he is not entitled to any commission.
In my view,
the plaintiffs here have demonstrated themselves as having been in breach, and
serious breach, of their fiduciary duties towards the defendants and, that
being the result, even though the defendants may have benefited by services in
the sense that the lease of the premises was sold for £29,000, quite plainly
the plaintiffs have forfeited any right to commission by reason of those
breaches and by reason of their conduct generally. Accordingly, in my view,
this claim must fail and there should be judgment for the defendants, with
costs.
Judgment was
given for the defendants with costs, the costs to be taxed on the common fund
basis.
