As any
experienced estate agent will tell you, there is nobody so ingenious as a
client who is seeking to explain why he need not pay the agent’s fee.
Last week we
saw how the definition of sole selling rights contained in the Estate Agents
(Provision of Information) Regulations 1991 (a definition which agents are obliged
by law to include in their terms of engagement) operated to deprive an estate
agent of fees when the transfer of a business was arranged in a way which did
not involve either the sale or a lease of the premises concerned. Today we note
another recent case, this time from Scotland, in which an agent’s attempt to
add a little muscle to a sole agency agreement was defeated on a different, and
certainly unexpected, ground.
The case in
question, Chris Hart (Business Sales) Ltd v Mitchell 1996 SCLR
68, concerned a sole agency agreement under which the plaintiff agents were to
seek a purchaser for the defendants’ hotel. The agreement was readily
terminable by either side. However, it provided in clause 5 that, even after
such termination, the agents would be entitled to payment of their fee if the
hotel was sold and they had ‘contributed in any way’ to that sale.
Clause 2 of
the agreement further required the defendants to submit any offer to purchase
to the agents before sending it to their solicitors (presumably so that the
plaintiffs could judge whether they had contributed to that offer so as to
justify a claim for commission). In the event of failure to submit any such
offer to the agents, it was stated that their whole remuneration and outlay
would be payable.
A familiar
story is told by the actual events in this case. The agents tried and failed to
find a purchaser: the defendants terminated the agency (paying the specified
charges for so doing); the defendants then marketed the property themselves and
in due course were successful. On learning of this sale (though not from the
defendants), the plaintiffs brought an action for their fees. The first ground
on which the agents claimed to be entitled to payment was that they had
‘contributed’ to the sale, in that the clients had based their private sale
particulars on those previously prepared by the plaintiffs. This was rejected
by the sheriff (whose decision was upheld on appeal) on the ground that there
was no evidence to show how far, if at all, those particulars had ‘contributed’
to the actual sale which took place.
The agents’
alternative claim (and the really interesting one) was based on their clients’
failure to submit the ultimately successful offer to them, as required by
clause 2 of the agency agreement. There seemed, at face value, little answer to
this, until the court pointed out that what the agents were actually seeking
was not commission, but rather an award of damages for breach of a term in the
contract. Not only that, but they were relying on the agency agreement to
specify the amount of those damages (ie their ‘whole remuneration and
outlays’). And since this could not possibly be regarded as a genuine
pre-estimate of the loss which the plaintiffs would suffer if they were not
told about an offer, it was a penalty clause and therefore unenforceable!
local authority liability
Readers will
no doubt remember the days, not so long ago, when the owner of a defective
building could recover damages in negligence from its designer or constructor,
or from the local authority responsible for passing the plans or for inspecting
the building during the course of its construction. This last possibility was,
in practice, an extremely important one, since the local authority was not
infrequently the only potential defendant remaining solvent by the time the
defects emerged and writs began to fly. Of course, that is all history; the
House of Lords in Murphy v Brentwood District Council [1991] 1 AC
398 declared that its recent decision in Anns v Merton London Borough
Council [1977] 2 EGLR 94 had been an aberration, and that neither builders
nor inspectors owed any duty of care to the second or subsequent owners of
buildings.
Now the
central thrust of Murphy was the insistence by the House of Lords that what
is suffered by a person who discovers that his building is defective (even
dangerously so) is pure economic loss, a type of damage for which the
tort of negligence does not normally provide compensation. However, a recent
decision (albeit only at official referee’s level) suggests that the winds of
change have blown even more strongly, and that the immunity (at least as far as
the local authority is concerned) is of a more extensive nature. The case of Tesco
Stores Ltd v Wards Construction (Investment) Ltd (1995) 76 BLR 94
arose out of a disastrous fire at a shopping centre in Maidstone in 1993,
caused by vandals setting light to a rubbish bin outside one of the shop units.
The fire, having penetrated the unit in question, spread to the roof void and
thence very quickly to other units, including the plaintiffs’ supermarket,
where it caused serious damage to fixtures and fittings and to stock. The
plaintiffs claimed that the speed with which the fire spread was due to defects
in the design and construction of the shopping centre, and they brought an
action against the local authority, among others, alleging negligence in its
approval of design drawings and its inspection of the construction works. The
local authority denied that it owed any duty of care to the plaintiffs to
safeguard their property from physical damage, and it was this point which came
before the deputy official referee as a preliminary issue.
Having
carefully examined the statutory background to the local authority’s powers,
and the case law on both liability for defective buildings and the
responsibilities of public authorities generally, the judge concluded that the
crucial issue was the purpose of the scheme of building control under
the Building Act 1984. This purpose, he decided, was the protection of health,
safety and welfare of persons; it did not extend to the protection of property.
In consequence (and even assuming that the designer or builder could have been
held liable for this type of damage), the local authority owed no duty of care.
How things have changed in such a short time!
