Solicitor – Estate agent – Warranty of authority – Fraudster dishonestly impersonating true owner of residential property – Fraudster instructing defendant solicitors and estates agents to act in sale of property – Claimant purchaser claiming defendants liable for breach warranty of authority – Whether defendants warranting to purchaser that they had authority to act for true owner – Whether defendants being liable for breach of warranty of authority – Claim dismissed
The claimant was a property investment company which believed it had exchanged contracts for subsequently completed on the purchase of a residential property at 52 Brackenbury Road, London W6. It became apparent, almost immediately afterwards, that the vendor was a fraudster who had impersonated the true owner. Having failed, as a result, to acquire title to the property and the fraudster having disappeared with the completion monies, the claimant claimed against two of the parties who had been instructed in relation to the sale, namely the first defendant, which acted as the vendor’s solicitor, and the second defendant, the estate agents who marketed the property.
The claimant contended, among other things, that the defendants were liable for breach of warranty of authority, on the basis that, through words and conduct, they had represented that they had authority to act for the owner of the property and in particular that they were properly instructed by the true owner, when they were not.
Held: The claim was dismissed.
(1) One central justification for the doctrine of warranty of authority was that, if the agent did not have the authority which he claimed, the third party might have no claim against the supposed principal. Treating the agent, in such a situation, as having impliedly warranted his authority, gave the third party a claim against the agent, where otherwise he might have no claim at all. In such circumstances it was appropriate that liability should be strict. However, complications arose where the issue was not simply whether the agent had authority to act for a particular individual, but rather concerned the identity of that principal or his attributes. In such circumstances, the critical question was not whether there was a warranty of authority, but the precise terms of the warranty.
(2) The court should normally be cautious about holding that a professional person had undertaken an unqualified obligation in the absence of special facts or clear words to that effect. A person who represented that he had the authority of another to act on his behalf was, as a matter of law, liable if that representation was incorrect. Where such a warranty existed, it operated as an exception to the normal position. The mere fact that the agent was a professional did not exclude the existence of a warranty of authority nor, as a result, strict liability if the warranty was breached, even in the context of a fraud which the solicitors might not reasonably have been able to discover: Platform Funding v Bank of Scotland [2008] EWCA Civ 1016, Bristol & West Building Society v Fancy Jackson [1997] 4 All ER 582 and Penn v Bristol & West Building Society [1997] 1 WLR 1356; [1997] PLSCS 100 considered.
(3) The court would not construe an implied warrant of authority as operating more broadly than as representing that the agent had authority to act on behalf of his client unless it was clear that such a warranty was properly to be implied. Although the court had not been referred to any authority dealing specifically with, in the context of estate agents, as a general principle, any agent who claimed to have authority beyond what in fact existed might be liable to a third party for breach of warranty of authority: SEB Trygg Liv Holdings AB v Manches [2005] EWCA Civ 1237 and Knight Frank LLP v De Haney [2011] EWCA Civ 404; [2011] PLSCS 108 considered.
(4) The basic representation was only that the agent had authority to act for another, which arose between him and his principal and was usually peculiarly within his own knowledge. An agent did not, simply by acting as agent, represent that his principal would perform the contract or was solvent or make any other representation as to the principal’s attributes or characteristics. The court should not imply a warranty of authority which had an effect going beyond the basic representation, save where it was clear that the necessary promise was properly to be implied. That was particularly so in relation to professionals, including solicitors, who did not normally undertake an unqualified obligation. With regard to the defendant solicitors, there was no basis to imply a warranty of authority, as to their client’s attributes or characteristics, going beyond the basis representation. While there was no reason in principle why the estate agent defendants should not be liable for breach of warranty of authority, they had not represented that they had authority to act for the true owner.
Gary Blaker QC (instructed by JPC Law) appeared for the claimant; Ben Patten QC (instructed by BLM LLP) appeared for the first defendant; Ivor Collett (instructed by Mills & Reeve LLP) appeared for the second defendant.
Click here to read a transcript of P&P Property Ltd v Owen White & Catlin LLP and another.
Eileen O’Grady, barrister