If a property agent is a fiduciary, he owes loyalty to his principal to act in good faith and not make a profit from his trust, place himself in a position where his duty and interest conflict or act for his own benefit.
In Ensign House Ltd v Ensign House (FEC) Ltd and others [2023] EWHC 1563 (Ch), the High Court awarded negotiating damages to the claimant of £2m for breach of a non-disclosure agreement and ordered a property agent to account for commissions of £800,000 made in breach of his fiduciary duties.
The case concerned Ensign House, Canary Wharf, E14, which comprised 18 office suites let on long leases to 13 different suiteholders. Between 2014 and 2019, the claimant, EHL, assisted by Terence Alford, a property agent, sought to negotiate with the suiteholders to acquire title to Ensign House in order to redevelop the site.
In 2020, FEC Development Management Ltd, one of the defendants, expressed interest in acquiring EHL’s position in Ensign House. The companies entered into an NDA by which FEC agreed to use any confidential information provided by EHL only for due diligence on the transaction. Information on proposed deals was provided by EHL to FEC, which, assisted by Alford and without EHL’s knowledge or consent, negotiated directly with the suiteholders and acquired the property. EHL brought claims for breach of the NDA.
Not all property agents owe fiduciary duties. A fiduciary is someone who has undertaken to act for or on behalf of another in circumstances which gives rise to a relationship of trust and confidence and an obligation of loyalty: Bristol & West BS v Mothew [1998] Ch 1 considered.
The court was satisfied that there was a fiduciary relationship between Alford and EHL. His function was to liaise and negotiate with the suiteholders to acquire Ensign House on behalf of EHL, although he was not prevented from introducing other properties to other clients or potential buyers. He acted as principal negotiator, advised EHL on the conduct and tactics of negotiations and kept EHL informed of progress. It was reasonable for EHL to expect that Alford would subordinate his own interests to theirs.
By acting as introducing agent to FEC in mid-2019, a conflict arose between the interests of EHL and those of FEC of which Alford was fully aware. He was in breach of his duty of good faith by promoting FEC’s interests without terminating his retainer with EHL. He also breached his duty of confidence by disclosing confidential information under the NDA – title and pricing information – to FEC.
Louise Clark is a property law consultant and mediator
