Estate agents –– Estate Agents Act 1979 –– Duty of Director General of Fair Trading –– Alleged facts of malpractice –– Subsale at higher price –– Allegations against estate agent employees –– Whether a “triggering” event –– Whether Director General should consider exercising power to prohibit or warn
In 1998 the applicant estate agents were retained by the vendors of a property to act as their agents in its sale; expressions of interest for sums between £1.1m and £1.2m were received. In September 1998 contracts were exchanged for the sale of the property to S for £950,000. S resold the property shortly afterwards for £1.2m.
Two employees were later dismissed summarily by the applicants; one of these admitted receiving £5,000 in connection with the sale and subsale. The applicants alleged that the two employees had agreed to assist S in his purchase and onward sale, and that their acts involved bribery and the exclusion of other prospective purchasers. The respondent director general was notified of the events, but in June 1999 reported that no event had taken place that required him to take action under the Estate Agents Act 1979 to make a prohibition order or issue a warning. Following a request to reconsider his decision, the respondent declined to act.
The applicants sought judicial review of these decisions, contending that, on the alleged facts, there had been breaches of the Estate Agents (Undesirable Practices) (No 2) Order 1991 and Estate Agents (Provision of Information) Regulations 1991 that triggered the powers of the respondent under sections 3 and 4 of the Act.
Held: The application was allowed in part. On the alleged facts, the two employees had engaged in practices that, in relation to estate agency work, had been declared undesirable by an order made by the Secretary of State, by misrepresenting the details of S’s offer to purchase, contrary to Article 2(c) and paras 1(a) and/or 2 of Schedule 3 to the Estate Agents (Undesirable Practices) (No 2) Order 1991. Accordingly, there was a triggering event within section 3(1)(d) of the Act, requiring the respondent to consider exercising his powers.
The following cases are referred to in this report.
Bromley London Borough Council v Greater London Council [1983] 1 AC 768; [1982] 2 WLR 92; [1982] 1 All ER 153
Industries & General Mortgage Co Ltd v Lewis [1949] 2 All ER 573
Pepper (Inspector of Taxes) v Hart [1993] AC 593; [1992] 3 WLR 1032; [1993] 1 All ER 42, HL
Pharmaceutical Society of Great Britain v Storkwain [1986] 1 WLR 903; [1986] 2 All ER 635
R v Monopolies and Mergers Commission, ex parte South Yorkshire Transport [1993] 1 WLR 23; [1993] 1 All ER 289
This was an application by the applicants, Benhams Ltd, for the judicial review of decisions by the respondent, the Director General of Fair Trading.
Murrary Rosen QC and Jonathan Middleburgh (instructed by Cawdery Kaye Fireman & Taylor) appeared for the applicants; Richard Snowden (instructed by the Treasury Solicitor) represented the respondent.
Giving judgment, SILBER J said:
Introduction
The applicants, who are estate agents, seek to judicially review two decisions of the Director General of Fair Trading (the respondent), contained in letters dated 30 June 1999 and 18 August 1999, in which he said that he would not exercise his powers under sections 3 and 4 of the Estate Agents Act 1979 (the Act) in respect of complaints made by the applicants in respect of two of their former employees. The ability of the respondent to exercise his powers under those provisions depends upon him being satisfied that a so-called “triggering event” has occurred, and that means that one of the specified incidents under section 3(1) of the Act has occurred. The applicants contend that, upon the true construction of the relevant statutory provisions, such an event had occurred, but the respondent disputes this construction. The issues before me relate to the construction of section 3(1) of the Act and two statutory instruments made pursuant to the provisions in the Act.
The respondent had not investigated the facts that are alleged by the applicants to give rise to triggering events, and it is agreed that, for the purposes of this application, I should assume that the allegations are correct. There is a slight difference in the inferences that both parties draw from the facts, and I will refer to the respondent’s views when I set out the background facts that the applicants allege have triggered the respondent’s duty to investigate. The respondent makes no admissions as to whether the material supplied by the applicants provides any evidential basis for the applicants’ allegations, to which I now turn.
Alleged wrongful acts
The applicants are estate agents and operate from three offices in North London. The application relates to the activities of Jeremy Gee, who had been a director of the applicants until 8 February 1999, and of Paul Samuels, who had been employed as a senior negotiator until the same date.
In 1998 the applicants were retained by the vendors of 22 Linfield Gardens, London NW3 (the property), to act as their estate agents in its sale. Both Gee and Samuels were thereafter involved in arranging the sale of the property. In about July 1998, there were at least four parties who had expressed an interest in acquiring the property for sums varying between £1.1m and £1.2m. On 30 September 1998 contracts were exchanged for the sale of the property, at the price of £950,000, to Mr Sohail Sarbuland, or to a limited company or nominee purchaser controlled by him. On 2 October 1998 Mr Gee, on behalf of the applicants, rendered an invoice to the vendors for the applicants’ commission of 1% of the purchase price, namely £9,500, together with value added tax.
In November 1998 it came to the attention of Mr Brown, who owns the entire issued share capital of the applicants, that the property was included in a residential auction sale scheduled to take place on 9 December 1998. The guide price for the property was stated to be £1m to £1.2m. It was, in fact, sold prior to the auction for £1.2m, and this would have meant that the purchaser of the property from the applicants’ clients would have made a profit of £250,000, less expenses. It was the policy of the applicants to seek to exclude subsales, and Mr Brown was concerned that the property was being sold by way of a subsale at a substantial profit at a time prior to the completion of Mr Sarbuland’s purchase.
As a result of inquiries instigated, it transpired that, after Mr Sarbuland had exchanged contracts to purchase the property, there had been approximately 90 telephone calls from the applicants’ land line to Mr Mark Grieg and Mr Rosh Pathman, who were negotiators employed by Paramount Properties, the estate agents that had introduced Mr Sarbuland to the applicants. The applicants contend that these agents had also acted for Mr Sarbuland. The applicants believed that there was no obvious need for any substantial contact with Paramount after exchange had occurred.
Mr Brown was concerned at the time as to whether Mr Gee or Mr Samuels had improperly advised the vendors of the property, or whether they had recommended the acceptance of an artificially low offer for the property, for which either or both of them would receive some reward upon a profitable subsale by the purchaser. Covert recordings were made of the telephone lines of Mr Gee and Mr Samuels at the applicants’ office. On 2 February 1999 a conversation took place between Mr Gee and Mr Grieg, of Paramount, in which Mr Grieg referred to an individual bringing in “your money today”. The applicants understood that this related to an illegal payment being made by Mr Sarbuland to Mr Gee or Mr Samuels, in return for them, or either of them, having recommended Mr Sarbuland’s offer to the vendors, with the result that Mr Sarbuland made a subsequent profit. Mr Grieg subsequently related the difficulties that he and Mr Pathman were having with their own fee, and Mr Grieg remarked that Mr Pathman had inquired whether arrangements had been made “for Benhams” and he said “you can definitely have it tomorrow”, to which Mr Gee responded “alright, OK, you just let us know”. The applicants contend that when, during the conversation, Mr Greig also referred to being paid a fee “on the way out” and “putting you (ie Mr Sarbuland) in and getting you out of a deal”, this related to a payment being received by Mr Gee and/or Mr Samuels in return for their involvement in the sale and subsale of the property. The respondent does not accept that this is necessarily so.
Subsequently, Mr Gee and Mr Samuels were summoned by Mr Brown to a meeting on 8 February 1999, at which they were asked whether the commission of £9,500 already paid to the applicants was the entire fee and that no other commission had been paid, or was to be paid, to the applicants. Mr Gee and Mr Samuels answered that the applicants had been paid in full. While Mr Gee repeatedly denied that he was to receive any payment in connection with the sale and subsale, Mr Samuels said that he had received £5,000, for which he would “put his hands up”. Both Mr Gee and Mr Samuels were summarily dismissed.
The vendors of the property had no knowledge of the financial arrangements made with Mr Sarbuland and his agents, or of any services that might have been performed by Mr Gee and Mr Samuels. The applicants have no explanation as to why the expressions of interest in the property in July 1998 for sums between £1.1m and £1.2m did not materialise. The applicants have been unable to find any computer file relating to the sale of the property or any file containing relevant correspondence and details of viewing. To the applicants, this was highly irregular, and contrary to the established practice.
The work diaries of Mr Samuels and Mr Gee contain diary entries for both 3 November 1998 and 5 November 1998, which, according to the applicants, indicate a meeting or meetings at the property. According to the respondent, they may only indicate a meeting or meetings at the property. While the applicants regard the 5 November 1998 entry as indicating that Mr Samuels was reviewing plans for the property, the respondent contends that it merely shows the possibility that this was occurring. The applicants assert that there was no reason for either Mr Samuels or Mr Gee to be conducting meetings at the property, or reviewing plans for the property, in connection with the sale to Mr Sarbuland in early November 1998, as exchange had already taken place.
Further, the ultimate purchaser of the property –– in other words, the purchaser of the property upon Mr Sarbuland’s outward sale –– was on the database of the applicants for their clients or interested purchasers.
There is a dispute between the parties as to the inferences that can be drawn from the alleged facts. To the respondent, the applicants are alleging that an illegal payment had been made by Mr Sarbuland to Mr Samuels and/or Mr Gee in return for them having recommended Mr Sarbuland’s offer to the vendors, notwithstanding that it may not have been the highest offer. The applicants, I believe, infer that: Mr Samuels and/or Mr Gee agreed to, and did, assist Mr Sarbuland in his purchase and onward sale of the property; they were paid by him for so doing; and they made arrangements with him to that end prior to his exchanging contracts for the purchase of the property. The applicants contend that Mr Sarbuland was a client of Mr Gee and/or Mr Samuels. The applicants also contend that these acts may have involved bribery and the exclusion of other prospective purchasers.
Dealings with the respondent
The applicants and estate agents employed by them are regulated by the respondent pursuant to the provisions of the Act. By a letter dated 25 February 1999, the applicants’ solicitors notified the respondent that the applicants intended to make a full report to enable him to consider what action he should take, if any. The applicants’ solicitors subsequently dispatched a full report to the respondent in April 1999.
By a letter dated 30 June 1999, the respondent reported that, upon the evidence presented to him, no event had taken place that would trigger the scope for action, on his part, to exercise the powers to make a prohibition order under section 3 or issue a warning under section 4 of the Act. This is the first decision that the applicants are seeking to judicially review, and I will hereafter refer to it as “the first decision”. The respondent took the view that the only relevant obligation, for the purposes of triggering under section 3(1)(c), was the obligation under section 21 of the Act to disclose any personal interest in the land that is the subject matter of the transaction, but neither Mr Gee nor Mr Samuels had any such interest. The respondent also thought that even if Mr Gee or Mr Samuels had a personal interest in the transaction, the respondent would require evidence of more than one instance of this for there to be an undesirable “practice” for the purposes of section 3(1)(d) of the Act.
In response to the first decision, the applicants’ solicitors wrote to the respondent asking him to review the first decision, and, in particular, explaining that the facts complained of amounted to a failure to provide the prescribed information to the vendors under section 3(1)(c) of the Act, and an undesirable practice by way of misdescription under section 3(1)(d) of the Act.
On 18 August 1999 the respondent wrote to the applicants’ solicitors, having reconsidered his first decision, but indicated that nothing in the letter from the applicants’ solicitors of 4 August caused him to change his view. This is the second decision that the applicants are seeking to review.
When granting the applicants permission to apply for judicial review of the first and second decisions, Sullivan J ordered that Mr Gee and Mr Samuels should be served with notice of the application for judicial review. This was done, but neither has filed any evidence, nor participated in the proceedings before me. It was common ground that I should seek to determine this case by giving rulings upon the meanings of the statutory provisions, and also state whether, upon the basis of certain assumed facts concerning the activities of Messrs Gee and Samuels, events had occurred that enabled the respondent to exercise his powers under sections 3 and 4 of the Act. I will endeavour to do so, and not to approach the application upon the basis that I should grant the application for judicial review only if the decision maker had
Framework of the legislation
As the issue before me relates to the circumstances in which the respondent can exercise his powers, it is necessary now to outline the legislative structure. The relevant triggering provisions are contained in section 3 of the Act, the material parts of which provide:
(1) The power of the Director General of Fair Trading… to make an order under this section with respect to any person shall not be exercisable unless the Director is satisfied that the person…
(c) has failed to comply with any obligation imposed on him under any of sections 15 and 18 to 21 below; or
(d) has engaged in practice which in relation to estate agency work has been declared undesirable by an order made by the Secretary of State…
Sections 3(1)(c) and 3(1)(d) provide different routes, which, according to the applicants, should have triggered the respondent into taking action.
As I have said, section 3(1)(c) states that a triggering event is a failure on the part of the relevant person to comply with obligations under a number of statutory provisions. The only statutory provision relevant to the present case is section 18, the marginal note for which reads: “Information to clients and prospective liability”. The relevant part of that section states:
(1) Before any person (in this section referred to as “the client”) enters into a contract with another (in this section referred to as “the agent”) under which the agent will engage in estate agency work on behalf of the client, the agent should give the client ––
…
(b)… any additional information which may be prescribed under sub-section (4) below.
Subsection 18(4) empowers the Secretary of State to require that additional information be given to clients of persons engaging in estate agency work, and to stipulate the time and manner in which that obligation is to be performed. Pursuant to that empowering provision, the Estate Agents (Provision of Information) Regulations 1991* (which I will refer to as the “Information Regulations”) were made. I will have to refer in greater detail to their terms in due course.
* Editor’s note: SI 1991/859
Section 3(1)(d) of the Act enables the respondent to make orders where he is satisfied that a person “has engaged in a practice that, in relation to estate agency work, has been declared undesirable by an order made by the Secretary of State”. Pursuant to these powers, the Secretary of State made the Estate Agents (Undesirable Practices) (No 2) Order 1991 (the Undesirable Practices Order), which declares certain practices to be undesirable for the purposes of section 3(1)(d).
Issues
The applicants contend the respondent should have invoked his powers under section 3(1)(c) and section 3(1)(d) upon three separate grounds, namely:
1. under section 3(1)(c) of the Act, as Samuels and Gee failed to give the prescribed information to the vendors before they were committed to a liability to the applicants, in accordance with section 18(1)(a) of the Act and para 2(1)(a) of the Information Regulations (the Information Regulation trigger);
2. under section 3(1)(d) of the Act, as Samuels and Gee had engaged in a practice that had been declared undesirable under the Undesirable Practices Order, as they had failed to forward promptly to the vendors an accurate list of services for which application had been made, and not rejected, prior to exchange of contracts, in accordance with Article 2(b) of, and para 2 of Schedule 2 to, the order (the list of services trigger);
3. under section 3(1)(d) of the Act, as Samuels and Gee had engaged in a practice that had been declared undesirable, by misrepresenting the details of Mr Sarbuland’s offer contrary to Article 2(c) of, and paras 1(a) and 2 of Schedule 3 to, the Undesirable Practices Order (the misrepresentation trigger).
I will deal with each of these matters in turn, but I must, at this stage, express my gratitude to counsel for their helpful written and oral submissions. The parties have asked me to deal with the points of law raised, and then leave to a further hearing a discussion of the relief, if any, that I should grant. I will try to comply with this request.
Information Regulation trigger
The applicants contend that Gee and Samuels failed to provide the prescribed information within the terms of the Information Regulations and that, therefore, they were in breach of section 18(1), which therefore triggered section 3(1)(c). The actual breach of the Information Regulations relied upon by the applicant is regulation 2(1), which, they submit, imposed obligations upon Messrs Gee and Samuels to give to the vendors information as to the services that they were offering, or intending to offer, to Mr Sarbuland, namely that they were assisting him to obtain and/or to use and/or to sell the property.
The relevant parts of regulation 2(1) are:
The following additional information is hereby prescribed and should be given by an estate agent to his client, that is to say the services ––
(a) which the estate agent is himself offering, or intends to offer, to any prospective purchaser of an interest in the land…
Regulation 3 deals with the timing of this obligation to provide additional information, and the relevant part of it states:
(1) The time when an estate agent shall give the information specified in section 18(2) of the Act, as well as the additional information prescribed in Regulation 2 above, is the time when communication commences between the estate agent and the client or so soon as is reasonably practicable thereafter provided it is a time before the client is committed to any liability towards the estate agent.
The respondent contends that there has been no breach of the Information Regulations, and therefore of section 18(4), with the result that section 3(1) is not triggered. He puts forward two reasons, namely that: first, the first services provided by Gee and Samuels fell outside the scope of the Information Regulations (the services point); and, second, even if the services provided fell within the Information Regulations, they did not have to be disclosed, as they had not been offered at or before the time when they had to be declared (the timing point).
On the services point, the respondent points out that the Information Regulations define “services” covered by regulation 3 as being (with emphasis added):
any services to a prospective purchaser for consideration, being services which are such as would ordinarily be made available to a prospective purchaser in connection with his acquisition of an interest in land or his use or enjoyment of it (including the provision to that purchaser of banking and insurance services and financial assistance and securing the disposal for that purchaser of an interest in land if that disposal is one which has to be made in order for him to be able to make the acquisition he is proposing or is one which is a result of that acquisition).
In support of the contention that the services that were being offered by Gee and Samuels fall outside the definition of “services”, the respondent points out that the services that were being offered were not “such as would ordinarily be made available to a prospective purchaser in connection with his acquisition of an interest in the land or his use or enjoyment of it”. It is said that the legislature clearly did not intend that these regulations should deal with disclosure of any and every service that an agent might intend to offer to prospective purchasers for consideration, as, otherwise, the definition of “services” would have ended after the word “consideration” in the first line, and would not have been qualified as it is. So he argues that the ambit of the
The respondent contends that the allegation of the applicants is that Gee and Samuels received an illegal payment from Mr Sarbuland in return for recommending Mr Sarbuland’s offer to the vendor, and that this may have involved bribery and the exclusion of other purchasers. It is settled law that a bribe is an undisclosed payment made to a person who is known to be an agent of the person with whom the payer is dealing, with a view to inducing the agent to favour the payer in some way in his dealings with the principal of the agent: see, for example, Industries & General Mortgage Co Ltd v Lewis [1949] 2 All ER 573 at pp575-576. Samuels admitted that he received £5,000, and it is contended that an engagement that entails the acceptance of this sum by an estate agent retained by the vendor, from a prospective or actual purchaser of the property, was not a service “ordinarily made available to a prospective purchaser”.
The applicants respond to this argument by saying that the service provided by Gee and Samuels to Mr Sarbuland was a “service” within the provision, as they were helping to dispose of the property, but I do not accept that argument for three reasons, which independently or cumulatively, drive me to that conclusion. First, the applicants’ version of the work to be done by the two men does not fully or accurately set out the nature of the service that, at least in Samuels’ case, was for consideration, and was to ensure that Sarbuland’s offer was recommended and accepted irrespective of the obligations owed by Messrs Samuels and Gee to their employers’ clients (and, therefore, their clients), who were the vendors. Even upon the applicants’ own interpretation of the facts, which, for the time being, I will assume to be correct, Mr Sarbuland was a client of Mr Samuels and Mr Gee, and, in the words of a document prepared by the applicants for the purpose of the hearing before me, setting out their allegations of fact:
Mr Samuels and/or Mr Gee agreed to and did assist Mr Sarbuland in his purchase and onward sale of the property; were paid by him for so doing; and made arrangements with him to that end prior to his exchanging contracts for the purchase of the property… this may have involved bribery and the exclusion of other prospective purchasers…
In other words, upon the applicants’ own case, the service in this case offered by Mr Gee and Mr Samuels, upon the applicants’ interpretation of the events, was to put their duties to Mr Sarbuland and Paramount in conflict with and/or over and above those that they owed to the vendors, who were, after all, the persons to whom they, as employees of the applicants, owed their primary duty. I believe that this role for Mr Samuels and Mr Gee falls well outside the definition of “services ordinarily… made available to a prospective purchaser” in the Information Regulations.
I should add that if I had been in any doubt upon this issue, I would have inferred from the facts, as the respondent has done in his version of the facts, that “an illegal payment was made by Mr Sarbuland to Mr Samuels and/or to Mr Gee in return for their having recommended Mr Sarbuland’s offer to the vendors notwithstanding that it may not have been the highest offer for the property”. This service, which links the right, on the part of Messrs Gee and Samuels, to receive payment to the recommendation to the vendors, falls even more clearly outside the definition of “services” than the applicants’ version, to which I have just referred.
Second, I accept the undisputed evidence contained in the witness statement of Mr Raymond Watson, the director of consumer credit and regulation at the office of the respondent, that “it is not usual for an estate agent to undertake an onward sale transaction prior to completion of the original sale”. This indicates that what Messrs Gee and Samuels were doing was not usual for estate agents and was not a service “ordinarily made available” to the prospective purchaser.
Third, the thrust of the applicants’ case is that the behaviour of Mr Gee and Mr Samuels was so outrageous that it justified not only a report to the respondent but also required him to consider taking serious steps against each of them. It is also noteworthy that Mr Brown, the owner of the applicants, in his witness statement, confirms the accuracy of the notice of application, which said that it was the policy of the applicants to exclude subsales. The inescapable inference to be drawn from the written material and the oral submissions adduced by the applicants is that this was such an extraordinary transaction for Mr Samuels and Mr Gee to enter into that their behaviour justified summary dismissal. In other words, the applicants themselves saw the services offered by these men as being totally different from the ordinary services offered to a prospective purchaser. Indeed, if this were not the case, it is difficult to see why they reported this matter to the respondent, and why they are now saying that the behaviour of their erstwhile employees merits investigation by him, obviously with a view to disciplinary action.
For those reasons, the information trigger does not apply, as regulation 3 does not apply to the behaviour of these two men, but, in case I am wrong, I must consider the timing argument put forward by the respondent. It is that the obligation to convey information under regulation 3 of the Information Regulations and section 18(1) and (2) of the Act arises only before the agreement between the vendor and the agent has been entered into, or before the vendor becomes committed to any liability to him.
The respondent points out that the Information Regulations are made under section 18(1) of the Act, which refers to the obligation to give information “before… the client [ie the vendor]… enters into a contract with… the agent… under which the agent will engage in estate agency work on behalf of the client”, and this includes “any additional information which may be prescribed under sub-section (4) below”. The Information Regulations must be subject to that provision, as they are made under section 18(4).
In any event, under regulation 3 of the Information Regulations, the information has to be given:
when communication commences between the estate agent and the client or as soon as is reasonably practicable thereafter provided it is a time before the client is committed to any liability towards the estate agent.
In this case, the vendors retained the applicants in June 1998, and it is then that the obligation to pass information terminated under section 18(1). There is no evidence, or even an allegation, that Messrs Gee and Samuels were ever offering, or intending to offer, services to Mr Sarbuland at any time prior to the applicants being instructed to act by the vendors of the property. So the respondent contends that the obligation to pass on information arose before the vendors made their contract with the applicant. It is important to bear in mind that the Information Regulations are made pursuant to section 18(4), which prescribes, for the purposes of subsection 1(b), additional information that is to be made available. In consequence, the provisions of section 18(1) determine the time when information has to be given, and, as I have said, they only relate to the period before the client enters into a contract with the agent, which, in this case, must have been in June 1998, and that must have been before any dealings were made with Mr Sarbuland. If I had been in any doubt about this matter, I would have considered that the burden of proof must be upon the complaining party, namely the applicants, to show this, and they have failed to discharge that burden.
The applicants say that there is a distinction between regulation 3, which obliges the agent to give information at any time “before the client is committed to any liability towards the estate agent”, and the language of section 18(1), which imposes a restriction “before the vendor enters into a contract with the agent”. So they say that Messrs Gee and Samuel had an obligation to communicate this information even after the applicants had been instructed “at any time before the exchange of contracts (it being only at that stage that their liability to pay the commission crystallised)”: see para 32 of Form 86A. There are three reasons why I cannot accept this argument.
First, it must not be forgotten that the Information Regulations were made pursuant to section 18, and therefore must be read in accordance with and pursuant to it. As I have explained, section 18(1) requires the information covered by that section (including those regulations) to be served before the client and the agent (ie the applicants) enter their
Second, and alternatively, even if that is not correct, the obligation in regulation 3 covers only the period “before the client is committed to any liability towards the estate agent”, and, on the facts of this case, such liability arose when the vendors entered into an agreement with the applicants. Mr Brown, of the applicants, has produced a copy of the applicants’ commission agreement with the vendors of the property. It makes provision for a payment of commission not only in the event of the applicants introducing a purchaser who enters into a binding contract to purchase (clause 1) but also if they introduce a ready, willing and able purchaser and the vendor subsequently withdraws (clause 11). It therefore seems, by reason of that agreement, that the vendors were committed to a contingent liability to the applicants upon entering into the agreement with them, not only during the currency of the agreement but also within a period of 12 months from its termination (clause 10). Thus, by the time the agreement was made between the applicants and the vendors, the vendors have been committed to “any liability towards the estate agent”.
Third, I believe that the onus of proof that the information trigger had been activated must be upon the applicants, as they, unlike the respondent, had access to the relevant information on this issue. So they would have to satisfy the respondent of the time when their former employees were offering services, or intending to offer services, that fell within regulation 2(1)(a) of the Information Regulations. I am bound to say that I have no idea when this occurred, and it might have been after contracts were exchanged on 30 September 1998, which, as I understand the applicants’ case, was the last date when there could have been an obligation to disclose the information. So if I had been in doubt, I would have rejected the applicants’ case on this trigger on this point as well.
For the purpose of completeness, I add that it is noteworthy that para 2 of Schedule 2 to the Undesirable Practices Order* requires that an agent must, at all stages up to the exchange of contracts with the purchaser whom he has introduced, notify his client vendor of any outstanding application to him from that prospective purchaser for the type of services that are ordinarily made available to such purchaser.
* Editor’s note: The Estate Agent (Undesirable Practices (No 2) Order 1991 (SI 1991/1032)
List of services trigger
The thrust of this point is that the activities of Messrs Gee and Samuels fall within section 3(1)(d) of the Act because they “engaged in a practice which, in relation to estate agency work, has been declared undesirable by an order made by the Secretary of State” (section 3(1)(d) of the Act), by failing to forward promptly to their client an accurate list of services for which the application had been made and not rejected prior to exchange, contrary to Article 2(b) and para 2 of Schedule 2 to the Undesirable Practices Order.
The relevant provision of Article 2(b) is:
the arrangement and performance of services, any act or omission as designed in Schedule 2 to this Order…
Under para 2 of Schedule 2 to the Undesirable Practices Order, it is provided, only referring to the material parts, that:
In cases where an estate agent has introduced a prospective purchaser to his client and that purchaser has made an offer, failure by the estate agent to forward to his client promptly and in writing at all stages before contracts for the disposal of the interest in the land have been exchanged,… an accurate list of services, provided that ––
(a) an application from the prospective purchaser for services has been received by the estate agent…
(b) the estate agent knows that such application has been received…
(c) the application has not been refused.
The respondent contends that the applicants’ argument is incorrect for two reasons. First, he points out that these provisions of the Undesirable Practices Order only refer to “services” within the meaning of the Undesirable Practices Order. Second, the respondent says that even if he is wrong on this point, section 3(1)(d) of the Act requires more than one incident amounting to an undesirable practice to have occurred before he can be satisfied that the estate agent in question has “engaged in a practice” that has been declared undesirable. I will deal with both of those points in turn.
The definition of “services”, for the purposes of the Undesirable Practices Order (with emphasis added), is:
any service for consideration provided, or to be provided, to a prospective purchaser ––
(a) by an estate agent or a connected person, or (in a case where the estate agent or connected person would derive financial benefit from the provision of the service) by another person, and which
(b) is such as would ordinarily be made available to a prospective purchaser in connection with his acquisition of an interest in land…
It will be seen that the wording of the definition of “services” in the Undesirable Practices Order is very similar to that in the Information Regulations, upon which I have already commented. In both cases, it is necessary to focus upon the words “ordinarily be made available to a prospective purchaser in connection with his acquisition of an interest in land”. For the reasons that I have already stated, I believe that the services being offered by Samuels and Gee are not those “ordinarily” made available, and they therefore fall outside the Undesirable Practices Order. That is sufficient to explain why the list of services trigger does not assist the applicants. I will consider the meaning of “engaged in practice” in detail when considering the misrepresentation trigger.
Misrepresentation trigger
The applicants contend that a triggering event had occurred because Gee and Samuels had, within the meaning of section 3(1)(d) of the Act, “engaged in a practice that, in relation to estate agency work, has been declared undesirable by a order made by the Secretary of State” by misrepresenting the details of Mr Sarbuland’s offer, contrary to Article 2(c) of, and paras 1(a) and 2 of Schedule 3 to, the Undesirable Practices Order.
The respondent accepts, for the purpose of this application, that there is an arguable case, upon the information provided by the applicants, that Gee and Samuels engaged in behaviour falling within the meaning of Article 2(c) of, and Schedule 3 to, the Undesirable Practices Order. I think that this is a proper concession to make in relation to the misrepresentation of details of the offer from Mr Sarbuland and/or the failure to forward accurate details to the vendor of Mr Sarbuland’s offer for the property.
In fairness to the respondent, I should add that he has made it clear, through counsel, that he would not be “averse” to a judgment supporting the applicants’ construction of section 3(1)(d), but he would welcome the guidance of the court. The respondent does, however, contend that this triggering event has not occurred, because section 3(1)(d) of the Act requires more than one act amounting to an undesirable practice to have occurred before the respondent can be satisfied that the estate agent in question has “engaged in a practice which has been declared undesirable”. In other words, he argues that the applicants do not succeed because they can only give one instance of an undesirable practice, so that conduct does not fall within section 3(1)(d).
The argument of the respondent is that the ordinary, natural meaning, and the primary dictionary definition, of where a person has “engaged in practice” is the habitual doing or carrying on of something. He points to one of the definitions in the New Shorter Oxford English
The respondent also contends that if this provision is ambiguous or obscure, then I should take advantage of the principle in Pepper (Inspector of Taxes) v Hart [1993] AC 593 to look at Hansard, so that I could be assisted by the comments of Mr John Fraser MP, the minister of state during the committee stage of what became the Act.
It is convenient, at this stage, to bear in mind that the use for the purpose of construing statutes of parliamentary material, such as Hansard, is only permitted:
where (a) legislation is ambiguous or obscure, or leads to an absurdity; (b) the material relied upon consists of one or more statements by a Minister or other promoter of the Bill together if necessary with such other parliamentary materials as is necessary to understand such statements and their effect; (c) the statements relied upon are clear.
Further than this I would not at present go…
(per Lord Browne-Wilkinson in Pepper v Hart at p640, with whom Lords Keith of Kinkel, Bridge of Harwich, Griffiths, Ackner and Oliver of Aylmerton agreed.)
My initial task must be to see whether the expression “is ambiguous or obscure or leads to an absurdity”, to quote again the words of Lord Browne-Wilkinson. If it does not, I cannot take note of the parliamentary materials. The applicants dispute that the provision is ambiguous or obscure, and say that in any event the statements of the minister are not “clear”.
I believe that the respondent is incorrect and that one act can, in the circumstances, constitute “a practice declared undesirable”, so far as any misdescription is concerned. In reaching this conclusion, my starting point is the impact of the Undesirable Practices Order upon section 3(1)(d) of the Act. In fact, the order is drafted in such a way that the conduct that is set out in it is a replacement for, or clarification of, the words “practices, which, in relation to estate agency, have been declared undesirable” in section 3(1)(d) of the Act. The material part of Article 2 of the order states:
For the purposes of section 3(1)(d) of the Act the following practices are declared undesirable that is to say as regards (c) any misdescription or omission of the kind described in Schedule 3 to this order…
So, in order to ascertain what are triggering events for the purposes of this subsection, it is necessary to look solely to the Undesirable Practices Order to decide what constitutes “a practice… declared undesirable” for the purpose of section 3(1)(d) of the Act. Thus, if that order had said “for the purpose of section 3(1)(d) of the Act, the following practices are declared undesirable, that is to say, as regards (c), persistently making misrepresentations…”, then it would have been clear that one misrepresentation would not suffice.
The Undesirable Practices Order “declared undesirable”, for the “purpose of section 3(1)(d) of the Act”, certain specific conduct, and it is of particular interest that this comprises some behaviour that would require only a single act, such as “the making… of any misrepresentation” and “the failure… to forward… details of any offer”. The significance of this is that the terms of the Undesirable Practices Order show how section 3(1)(d) is now to be read in relation to the making of a misrepresentation, namely that the person under consideration by the director general “has engaged in a practice which in relation to estate agency work has been declared undesirable”, namely “any misdescription or omission of the kind described in Schedule 3 to this Order”, which is referred to in Schedule 3 as being “the making… of any misrepresentation” and “the failure… to forward… accurate details of any offer…”: paras 1 and 2 of Schedule 3, with emphasis added.
The significant feature is that a single act suffices in the case of a misrepresentation, as is shown by the use of the word “any” before the specified misbehaviour. In other words, “a practice”, for the purposes of section 3(1)(d), is being defined as, and equated with, a single act or omission in the case of misrepresentation, and not a course of conduct. If it was intended that only a course of action would suffice, the order would have referred to more than a single act as being an undesirable practice; it might have used plural terminology such as “making representations”. Instead, singular terminology is adopted, as it is in the rest of section 3(1), to define triggering events. Put another way, to substantiate the interpretation, the respondent has to establish that expressions in the order, such as “any misrepresentation” and “any misdescription”, mean a course of misrepresentation or misdescription; I do not think that he can do so, as this construction is not right.
I have come to the clear conclusion that I cannot accept the respondent’s submissions, as I believe the words clearly mean that a single default by an estate agent would come within the words “has engaged in a practice which, in relation to estate agency work, has been declared undesirable by an order made by the Secretary of State”. There are four other factors that, to varying extents, support this conclusion.
First, I recognise that the word “practice” can mean a course of conduct, but I also believe that it is frequently used to mean a single act. The New Shorter Oxford English Dictionary defines it in different ways, and they include “an action, a deed”. It is common parlance to speak of a “sharp practice” as denoting a single act, and that is the way that I believe that it was intended to be used here.
Second, it is pointed out by the applicants that all the triggering events in section 3(1), other than in section 3(1)(a), arise specifically upon the occurrence of one action. So it is said that the word “practice” has to be construed in the light of its surrounding provisions, and they all relate to a single act being a triggered event. In the words of Lord Scarman, dealing with a different word, “it is a very useful word; chameleon-like taking its colour from its surroundings”: Bromley London Borough Council v Greater London Council [1983] 1 AC 768 at p841. In this case, I think that there is force in the argument that, by similar reasoning, the “practice” means a single act, like the other instances referred to in its neighbouring provisions in section 3(1).
Third, a more general point occurred to me after I had reached my conclusion upon the true meaning of the word “practice”, and, more significantly, after the end of submissions. It was that the Undesirable Practices Order seems to have been drafted upon the basis that a single act will suffice for the purpose of section 3(1)(d), and this is indicative of the intention of parliament, when enacting the Act, and, in particular, that subsection. There is some authority for this kind of approach. Halsbury states:
Delegated legislation made under an Act may be taken into account as persuasive authority on the meaning of its provisions. This is because delegated legislation… originates in the government department responsible for initiating and administering the relevant Act and may therefore be assumed to reflect a correct view of the intention of its promoters.
(Halsbury’s Laws of England (4th ed reissue) vol 44(1) para 1428).
In Pharmaceutical Society of Great Britain v Storkwain [1986] 1 WLR 903, Lord Goff, giving the only reasoned speech in the House of Lords, was “able to draw support” for his construction of a 1968 statute from the fact that ministers, in making a 1980 order under the statute, plainly did not read the statute in the way that Lord Goff had rejected. I have already explained that, in the Undesirable Practices Order, the references to undesirable practices concerning misrepresentation are to individual events. As I have not heard argument upon this third point, it does not form a basis for my decision.
Finally, the wording of section 4 of the Act is of very limited significance; it deals with warning orders and provides that, inter alia, where a person has engaged in a practice as is referred to in section 3(1)(d), and “were to continue to engage in that practice”, certain consequences would follow. There was a dispute about the significance of the wording in section 4, as both sides contend that it supports their particular interpretation of section 3(1)(d). It does not really help the respondent, as, upon his interpretation, he would have to be satisfied that there was not only the initial series of events (namely those required under section 3(1)(d)), but a continued pattern of further acts (ie several
Having concluded that the meaning of “a practice” in the Act covers a single act, it is not permissible for me to look at Hansard, because I can only do that if, in the words of Lord Browne-Wilkinson, the meaning is “obscure or ambiguous or would lead to an absurdity”. That is not the position here. In fact, if the respondent were correct, an estate agent could avoid action by the respondent if, on one occasion, he were to receive a vast sum of money by ensuring a sale to a buyer who had offered substantially less than other prospective purchasers for a large development, but had agreed to give a vast sum to the agent as a reward for him ensuring that the other bids were not notified to the vendor. Upon the respondent’s argument, there would be no trigger for his intervention unless the agent repeated his behaviour; in other words, the agent would have immunity from any action by the respondent unless he did something similar on at least one more occasion. So I am satisfied that my interpretation would not lead to an absurdity. Incidentally, it might be difficult to know how often an act has to be repeated, or with what degree of similarity, for it to constitute a practice.
I have considered the meaning of this subsection at some length, as the respondent has asked for guidance upon its meaning and I have tried to assist, but, at this stage, I am not convinced that the applicants could not prove a breach, even on the respondent’s construction of section 3(1)(d). In other words, it is possible (but, as I have not heard argument on this point, my views are very tentative) that the applicants could establish that Messrs Gee and Samuels have “engaged in a practice”, even upon the basis of the respondent’s construction that one instance is not enough. The reason is that even if the respondent were correct and the word “practice” required, as the respondent contends in para 14 of his skeleton, “the habitual doing or carrying on of something”, then it is strongly arguable that the alleged acts and omissions of Messrs Gee and Samuels fall within that definition, upon the basis that either or both of them failed over a substantial period “to forward to his client promptly and in writing accurate details… of any offer the estate agent has received from a prospective purchaser in respect of an interest in the land”, as required by the Undesirable Practices Order. Their continuing breach could be regarded as “a practice” upon the respondent’s construction. My views upon this issue are tentative, not only because I have not heard submissions on this point, which occurred to me after the end of the hearing, but also because I am not sure how long Messrs Gee and/or Samuels withheld this information.
It might be that they withheld information from when they first received the offer from Mr Sarbuland, but it was probably from before exchange on 30 September 1998, and that their failure to disclose the information to the vendors continued until their dismissal on 8 February 1999. During that period, there was arguably a continuing breach on the part of Messrs Gee and Samuels of the requirement to forward details, and this would have constituted a “practice” in which they engaged. For that reason, I believe that it is arguable, at least, that a triggering event for the purposes of section 3(1)(d) has occurred in this case, irrespective of which interpretation of the word “practice” is correct.
Conclusion
For the reasons that I have given, the applicants only succeed upon the misrepresentation trigger, namely that, under section 3(1)(d) of the Act, Messrs Samuels and Gee had “engaged in a practice which, in relation to estate agency work had been declared undesirable by an order made by the Secretary of State” by misrepresenting the details of Mr Sarbuland’s offer, contrary to Article 2(c) of, and paras 1(a) and 2 of Schedule 3 to, the Undesirable Practices Order 1991. The applicants fail on the remainder of their points. It was agreed at the hearing, at the request of counsel, that I would circulate a copy of my draft judgment and later hear counsel upon the appropriate order that should be made. I would be grateful if counsel could inform my clerk when they will be ready to make submissions upon the appropriate order in this case.
For the avoidance of any doubt whatsoever, I must repeat that I am merely deciding whether, upon the facts alleged, a triggering event had occurred so as to require the respondent to consider exercising his powers under section 3 or 4 of the Estate Agents Act 1979. I do not know what the true facts are. Nothing that I have said can be of any relevance or value upon the way in which the respondent should now exercise those powers, and, in particular, I am not suggesting or implying how, if at all, he should or should not do so. He will have to decide this after he has carried out a full and a proper consideration of the facts.
