The Lorenz Consultancy Ltd v Fox-Davies Capital Ltd

Agency – Defendant negotiating to sell business – Prospective purchaser instructing claimant commercial property adviser to find new premises for defendant – Defendant signing lease – Sale of business not proceeding – Whether claimant entitled to recover fee from defendant – Whether prospective purchaser contracting with claimant on behalf of defendant – Claim dismissedThe claimant was a London-based commercial property adviser. R, a stockbroker, contacted a director of the claimant and instructed him to find larger office premises for the defendant, an investment banking company that R was in negotiations to purchase. The claimant introduced R to a suitable property and R instructed his solicitor to negotiate a lease in favour of the company that he was using as a vehicle for purchasing the defendant. Following discussions with the landlord, it was decided that the defendant, as the proposed operating company, should be the tenant.Negotiations for the purchase of the defendant continued. Meanwhile, the landlord informed the claimant that the defendant would lose the premises if the new lease were not signed immediately and, at R’s request, the defendant’s owner met with R’s solicitor to sign the lease. On the instructions of R, the lease was completed that evening.However, the purchase did not proceed and the defendant disposed of the new lease, which it did not require. The claimant sought to invoice R for fees for finding the new premises. It redirected its invoice to the defendant after R informed it that the property had been acquired by the defendant and all negotiations had been undertaken on its behalf. The defendant disputed liability.The claimant brought proceedings to recover £142,774.50 from the defendant. It contended that the defendant had retained it to find a property in return for a commission under an oral contract made between the claimant and R. The claimant based its claim on: (i) R’s actual or ostensible authority to enter into the contract on the defendant’s behalf; alternatively (ii) the defendant’s subsequent ratification of R’s unauthorised actions; or (iii) estoppel, in that the defendant had been aware that R was purporting to act as its agent and had encouraged the claimant to act in that belief.Held: The claim was dismissed.(1) The claimant had not established that, in agreeing to its terms of business, R had acted with the authority of the defendant as an undisclosed principal. To make good that allegation, the claimant needed to show first that R had: (i) had authority to bind the defendant; and (ii) had intended to instruct the claimant on the defendant’s behalf. Neither of those requirements had been satisfied. The defendant had not given R authority to enter into an agreement with the claimant on its behalf. The requirement for larger premises had arisen only from R’s ambitions for the defendant’s business as and when he acquired it and that was the context in which he and the defendant had discussed his proposal to instruct the claimant. Had R asked the defendant for permission to act on its behalf, the defendant would have refused since it did not require larger premises for its own business and could not pay for them. On the evidence, the defendant’s owner had intended that the signed lease for the new premises was to be held to his order pending the completion of the sale and had expressed that intention to R’s solicitor. Further, the correspondence showed that R had not intended to instruct the claimant on behalf of the defendant. When the claimant was instructed, R had not yet acquired the defendant and did not control it, and there was a real possibility that the tenant of the new premises would be R’s takeover vehicle. Although the work done by the claimant would in due course benefit whichever entity became the tenant, the claimant had been instructed by R alone and understood this to be the case.(2) The fact that R was not purporting to act on behalf of the defendant when he instructed the claimant precluded any claim by the claimant based on ostensible authority, subsequent ratification of unauthorised acts or estoppel. A claim of ostensible authority would require the court to find that: (i) the defendant, by its words or conduct, had represented that R had the authority to enter into a contract on its behalf; and (ii) the claimant had relied on that representation believing R to have that authority. There had been no representation of the necessary kind and no reliance. For the same reason, it could not be argued that the defendant had subsequently ratified R’s unauthorised actions since ratification could take place only where an action had purportedly been taken on behalf of another party. Moreover, ratification required a manifestation by the party on whose behalf an unauthorised act had been taken that it had treated the act as having been authorised. The defendant’s actions did not amount to a clear and unequivocal demonstration of an intention to recognise a contract with or the retention of the claimant but were all equally consistent with the claimant having a contract with R alone. As to estoppel, the claimant had not believed that R had entered into the contract on behalf of the defendant and, further, the defendant had done nothing to cause such a belief and had not suspected that the claimant might hold that belief.(3) The defendant could not be held to have taken over R’s liabilities to the claimant by novation or separate instruction. The claimant had offered to provide the defendant with services in consideration of a fee; the defendant had not accepted any such offer and had not held or manifested any intention to create legal relations with the claimant.Anthony Lorenz appeared in person on behalf of the claimant; David Blayney (instructed by Field Fisher Waterhouse LLP) appeared for the defendant.Sally Dobson, barrister