ON APPEAL FROM
CENTRAL LONDON CIVIL JUSTICE CENTRE
His Honour Judge Hand QC
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE WILSON
LORD JUSTICE TOMLINSON
| Knight Frank LLP
|- and -
|Aston Du Haney
Mark Tempest (instructed by Haldanes) for the Respondent
Hearing date : 9 March 2011
Crown Copyright ©
Lord Justice Tomlinson :
"11. In due course, the sum of £5,875.00 was paid. In the Defendant's diary for 11th December 2006 are two entries; "Knight Frank – Simon McKay re Chq" and "Fergus re Chq for K Frank" (see B/10/187-187A). The sum requested in respect of the desk top appraisal appears to have been paid by bank transfer on 12th December 2006. The diary entry for that day reads "Knight Frank EA – Simon McKay re payment for valuation – M Locks" (see B/10/190 and 191A). It seems likely that the payment preceded the invoice. The "Billing Request Form" seems to have been raised on 15th December (see B/10/191). It is address "ATTN: Aston du Hanaey Morecombe New Haven c/o 39 Lennox Gardens, LONDON SW1X 1DF". The receipted invoice is dated 15th December and is similarly addressed (see B/10/192).
12. The desk top appraisal is dated 10th January 2007 (see B/10/196-209). It was addressed to "Morecombe Investments Ltd", care of the Lennox Gardens address and marked for the attention of "Aston du Haney". He received it there. He also received an electronic version by e-mail (see B/10/210). After further conversations, it was agreed that the Claimant would proceed to prepare the full report. The Claimant wrote a letter setting out the terms of the retainer on 5th February 2007 (see B/10/217-218). In the same way that the letter of instruction had been addressed, the letter of the retainer was marked for the attention of "Aston du Haney" and addressed to "Morecombe Investments Ltd" care of the Lennox Gardens address. Despite the fact that the Defendant had added "As Agent" to the words "For and on behalf of Morecombe Investments Ltd" in the letter of instruction, the retainer letter repeated the same formulation and, once again, when it was returned duly signed by the Defendant, he had added the words As Agent" (see B/10/220).
13. The full appraisal took some time to prepare and appears to have gone th[r]ough a number of drafts. There is one draft in the bundle at B/10/242-292; it had a manuscript date of "14/5/07" and the manuscript initials "SM" on the frontispiece and the words Prepared for Morecambe Investments Limited" (my underlining) are also to be found there. The words "Prepared for Morecambe Investments Ltd – May 2007" appear at the foot of each page. An invoice was raised on 26th April 2007 (see B/10/239) addressed to "Morecambe Investments Ltd" care of the Lennox Gardens marked for the attention of "Aston du Haney". I am not entirely clear as to whether it was sent and, given that the report was still in draft then, it might have been thought premature to send it but the appraisal had been completed by 30th May 2007 (see B/10/295-390) and it has handed to the Defendant when he came to the Claimant's Manchester office on that date, together with a copy of the invoice, which I assume to have been the same as or similar to B/10/239. The appraisal in its final form, not surprisingly because it is the final version of the earlier draft, had the same frontispiece and the same footer with the same wording "Prepared for Morecambe Investments Limited" (frontispiece) and "Prepared for Morecambe Investments Ltd – May 2007" (footer).
14. It soon became apparent to Mr Mackay that all was not well. In early June 2007 he contacted a Mr David Earley, who he described as an "associate" of V & V, and was told that contracts for the sale and purchase of the land had not been exchanged, as he had thought was to be the case (see paragraph 5.1 of his witness statement – A/7/25), and attempts (or renewed attempts) were made to secure payment from the Defendant.
15. Nothing had been achieved by July 2007 and, despite his misgivings, Mr Mackay did make the appraisal available in electronic form to the Defendant. As the summer progressed it became apparent that this electronic form of the appraisal was achieving a wide circulation. Contact with the Defendant at the end of July revealed that he was unhappy because certain parts of the site had been included in the appraisal. In fact what was known as plot G had never been included but plot H had been, although Mr Mackay believed that to be in accordance with the Defendant's instructions. The Defendant was complaining as to the wide circulation of the report and also that the issue of non-payment of the Claimant's fees was also circulating in what might be described as the "public domain". In an effort to cut through these controversial matters, despite the fact he did not accept any of the criticisms, Mr Mackay offered to prepare an amended report, which excluded plot H, without charging a further fee, on the basis that the outstanding fees would be paid. This further report was forwarded to the Defendant in PDF format on 24th August 2007. Thereafter in January 2008 there appear to have been some discussions involving the fees; Mr McClintock seems to have been party to those discussions (see Mr Mackay's witness statement at paragraph 5.14 (A/7/28) and B/10/4150417A). The fees have never been paid."
Further Factual Findings
"Finally, despite my considerable reservations about the Defendant as witness, as expressed above, I do not regard the Defendant as having deliberately misstated the name of his principal. It seems to me that he had no motive for doing so. He was at pains to emphasise his role as agent by adding the words "as agent" to the counterpart letter of instruction. In law this was probably unnecessary but it illustrates that his state of mind was a wish to clarify his role and I have already indicated my finding that Mr Mackay never regarded the Defendant as anything other than an agent."
i) He did not investigate the provenance of his client, by which the judge meant the nature, identity and creditworthiness of his client, because the introduction of the Respondent by Mr McClintock was a sufficient recommendation. The reputation of Mr McClintock with his colleagues was sufficient in itself to satisfy Mr Mackay that this "unknown quantity" [scilicet the Respondent's principal] could be relied upon;
ii) He believed throughout that the Respondent was acting as an agent for the entity that paid for the option and for the people who lay behind it;
iii) He was not concerned about the precise identity of that entity or the people who lay behind it;
iv) It would not have mattered to him to have discovered that he had not been given the precise name of the single purpose vehicle (SPV) – inferentially the judge must also have found that Mr Mackay appreciated that the principal of the Respondent might be a single purpose corporate vehicle;
v) It would have made no difference to how Mr Mackay proceeded had he known or discovered that the SPV was an offshore company. The judge also found that in the modern world of property development the use of an offshore company would not be "that unusual";
vi) He did not need to investigate the substance of the people who lay behind the SPV in a conventional way because he could measure reliability by matters known to him or matters that he could find out in the world of commercial property development within which he moved and worked;
vii) He knew that there was a Call Option contract and that the option holder paid a very considerable amount of money for the option. He never saw the contract because he did not think that he needed to see it. He was satisfied that he had all the proof he needed of involvement of the Respondent's principal in the Middlewood Locks project;
viii) He understood that his fees would not be paid directly by the SPV or by individual members of the syndicate said to lie behind it – inferentially therefore the judge found that Mr Mackay understood that the liability of the entity that had paid for the option and the people who lay behind it would be discharged by someone else on their behalf, hence the possible discussion of Newhaven Nominees as an entity to whom invoices should be sent for payment on their behalf. However the judge also found expressly that Mr Mackay did not expect the fees to be paid by the Respondent.
"It is unclear whether the principle of personal liability where the agent fails to identify his principal correctly as suggested by Roxburgh J in Hersom v Bernett  1QB 98 is sound or is really, depending on the facts, just a species of breach of warranty of authority. This is a secondary matter but merits consideration alongside 1. above [which was the question whether an agent can be liable for breach of warranty of authority in circumstances where there had been a negligent failure to correct the name of his principal]."
". . . it seems to me that a fundamental principle of justice requires that a defendant who has given false evidence that his principal was X should not be heard to say through his counsel in argument that his principal may have been somebody else, but must thereafter be treated as having no principal; or, in other words, as being himself the principal."
"The mere fact that the agent's act does not bind his purported principal does not mean that he is to be regarded as acting for himself; there must be evidence that he actually is doing so, or (as in Hersom v Bernett) other circumstances preventing him from denying this."
However none of this arises here. Notwithstanding the unsatisfactory aspects of his evidence, it was the pleaded defence of the Respondent to the claim made against him personally that he had acted for and on behalf of Morecombe Investments Company Limited, BVI company number 1000660. The misspelling and the redundant "s" are irrelevant misnomer. The Appellant has made no attempt to show that the Respondent did not in fact have the authority which he warranted, still less that he was not in fact acting as agent. There is no basis upon which the Respondent can be held under a personal liability to the Appellant.
Lord Justice Wilson
Lord Justice Lloyd