8 April 2011

Withold temptation to self-instruct

The Message: Commercial property agents have to be sure who their client is.

The Case: The High Court has determined whether an agent can recover commission on securing a property for a party with whom it did not have a direct contract (Lorenz Consultancy v Fox-Davies Capital, 17.03.11).

The Lorenz Consultancy is a property adviser based in the West End of London run by Anthony Lorenz. It claimed £142,774 from Fox-Davies Capital for introducing it to a property. The defendant denied liability on the basis that it had never instructed Lorenz.

Fox-Davies Capital is an independent investment bank founded by Daniel Fox-Davies. Kim Richardson was seeking to buy the bank, which was in financial difficulty. Richardson and Lorenz were old friends. Richardson principally dealt with Lorenz and asked him to help to find larger premises.

On 1 April 2009, Lorenz confirmed to Richardson that its fee would be based on 10% of one year’s rent. Richardson forwarded this email to Fox-Davies on 2 April, and told him a budget of £100,000 had been put aside for this purpose. Fox-Davies was involved in the search for premises.

It was originally proposed that the lease of 23 Savile Row be taken in the name of a company called Jendens Holdings, as this was the proposed vehicle for the takeover of the defendant, but it was decided the lease should be in the name of Fox-Davies Capital.

There was a lot of urgency to complete the lease, which was entered into on 10 June. On 18 June, Fox-Davies informed Richardson that he was not prepared to proceed with the sale of the bank. The defendant subsequently disposed of the lease.

Lorenz initially sought to recover its fee from Richardson, who claimed that he had no liability as all negotiations were carried out on behalf of the defendant. Lorenz then sought to recover its fee from Fox-Davies Capital on the basis that Richardson had had authority to enter into a contract with it on its behalf or that the defendant was prevented by its own conduct from arguing that it was liable.

The court noted that, rather than pursuing any claim against Richardson, Lorenz had proceeded to find premises for Richardson’s business, which would have ordinarily commanded a fee of about £70,000 but, in the light of all that had happened, a fee of £100,000 was agreed in settlement of all matters.

The court was of the view that Richardson had never had any actual or implied authority to act on behalf of the defendant and it held that Lorenz had not proved Richardson did have such authority and that he intended to instruct Lorenz upon behalf of the defendant.

Fox-Davies had not given Richardson any such authority. The need for larger premises arose from Richardson’s intention to take over and expand the bank. It decided Richardson had been acting on his own behalf when retaining Lorenz at a time when he had not acquired the defendant and had no control over it, so there was no reason for Lorenz to consider it had been instructed by anyone except Richardson.

The court did not think that the conduct of the defendant in participating in the search for the new offices gave rise to any liability. There was no clear and unequivocal recognition 
or representation that it had a contract with Lorenz.

Accordingly, the claim failed, as the only party that could have had any liability was Richardson.

Summing up: Lorenz v Fox Davies

  • Lorenz claimed a fee from Fox-Davies after finding space on 23 Savile Row.
  • Fox-Davies said he was not liable as Richardson had contracted with Lorenz on his own behalf.
  • The court found Fox-Davies was not liable. Only Richardson could have been liable.

 

First seen in Property Week, 8 April 2011

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