Singh & Anor v Sardar Investments & Ors

Damages for breach of warranty of authority are assessed by comparing the claimant’s position after the transaction with the position that would have existed if the warranty had been true. The claimant is not entitled to recover the loss of a bargain that could not have been performed even if the agent had authority. An unauthorised contract creates no contractual election for the innocent party, and the breach occurs when the warranty is given. An agent who warrants authority ordinarily warrants only the fact of authority, not the manner in which it was obtained or the occurrence of an event on which its exercise may depend. A costs order should not make the same deduction twice.

The claimants contracted to buy property from Sardar Investments Ltd through Mr Amritpal Virdi. Mr Davinder Virdee disputed Mr Virdi’s authority and took steps to obstruct the sale. The claimants sought specific performance and damages, including damages for breach of warranty of authority.

Patten J rejected specific performance and held that the contract was unauthorised. He also held that the claimants could recover only nominal damages because they could not have completed the purchase by the contractual deadline, even if authority had existed. The claimants appealed that conclusion. Mr Davinder Virdee also appealed aspects of the costs order.

1. Main appeal dismissed. The warranty of authority was breached when Mr Virdi entered the transaction without authority. The dispute about authority and the later adjudication of it did not postpone accrual of the cause of action.
2. The claimants were not required to elect whether to affirm or reject the purported contract. There was no contract to accept. They were therefore relieved from performing obligations under it, but that did not establish recoverable loss.
3. The proper measure was the loss suffered by comparing the claimants’ position if the representation of authority had been true with their actual position. Applying the approach in Banque Bruxelles [1996] 3 WLR 87, the claimants would not have been better off. Even with authority, they could not have funded completion by the deadline and the principal could have rescinded.
4. Lord Justice Dyson additionally applied Heskell v Continental Express Ltd [1950] 1 All ER 1033: the agent warranted only the bare fact of authority, not that an arbitral committee had authorised the transaction or that the option and cautions would be removed. The factual premise that those entries would have been removed in time was unsupported.
5. The costs appeal was allowed in part. Paragraph 6 was upheld. Paragraph 7 was set aside because it deducted the same issues twice. The substituted order excluded the caution, option and beneficial-interest issues from the costs payable by the fourth defendant, and required the second defendant to pay the fourth defendant’s costs of those issues.

• Court of Appeal (Civil Division) [2002] EWCA Civ 1706: dismissed the claimants’ appeal on damages; allowed the costs appeal in part and substituted the costs order.
• High Court, Chancery Division: Patten J rejected specific performance, held that the contract was unauthorised, and awarded nominal damages for breach of warranty of authority.