Aviva Life & Pensions UK Ltd v Strand Street Properties Ltd

An agreement to share professional costs may be binding where each party obtains a benefit, including avoiding possible liability for the whole of a disputed fee or fixing a mutually beneficial termination date. Actual authority is construed in context and is not necessarily confined to written terms. A project manager may have implied authority to appoint professionals, agree fees and bind the principal to cost sharing where the appointment and the parties’ dealings support that conclusion. Ratification may arise from clear adoption by conduct, including acquiescence after notice. A fee-sharing arrangement ordinarily creates a debt payable when one party has paid the relevant fees, rather than merely a right to an account.

Aviva Life & Pensions UK Ltd, formerly Norwich Union, claimed against Strand Street Properties Ltd for half of professional costs incurred on a proposed Bristol development. The claim was based on an alleged agreement made through London & Paris Estates Ltd, acting for Strand Street.

After a seven-day trial, Morgan J held that the agreement had been made, was supported by consideration, bound Strand Street through actual authority or ratification, and gave rise to a claim in debt. The defendant appealed on seven grounds, concerning consensus, consideration, agency, ratification, and whether the remedy was a debt or an account. The appeal was from the order and judgment reported at [2009] EWHC 1109 (Ch).

The Court of Appeal unanimously dismissed the appeal. Lord Justice Lloyd gave the judgment, with Lord Justices Jacob and Ward agreeing.

1. Consensus. The trial judge had properly assessed the oral and documentary evidence and was entitled to prefer the evidence of Mr Peacock and Mr Ashcroft. The letter of 5 July 2001 was evasive rather than plainly inconsistent with an agreement reached on 2 July. The subsequent telephone agreement concerning invoices did not contradict the earlier agreement.
2. Consideration. The fee-sharing agreement was legally binding. There was uncertainty about which party was liable to the professional consultants. Norwich Union’s promise to pay half the fees benefited London & Paris Estates and Strand Street by avoiding possible liability for the whole of a fee. In addition, agreeing that the arrangement would continue until 16 July provided a mutually beneficial fixed termination date.
3. Actual authority. The scope of LPE’s actual authority was not necessarily limited to the express wording of the appointment letters. It had to be construed in context. There was no general rule defining the authority of a project manager. The correspondence and the parties’ conduct supported implied authority to deal with the professional team and to agree that the costs would be shared equally. The agreement was therefore within LPE’s authority, whether directly or through delegation by Topside.
4. Ratification. Alternatively, Strand Street had ratified the agreement. Ratification may be express or arise from conduct amounting to clear evidence that the principal adopts or recognises the transaction. Acquiescence or inactivity may suffice. Strand Street’s failure to object after receiving notice of the fee-sharing arrangement was sufficient. A new argument that the agreement was so disadvantageous that knowledge of one director could not be attributed to the company could not be raised for the first time on appeal, particularly because it required factual investigation; permission to appeal did not itself make the point available.
5. Debt or account. The arrangement entitled Norwich Union to demand half of the fees it had paid. It therefore created a debt claim. Bringing the arrangement to an end on 16 July did not, without express terms or necessary implication, replace that immediate entitlement with a right only to an account. The court accordingly upheld the judgment and dismissed the appeal.

• Court of Appeal (Civil Division): The appeal by Strand Street Properties Ltd was dismissed. The court upheld the decision of Morgan J.
• High Court of Justice, Chancery Division: After a seven-day trial, Morgan J held that the fee-sharing agreement existed, was supported by consideration, bound Strand Street through agency or ratification, and supported a claim in debt: [2009] EWHC 1109 (Ch).