The Lorenz Consultancy Ltd. v Fox-Davies Capital Ltd.

An intermediary who seeks payment from a company must establish that the company contracted with it, or that an authorised agent contracted on the company’s behalf. Authority cannot be inferred merely because the company knew of, or benefited from, the intermediary’s activities. Ratification requires an unequivocal manifestation that the principal treats the unauthorised act as authorised. Ostensible authority requires a representation by the principal and reliance on it. Estoppel requires belief, conduct causing or knowingly permitting that belief, and detrimental reliance. Conduct equally consistent with a personal contract between the intermediary and the promoter does not satisfy these requirements.

The claimant, a commercial property adviser, sought £142,774.50 from the defendant for introducing and acquiring leasehold premises at 23 Savile Row. The claimant’s dealings began with Mr Richardson, who was negotiating to acquire the defendant and intended to establish an expanded business. The defendant’s director, Mr Fox-Davies, inspected properties, assisted with aspects of the proposed fitting-out and signed the lease on behalf of the defendant before the proposed acquisition collapsed.

The claimant advanced alternative cases based on contract, actual or ostensible authority, ratification, estoppel, novation and a later separate instruction. The central issue was whether the defendant had become contractually liable for the claimant’s fee.

1. The claim was dismissed. Mr Richardson contracted with the claimant on his own behalf. The claimant therefore had no agreement with the defendant.
2. The claimant failed to establish actual authority. Mr Fox-Davies had not authorised Mr Richardson to retain the claimant, and would have refused such authority because the defendant did not need larger premises for its existing business and could not afford the associated liabilities. The evidence also showed that Mr Richardson intended to instruct the claimant in the same way as his own solicitors, for the benefit of whichever entity ultimately became the tenant.
3. The requirements for ratification were not met. Ratification required an act purportedly done on behalf of the alleged principal and an unequivocal manifestation by that principal that it treated the act as authorised. The defendant’s inspections, assistance with fitting-out arrangements and execution of the lease were equally consistent with Mr Richardson being the claimant’s client. They did not demonstrate an intention to adopt a contract with the claimant.
4. There was no ostensible authority. The defendant had made no representation that Mr Richardson had authority to contract on its behalf. The claimant also acted on the basis that Mr Richardson was its client, as shown by its initial demands for payment.
5. The estoppel case failed because the claimant had not believed that Mr Richardson was contracting for the defendant. In any event, the defendant had neither caused nor knowingly permitted that belief, and detrimental reliance was not established.
6. The defendant had not separately instructed the claimant, novated Mr Richardson’s liabilities or accepted the claimant’s terms. The court therefore did not need to address the defendant’s further argument concerning Estate Agents Act 1979, s 18.