The Northampton Regional Livestock Centre Co Ltd v Cowling & Anor

Professional agents owe duties of reasonable skill and care even where services are provided gratuitously or speculatively. An agent instructed by a vendor must not place himself in a position of conflict by acting for a purchaser of the same property unless the principals give fully informed consent. Disclosure must include the substance of the conflict and, where relevant, the basis and amount of the agent’s remuneration. Partial disclosure does not amount to informed consent, although it may affect the available remedies. A partner is not vicariously liable for a co-partner’s wrongful act merely because it occurred during a continuing partnership. The court must assess the closeness of the connection between the act and the ordinary business of the firm, including whether the partner was pursuing a personal interest outside his authority.

The claimant, as assignee of claims formerly belonging to a company, sued two commercial property agents. The first defendant was also the company’s chairman and a partner in the agency. The second defendant acted for the company in marketing a development site and later sought to act for the purchaser, Earlplace Ltd.

The claimant alleged that both defendants negligently marketed and sold the site for an undervalue. It also alleged that the second defendant breached his fiduciary duty by acting for both sides, disclosing commercially valuable information and agreeing a contingent remuneration arrangement with Earlplace without full disclosure. The first defendant’s alleged liability included vicarious liability under section 10 of the Partnership Act 1890.

1. Negligence. The defendants owed duties measured by the scope of their appointments. A surveyor or valuer may owe a tortious duty even when acting gratuitously or speculatively. The first defendant, as director, was required to exercise the care reasonably expected from a competent director with his knowledge and experience. The court assessed the decisions by reference to the circumstances existing in 2004 and 2005 and rejected hindsight evaluation.
2. The decision to market the site principally on an unconditional basis was reasonable. The company was under severe financial pressure, planning authorities were hostile to redevelopment without provision for a cattle market, conditional offers had repeatedly failed, and the site was not rigidly excluded from receiving conditional offers. Neither defendant was negligent.
3. Fiduciary duty. An agent owes single-minded loyalty and must not act for both vendor and purchaser in the same transaction where a real sensible possibility of conflict exists. The second defendant remained subject to the company’s fiduciary duty until exchange of contracts on 23 September 2005. Before then he disclosed commercially confidential information to Earlplace and agreed a remuneration arrangement giving him a powerful incentive to secure the lowest possible purchase price.
4. The second defendant failed to disclose the terms of his contingent retainer and the information he proposed to disclose. The company therefore gave no fully informed consent. The disclosure was partial, not wholly absent, so the remuneration was not treated as a fraudulent bribe. The second defendant was ordered to account for £744,035.02, the fee paid by the company in connection with the sale, and interest from receipt.
5. Partnership liability. Section 10 of the Partnership Act 1890 requires an evaluative assessment of whether the wrongful act was so closely connected with authorised acts that it may fairly and properly be regarded as occurring in the ordinary course of the firm’s business. The second defendant’s undisclosed personal arrangement concerned future work, lay outside his authority and was sufficiently remote from the firm’s ordinary business. The first defendant was not vicariously liable.
6. The claim therefore succeeded against the second defendant for breach of fiduciary duty, but failed against both defendants in negligence and against the first defendant on the vicarious-liability claim.