Dinglis Management Ltd & Anor v Dinglis Properties Ltd

A non-contractual agency may be inferred objectively from the parties’ conduct. The inference must, however, be consistent with the known purpose of their arrangements. An agency cannot ordinarily be inferred where it would defeat an intended legal barrier between a property owner and third parties.

Informal dealings within a family business do not require the court to impose a formal legal relationship. On appeal, the court may reconsider an evaluative conclusion where it is substantially a conclusion of law on undisputed facts and the judge omitted a material consideration.

A party must ordinarily advance its whole case at trial. A new alternative claim requiring further evidence and a second trial will not be remitted without special circumstances.

Dinglis Properties Ltd owned a portfolio of residential and commercial properties. Dinglis Management Ltd let the residential properties in its own name, collected rents and managed the properties. The arrangements formed part of an informally operated family business.

A deputy High Court judge held that the management company was the property company’s non-contractual agent and ordered it to account for rents. He also ordered Paul Dinglis to account for breach of his duties as a director. The management company and Paul Dinglis appealed. The property company cross-appealed concerning remuneration, an alleged trust of rents and payments of invoices relating to other family properties.

The central issue was whether agency could properly be inferred when the management company had been created to provide an effective legal barrier between the property-owning company and tenants or other claimants.

1. The appeals against the orders for accounts were allowed unanimously. Although agency may exist without a contract, the alleged relationship had to be inferred objectively from the circumstances. The first-instance conclusion was substantially a conclusion of law based on largely undisputed evidence. The Court of Appeal therefore had to reconsider it because the judge had omitted a material feature of the arrangements.

2. The management company had been established to provide an effective legal barrier between the property-owning company and tenants or other claimants. An undisclosed agency would leave the principal vulnerable to third-party claims and would entitle the agent to an indemnity. Inferring agency was therefore wholly inconsistent with the express purpose of the arrangement. Payments and instructions within the family business were equally consistent with its informal operation and did not require the imposition of a legal agency relationship.

3. The claim against the director was pleaded and argued as dependent upon rents being due from the management company under the alleged agency. Once the agency and accounting obligation failed, the dependent breach of duty claim also failed.

4. The cross-appeal concerning invoices was dismissed. The payments accorded with a policy adopted with the controlling shareholder’s full knowledge and approval. Any breach of duty that might otherwise have occurred was approved by the shareholders, and the property company suffered no recoverable loss.

5. The limitation appeal and the cross-appeals concerning remuneration and a trust of rents did not arise. The court nevertheless indicated that the limitation point had been raised too late, that the trust claim was incompatible with the management company’s protective role, and that an agent could retain remuneration agreed with its principal even without a binding contract.

6. Permission to seek a limited account for commercial rents by amending the respondent’s notice was refused. That alternative case should have been advanced at trial and, under the relevant practice direction associated with the Civil Procedure Rules 1998, raised conditionally in the respondent’s notice. It would have required new evidence and a second trial. No special circumstances justified the exceptional course of remittal.

1. Court of Appeal (Civil Division): By [2019] EWCA Civ 127, unanimously allowed the appeals against the orders requiring the management company and director to account, dismissed the cross-appeal concerning invoices, and refused permission to pursue a new limited-account claim and remittal.

2. High Court, Chancery Division: HH Judge Simon Barker QC, sitting as a deputy High Court judge, held that the management company was the property company’s agent and ordered accounts against it and the director. He dismissed the claims that rents were held on trust and that invoice payments caused recoverable loss. No neutral citation is stated in the judgment.