Hooper and others v Gorvin
Mr Kevin Garnett QC, sitting as deputy judge of the division
Lessees of different units on industrial estate learning that freehold up for sale – Claimant lessees authorising defendant lessee to negotiate with freeholder on their behalf – Defendant buying freehold for his own account – Claimants alleging freehold held by defendant on trust – Whether defendant had assumed role of fiduciary – Claim allowed
The 10 claimants and the defendant (the lessees) were leasehold owners of their respective premises on an industrial estate. Six of the leases were for a term of 999 years, and four were for a term of 21 years. In or about 1992, the lessees formed an action group in order to co-ordinate their dealings with their common landlord, with whom they were in serious dispute over service charges. In March 1993 the defendant became spokesman for the group. At a meeting in October 1994, where legal action against the landlord was decided upon, the defendant informed the group that the freehold of the estate had been put up for sale. It was agreed, at a group meeting in November 1994, that the defendant would enter into negotiations with the landlord on behalf of the lessees.
Thereafter, the defendant proceeded to negotiate with the landlord, but did so, to all intents and purposes, as if buying on his own account. In January 1995 the defendant pulled out of the negotiations upon learning that judgment had been given against the landlord in the service charge dispute. On the same date, he wrote to the claimants, referring to the new situation created by the outcome of the litigation, with regard to the proposed purchase, and called for a meeting to discuss “our next course of action”. In February 1995 the defendant made a fresh offer to buy the freehold for £160,000, which was accepted. At a meeting in February 1995, the defendant announced to the claimants that he had bought the freehold and that he was now their new landlord. In March 1995 the freehold was conveyed to the defendant, who thereafter dealt with the claimants as their landlord.
Lessees of different units on industrial estate learning that freehold up for sale – Claimant lessees authorising defendant lessee to negotiate with freeholder on their behalf – Defendant buying freehold for his own account – Claimants alleging freehold held by defendant on trust – Whether defendant had assumed role of fiduciary – Claim allowed The 10 claimants and the defendant (the lessees) were leasehold owners of their respective premises on an industrial estate. Six of the leases were for a term of 999 years, and four were for a term of 21 years. In or about 1992, the lessees formed an action group in order to co-ordinate their dealings with their common landlord, with whom they were in serious dispute over service charges. In March 1993 the defendant became spokesman for the group. At a meeting in October 1994, where legal action against the landlord was decided upon, the defendant informed the group that the freehold of the estate had been put up for sale. It was agreed, at a group meeting in November 1994, that the defendant would enter into negotiations with the landlord on behalf of the lessees.
Thereafter, the defendant proceeded to negotiate with the landlord, but did so, to all intents and purposes, as if buying on his own account. In January 1995 the defendant pulled out of the negotiations upon learning that judgment had been given against the landlord in the service charge dispute. On the same date, he wrote to the claimants, referring to the new situation created by the outcome of the litigation, with regard to the proposed purchase, and called for a meeting to discuss “our next course of action”. In February 1995 the defendant made a fresh offer to buy the freehold for £160,000, which was accepted. At a meeting in February 1995, the defendant announced to the claimants that he had bought the freehold and that he was now their new landlord. In March 1995 the freehold was conveyed to the defendant, who thereafter dealt with the claimants as their landlord.
Having at first assumed that nothing could be done, the claimants eventually questioned the propriety of the defendant’s purchase. In December 1999 they issued proceedings for a declaration that the defendant held the freehold on trust for himself and the claimants, subject to being paid the appropriate portion of the purchase price. At a High Court hearing, the judge was unable to find that the lessees had entered into a partnership with each other, or that they had gone so far as to authorise the defendant to act as a purchasing agent on their behalf. The defendant contended that, in the absence of such findings, there was no basis for subjecting him to any fiduciary duty towards the claimants.
Held: Judgment was given for the claimants.
1. The categories of fiduciary relationships were not closed. A fiduciary was someone who had undertaken to act for, or on behalf of, another in a particular matter, in circumstances that gave rise to a relationship of trust and confidence, the distinguishing obligation being one of loyalty: see per Millet LJ in Bristol & West Building Society v Mothew [1998] Ch 1 at p18, explaining that a fiduciary must not, inter alia, act for his own benefit without the informed consent of his principal. In assessing whether the relationship was a fiduciary one, it was a relevant (though not determinative) factor, particularly in a commercial context, whether the alleged fiduciary knew that the principal would act to his detriment in reliance upon the agreement reached: Pallant v Morgan [1953] Ch 43 and Yaxley v Gotts [1999] 2 EGLR 181 considered.
2. From what had transpired at the November meeting, it was clear that someone else would have been nominated to negotiate on behalf of the lessees, had the defendant been unwilling to act. It was also clear that, had the defendant told the meeting that he intended to try to buy the freehold for himself, the claimants would have attempted to buy it for themselves. To that extent, therefore, they had acted to their detriment: cf Pallant v Morgan. The upshot of that meeting was that the other lessees expected and trusted the defendant to act in their collective interests, and not his own.
Daniel Crowley (instructed by Beachcroft Wansbroughs) appeared for the claimants: David Parry (instructed by Harold G Walker & Co, of Bournemouth) appeared for the defendant.
Alan Cooklin, barrister
