Conway and another v Prince Eze

Sale of land – Breach of contract – Agency – Bribery – Respondents exchanging contracts for sale of property to appellant – Appellant failing to complete – Respondents claiming damages for breach of contract – High Court giving judgment for respondents – Appellant appealing – Whether relationship between agent and appellant meaning agent incapable of being bribed – Whether promise of payment by respondents to agent rendering agreement to purchase property void or voidable – Appeal dismissed The parties exchanged contracts for the sale by the respondents to the appellant of their property at 86 Uphill Road, London, NW7 for £5 million. The appellant later decided not to proceed with the purchase and failed to comply with a notice to complete. The respondents claimed damages for breach of contract; the alleged losses included the difference between the price agreed with the appellant and the reduced price of £4.2 million achieved on the subsequent sale of the property to another purchaser, as well as costs incurred for bridging finance to enable the respondents to purchase another property. The appellant resisted the claim on the principal basis that the contract was concluded following the respondents’ promise to pay a bribe or secret commission to his agent (O) which rendered the contract void or voidable and unenforceable by them. Alternatively, if the contract was enforceable by the respondents, the appellant challenged the amount of damages claimed. The Judge gave judgment for the respondents in the sum of £1,041,389, having found that the contract was enforceable despite the promise of payment of a fee by them to O which was not revealed to the appellant: [2018] EWHC 29 (Ch); [2018] PLSCS 10. The appellant appealed contending, amongst other things, that the judge was wrong to find that the relationship between O and the appellant was such that O was incapable of being bribed and that a payment of £75,000 by the respondents to O did not render the agreement to purchase the property void or voidable. Held: The appeal was dismissed. (1) In order for the law of bribery and secret commissions to be engaged there had to be a relationship of trust and confidence between the recipient of the benefit or the promise of a benefit and his principal (used in the loosest of senses) which put the recipient in a real position of potential conflict between his interest and his duty. Not all agents would be in such a position and the relationship might arise where there was no agency at all. It was not helpful to consider what might be considered to be the paradigm of any particular type of agent, whether an “introducing agent” or otherwise. It all depended on the nature of the individual’s duties and which of those duties was engaged in the precise circumstances under consideration. Although the relationship of principal and agent was fiduciary, not every person described as an “agent” was the subject of fiduciary duties and a person described as an agent might owe fiduciary duties in relation to some of his activities and not others: Novoship (UK) Ltd v Mikhavlyuk [2012] EWHC 3586 (Comm) and New Zealand Netherlands Society “Oranje” v Kuys [1973] 1 WLR 1126 (PC) applied. (2) In the context of bribes and secret commissions, where necessary, a broad view was taken of the necessary fiduciary relationship. The real question was whether the person receiving the benefit or the promise of a benefit was acting in a capacity which involved the repose of trust and confidence in relation to the specific duties performed rather than on some general basis; and whether the payment to him in that capacity was such that a real potential conflict between his interest and his duty arose. The requirement that the recipient of the payment or the promise of payment had to be someone with a role in the decision-making process in relation to the transaction, or someone who was in a position to influence or affect the decision taken by the principal, was no more than a means of satisfying the central criterion that the recipient owed fiduciary duties to the principal in relation to the transaction in question and a means of determining the extent of his obligations and fiduciary duties: Reading v The King [1949] 2 KB 232, Boardman v Phipps [1967] 2 AC 46, Bristol & West Building Society v Mothew (t/a Stapley & Co) [1998] Ch 1, McWilliam v Norton Finance (UK) Ltd (in liquidation) [2015] EWCA Civ 186; [2015] PLSCS and Haringey London Borough Council v Ahmed [2017] EWCA Civ 1861; [2017] PLSCS 208 followed. (3) The proposition that the judge was wrong to decide that the promise of a secret payment to a person acting in a purely “ministerial” role in relation to a transaction did not engage the law of bribery and secret commissions was neither entirely apposite nor fair. The judge had considered the factual circumstances including the nature of the relationship and the precise task which was being undertaken in detail, made his findings, applied the law and reached an evaluative judgment about the obligations and duties attaching to the actual relationship in the actual transaction. There was no error in the way in which the judge carried out his analysis of the facts and he had legitimate and proper grounds for reaching the decision he did. (4) The judge had been right to concentrate on the actual state of affairs between O and the appellant rather than what the respondents believed the circumstances to be. It was only the actual state of affairs which could give rise to the obligations and fiduciary duties sufficient to engage the law of bribery and secret commissions. Furthermore, the judge was entitled to find that O was nobody’s agent at the outset, that he sought a “finder’s fee” from the respondents and that when the appellant came on the scene, he was offered a pre-packaged deal. He was entitled to find on the facts that there was no other relationship between them than that of salesman and recipient of information and that the appellant’s decision to proceed with the purchase did not involve agency of any other kind of relationship that could fall within the scope of the rules on bribes or secret commissions. Edmund King QC (instructed by Watson Farley & Williams LLP) appeared for the appellant; Matthew Collings QC and GL Darbyshire (instructed by Kennedys Law LLP) appeared for the respondents. Eileen O’Grady, barrister Click here to read a transcript of Conway and another v Prince Eze