McLaughlin v Duffill

  Judgment   The Chancellor: 1.      This is the appeal of Ms Duffill brought with the permission of Jacob LJ from the order of District Judge Khan sitting as a judge of the Manchester County Court, made on 6 June 2008.  District Judge Khan made an order for specific performance of a contract which he found to have been made on 14 July 2006 between the claimant, Mr McLaughlin, and Ms Duffill by her agent for the sale of 16 Sandpiper Drive, Adswood in Stockport, Cheshire.  The sale was to be by Ms Duffill to Mr McLaughlin at a price of £115,000.  2.      The property in question had been brought by Ms Duffill in 1997.  It is a three-bedroom semi-detached house.  Ms Duffill was a teacher and at the material time was living and working in Hertfordshire rather than in the property itself.  By the summer of 2006 she determined that she wished to sell the property in order to fund a new business with the proceeds of sale.  Accordingly on 6 June 2006 she instructed a firm of local agents, Main & Main, to sell the property by auction with a reserve price of £140,000.   3.      A week later on 14 June she instructed a firm of conveyancers to act on her behalf, HL Interactive, a firm which had been suggested to her by Main & Main, and on their request they supplied to Main & Main a draft contract suitable for a sale by auction. The auction was held on 6 July 2006 but the property did not sell.  Accordingly, in accordance with the terms of Main & Main’s engagement for sale by auction — see clause five — the property was put on the open market for sale at the price of £140,000.  Thereafter there were various telephone conversations between Ms Dean, the individual at Main & Main responsible for the sale, and Ms Duffill as their client concerning various offers made by the claimant, Mr McLaughlin.  Following those conversations, on 14 July 2006 contracts were exchanged for the sale of the property to Mr McLaughlin for £115,000.  One part was dated 14 July and was executed by Mr McLaughlin.  The other was dated 4 July and was executed by Ms Dean as agent.   Although it did not specify that at the point of signature it was quite clear that she was acting or purporting throughout as agent for Ms Duffill as vendor.   Under the terms of that contract the completion date was set for 4 August 2006 and it contained a number of special conditions, 15 to 21, which were applicable only to a sale by auction as had been originally intended.  On 14 July 2006 Main & Main sent the contracts so exchanged and signed by Mr McLaughlin to HL Interactive acting for Ms Duffill, and Ms Dean in the covering letter described it as a sale “by way of auction”.  All this time Ms Duffill had been in Hertfordshire where, as I said, she is working as a teacher.  On 28 July 2006 she returned to Manchester and, according to her, discovered for the first time that she was apparently committed to a sale of the property to Mr McLaughlin at a price of £115,000.  As I have indicated, the date fixed for completion was 4 August but the sale was not completed.  By 9 August the solicitors for Mr McLaughlin lodged a caution, describing the contract as dated 4 July, and on 10 August the same solicitors served a notice to complete on Ms Duffill on or before 24 August, again referring to the contract as being made on 4 July.  Proceedings for specific performance were commenced on 1 March 2007 by the issue of a claim form by Mr McLaughlin from the local district registry.  When Ms Duffill served a defence on 13 July, she admitted that she had agreed to sell the property at £115,000, but “subject to contract”.  But she denied that she had ever authorised Ms Dean to sign any contract on her behalf.  In addition she contended that the contract was void for want of compliance with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, not only with regard to the lack of any signature of hers but also because of the inclusion of the terms relating to a sale by auction. The claim was transferred by District Judge Smith to the Manchester County Court where it came on for trial before District Judge Khan on 6 June 2008.  Mr McLaughlin appeared by counsel; Ms Duffill appeared in person, but, I think, with the assistance of a MacKenzie friend.  The judge heard oral evidence from Ms Dean, from Ms Duffill, and Mr McLaughlin, and considered the written evidence adduced before him by the parties.  This included of course the correspondence between the various firms of solicitors, the two forms of contract which had been exchanged and the various witness statements.  He gave judgment on the same day and the material conclusions to which he came can be described as follows.  First, the burden was on Ms Duffill to prove that she did not give Ms Dean authority to sign the contract on her behalf, and on Mr McLaughlin to prove that the contract was binding.  Second, Ms Dean required actual authority to contract on behalf of Ms Duffill, but that such authority might be given only orally.  Third, to comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, the contract must include all the terms agreed but might also include terms which are inapplicable in the circumstances, such as those relating to the auction sale.  Fourth, the judge reviewed the oral evidence of the three persons involved: Mr McLaughlin, Ms Dean and Ms Duffill.  He preferred the evidence of Mr McLaughlin and Ms Dean to that of Ms Duffill and concluded as a matter of fact that authority to sign the contract had been given orally by Ms Duffill to Ms Dean on or about 14 July 2006 as well as on two earlier occasions.  Fifth, he considered that the contract complied with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, notwithstanding that paragraph 17 and 20 applied to auction sales.  And, sixth, he considered that Mr McLaughlin was entitled to specific performance of the contract but not to damages as there was no evidence to support the claim.  District Judge Khan made an order as to costs and refused permission to appeal on 27 June.  Ms Duffill issued her appellant’s notice on 18 July 2008.  Longmore LJ granted a stay of execution on the judgment for specific performance, and a further order to that effect was made by District Judge Khan on 5 September.  Permission to appeal to this court was given by Jacob LJ on 10 October 2008.  He gave permission on two grounds only, namely whether or not section 53 of the Law of Property Act 1925 applies and whether or not the judge was right to hold that the burden of proof lay on Ms Duffill to prove that she did not give authority to Ms Dean.  He refused permission on all other points.  It is right that I should read the extended reasons that Jacob LJ gave: “1. Without the benefit of argument, it seems to me at the moment that s.53 is a complete answer to the claim.  It provides that: ‘no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law.’ 2. Heard v Pilley, relied upon by the DJ was a case where the contract was signed by the purchaser’s agent.  As between that agent and the defendant there was a perfectly good contract.  The contest was between the principal and his defaulting agent — a quite different thing from the creation of an interest in land. 3. Although s.53 was not drawn to the DJ’s attention (as it seems it should have been) it is a pure point of law which, subject of argument, is fit to be taken in the CA. 4. I am also doubtful about the burden of proof point.  Whilst an agent can bind his principal within his actual or ostensible authority, at present I see no reason to suppose that an estate agent has ostensible authority to bind his principal.  Estate agents normally do not sign for their principals in those circumstances it would seem to follow that the burden of proof of actual authority would lie on he who asserts the agent had that authority.  I find it difficult to imagine a purchaser being satisfied with the estate agent’s signature unless he has made a specific enquiry as to the agent’s authority to sign and at least got written confirmation from the agent as to having purely oral authority. 5. Miss Duffill seeks to raise a host of other points and some new evidence.  There is no merit in any of these.” In this court Ms Duffill has had the benefit of the advice and assistance of Mr Richard Green as her MacKenzie friend.  We expected her to advance the arguments in support of her appeal herself, and although in opening we heard Mr Green on parts of her case and in her reply read his notes of the argument that he considered that she should advance, the argument has been in effect given to us by Ms Duffill in person.  She did not renew her application for permission to appeal in respect of the various points to which Jacob LJ had referred to as being without merit.  Accordingly, there are two points on which she was granted permission by Jacob LJ: namely, (1) the burden of proof; and (2) whether section 53(1)(a) Law of Property Act 1925 applies so as to invalidate the contract as having been entered into by an agent with authority conferred only orally.  As to the burden of proof, the submission by and on behalf of Ms Duffill is that she emphasised that the district judge had put on her the obligation to prove a negative when it was Mr McLaughlin who was relying on the contract to which he alleged she was a party.  She considered this to be unfair.  She was also aggrieved that the judge had rejected her written evidence in favour of the oral evidence of Ms Dean.  As to the section 53 point, she enthusiastically espoused the view of Jacob LJ.  She pointed out that a specifically enforceable contract operates in equity as a transfer of the equitable interest in the land, and suggested that for this reason it should be recognised as a disposition of an interest in land for the purposes of section 53(1)(a) Law of Property Act 1925. She commented that if it were not so, the owner of land might lose it without ever having signed any formal agreement at all.  She suggested that this would be the result if her appeal was not allowed, because the outstanding order of the district judge providing for the transfer to be executed by the district judge by way of specific performance of the contract she had never signed.  She summarised this consequence as ‘a conveyance by an estate agent’.  Counsel for Mr McLaughlin sought to uphold the judge’s judgment.  As far as the burden of proof is concerned, he accepted that the judge put the burden on Ms Duffill by paragraph 15 of his judgment.  He also accepted that the correctness of that approach was at least arguable.  But he suggested that the point is immaterial in this court as the judge did not decide the issue of authority on any burden of proof basis.  The judge preferred the evidence of Ms Dean to that of Ms Duffill and found as a fact that the latter had authorised the former to sign the contract on her behalf – see paragraph 25 of his judgment.  As far as section 53 is concerned, counsel submitted that it had no application to this case for the simple reason that the contract does not itself dispose of any of interest in land.  He relied upon various passages and text books including Megarry & Wade Seventh Edition paragraph 15-041, Chitty on Contracts 29th Edition 4-036 and 4-055, Target Holdings v Priestley [2000] P & CR 305 and Heard v Pilley [1869] 4 Ch App 548.  I will deal with the burden of proof issue first.  As noted in Phipps on Evidence 16th Edition paragraph 607, on whom lies the burden of proof may be decisive in cases in which the court is unable to make findings of fact on a balance of probabilities.  By contrast, if findings of fact are made, then, subject to appeal, those findings will determine the outcome of the case.  In this case the judge considered the oral and documentary evidence at some length.  Whether Ms Duffill had authorised Ms Dean to sign the contract on her behalf depended on which of their rival versions of events the judge accepted.  In paragraph 30 of his judgment he made a clear finding of fact that Ms Duffill did give oral, or, as he described it, verbal authority to Ms Dean to sign the contract on her behalf.  Once that finding was made, and it is not challenged on this appeal, the question of on whom lay the burden of proof becomes immaterial.  Accordingly I see nothing in this point sufficient to warrant interfering with the order which District Judge Khan made. I turn then to the issue arising in respect of section two of the Law of Property (Miscellaneous Provisions) Act 1989.  That section replaced section 40 of the Law of Property Act 1925.  Thus for many years section 53(1)(a) of the 1925 Act, on which Ms Duffill relies, operated in parallel with the provisions of section 40 of the same Act, which has now been superseded.  If the point on which Ms Duffill now relies is a good one, one might have expected it to have been recognised as such in the period between 1925 to 1989, but the opposite is the case.  I start by quoting section 53 of the Law of Property Act 1925.  That provides as follows:   “(1) Subject to the provision hereinafter contained with respect to the creation of interests in land by parol— (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law;” Sub-paragraph (b) relates to declarations of trust and sub-paragraph (c) relates to dispositions of the equitable interest or trust subsisting at the time of the disposition, and I do not need to quote them in full.  Subsection (2) provides that this section does not affect the creation or operation of resulting implied or constructive trusts.   Thus, subsection (1)(a) applies to the disposition of an interest in land.  It must be in writing, signed by the person conveying the same or by his agent thereunto lawfully authorised in writing.  By contrast, section 40 of the Law of Property Act provided: “(1) No action may be brought upon any contract for the sale or other disposition of land, unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto by him lawfully authorised. (2) This section applies to contracts whether made before or after the commencement of this Act and does not affect the law relating to part performance, or sales by the court.” Thus section 40 applied to contracts for the disposition of an interest in land.  In such a case it was well established that the memorandum might be signed by an agent whose authority was conferred only orally.  One can start with the notes note in Wolstenholme and Cherry’s Conveyancing Statutes 13th Edition volume one page 104, where in the note to section 40 it is stated: “The agent under this section need not be authorised in writing (Waller v Endon & Cox 1723 — 2 Eq Cas Abr. 50; Mortlock v Buller – 1804 — 10 Ves. 291 ff.; Heard v Pilley – 1869 – LR. 4 Ch. App. 548…)” The decision of the Court of Appeal in Heard v Pilley, to which the note I have just read refers, is in my view precisely in point.  In that case, Mr Heard was the alleged purchaser, Mr Pilley was his agent and Mr Sugden was the alleged vendor.  The bill alleged a written agreement between Pilley and Sugden for the purchase of a lease from Mr Sugden by Mr Heard.  It also averred that Mr Pilley had entered into that contract as agent for Heard with oral authority only.  Mr Heard sought specific performance of the agreement against both Mr Pilley as agent and against Mr Sugden, the alleged seller, and both of them demurred.  The demurrer was overruled by the judge and there was an appeal brought by both the vendor and by Mr Pilley, the agent.  It is instructive to have regard to some of the arguments as reported in the Chancery Appeals Report.  At page 549 in the argument of Mr Glasse QC for the agent, Mr Pilley, appears the following: “But our principal ground of objection is, that the bill alleges no written appointment of Pilley as the Plaintiff’s agent; the transaction between them was entirely by parol.  This is, therefore, an attempt to constitute Pilley a trustee for the Plaintiff by a parol agreement, which is contrary to the 8th section of the Statute of Frauds.” Then counsel went off to refer to certain authorities.  No argument is reported from counsel for the vendor, Mr Sugden; but in the argument Mr Cotton QC for the plaintiff, Mr Heard, there is this passage on page 550: “The Plaintiff is not seeking relief against Pilley, but asked for specific performance against Sugden, alleging that the contract with Sugden was in reality the Plaintiff’s contract;” And then later on counsel submitted: “There is a distinction between the 1st and 8th sections of the Statute of Frauds: in the 1st section, which relates to conveyances of interests, it is required that the agency should be evidenced by writing; but this is not required by the 8th section, which treats of agreements.” The judgment of Selwyn LJ starts at 551, and towards the foot of that page appears the following passage: “Then with regard to the agency of Pilley, in the first place, the fact of the agency is distinctly stated in the paragraph which I have read.  And although it may be true that he afterwards disputed or questioned that agency, the fact must be taken as clear and indisputable.  This bill is therefore brought into the category of those very common bills — a bill alleging a contract entered into in writing with a person averred to be the agent of the Plaintiff, and praying specific performance against the agent and against the person with whom that agent has entered into the contract.  That is a bill of a very ordinary description, and it is a startling proposition to say that unless the bill alleges that the agency was constituted by writing, such a bill cannot be sustained.” The Lord Justice then went on to consider the case of Bartlett v Pickersgill [1760] 4 East 578n, and in the middle of page 552 said this in relation to that case: “That entirely distinguishes that case from the present, which is an ordinary suit by a principal, bringing before the Court an agent and the person with whom the contract has been entered into.  Assuming the case of Bartlett v Pickersgill to be good law, it cannot, I think, be considered as laying down any such general proposition as is contended for by the Defendants.” The other member of the court was Giffard LJ and he said in a short judgment: “…it is enough to say that there has been no conveyance from Sugden to Pilley, and that the whole object of the bill is to enforce specific performance between the Plaintiff and Sugden.” It is true that that case concerned a claim for specific performance by a seller, not a buyer, a distinction to which Jacob LJ drew attention in giving permission to appeal.  But there is nothing in the judgments to which I have referred to suggest any distinction based on whether the claimant is the buyer or the seller.  The proposition stated by Selwyn LJ on page 551 is of general application to what he described as those very common bills, and later on as a bill of a very ordinary description.  He drew no distinction between cases relating to a buyer or a seller; the proposition which he adumbrated was common to both.  There is a distinction to be drawn, I think, between a contract for the disposition of an interest in land to which section 40 applies, and a disposition of an interest in land to which section 53(1)(a) applies.  This was pointed out by HHJ Hicks QC in Target Holdings v Priestley [2000] P & CR 305, to which counsel for Mr McLaughlin referred us.  That case concerned the variation of a mortgage and whether the variation had to comply with section 2 of the Law Reform (Miscellaneous Provisions) Act 1989.  Most of the judgment is irrelevant to what we are now considering.  But in paragraph 51 HHJ Hicks said this: “What I have called the question of principle is therefore whether s.2 [that is to say of the 1989 Act] (and before it s.40, for there is no ground of distinction in this regard) applies to dispositions of interests in land themselves as well as to (executory) contracts for such dispositions.” Later in paragraph 53 he continued: “In the light of history and conveyancing practice, however, I am satisfied that contracts of disposition, as distinct from executory contracts for disposition, are not caught…” He indicated that was for two main reasons.  At the foot of the page at paragraph 56 he said this: “The position, therefore, is that in contrast to the precursors of s.2 of the 1989 Act the requirements for the form of dispositions of legal estates and interests stem from a wholly distinct line of common-law development and statutory regulation, while those for the creation and disposition of equitable interests, although associated with s.4 in the Statute of Frauds, were separated from s.40 in the 1925 Act, in which Pt II is divided into “Contracts”, running from s.40 itself to s.50, and “Conveyances and other Instruments”, running from 51 to 75. I conclude that s.40, and therefore its successor s.2, should not be construed as affecting instruments for which the formal or evidential requirements are governed by ss.51 to 55 of the 1925 Act.” The distinction pointed out by HHJ Hicks was picked up by the editors of Chitty on Contracts 29th Edition volume one paragraph 4-055.  I do not think I need quote it.  Accordingly an historical approach to section two of the Law of Property (Miscellaneous Provisions) Act 1989 would suggest that the contract could be signed by an agent whose authority was conferred only orally.  So far I have not referred to the provisions of that section.  Subsection (1) provides that: “(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.” Then subsection (2) is not relevant for present purposes.  Subsection (3): “(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract.” There is nothing in that section to suggest that the requisite authority can only be conferred in writing.  Nor is there anything to that effect in the report of the Law Commission, which initiated this section in the 1989 Act.  Thus in Bowstead on Agency 18th Edition paragraph 8-004, the editors state this: “The New Law.  Section 40 of the 1925 Act was however repealed and replaced by section two of the Law of Property (Miscellaneous Provisions) Act 1989 which requires that such contracts actually be in writing signed by each party.  This provision also allows signature by agents but in different words.  It requires that the signature be ‘by or on behalf of each party to the contract’.  It does not require that the agent himself has written authority.  Although the Law Commission working paper which eventually led to the Act avowed an intention to let the ordinary principles of agency operate, it is not clear how they were intended to do so.  If the agent signs for the principal whom he named, the matter is straightforward.” I end the quotation there because the rest of it goes on to deal with the issue as relating to undisclosed principles, which is not material to this case.  Thus, the normal law of agency applies to transactions within section two of the 1989 Act.  By that law the authority may be conferred orally as well as in writing.  I see no reason to imply any restriction when none previously existed, the Law Commission did not suggest that one should be imposed and Parliament did not see fit to do so expressly.  I should also deal with the argument addressed to us by Ms Duffill and foreshadowed in the written argument provided to the court before the hearing.  It is to the effect that the contract together with an order for specific performance is the equivalent of a conveyance, and is therefore a disposition of an interest in land within section 53(1)(a).  This is true up to a point, because if the contract is specifically enforceable then the principle that equity regards as done that which ought to be done will apply.  One consequence is that the purchase acquires an immediate equitable interest in the property – see Megarry & Wade 7th Edition paragraph 15-052 and the case there cited.  The contract would be completed by the execution of the relevant transfer either by the vendor, Ms Duffill or, as seems likely in this case, by the district judge on her behalf under the order of specific performance. But that is the consequence of the availability of the remedy of specific performance.  The remedy is discretionary and may be lost for a number of reasons.  Indeed, it may not even be sought by a purchaser.  The existence of the contract is a necessary precondition for an order of specific performance, but it is not itself and without more a disposition of the land, the subject matter of the contract, or of an interest in it.  The principle of equity applies because of the theoretical judicial intervention constituted by the availability of the discretionary remedy of specific performance.  Without that theoretical intervention the contract would remain just that;  it could not constitute a disposition of any interest in the land agreed to be sold.  For these reasons I would reject this objection to the judge’s order also.  The fact is that there is nothing in section two to suggest that written authority is required to enable an agent to contract to buy or sell land.  There is no reported case, whether in respect of section 40 of the Law of Property Act 1925 or section two of the Law of Property (Miscellaneous Provisions) Act 1989, to suggest it.  All the text books to which I have referred, namely Megarry & Wade, Chitty on Contracts and Bowstead on Agency, state unequivocally that written authority is not required.  For all these reasons I would dismiss this appeal.  In my view, on the findings of fact of the district judge, which are not subject to appeal, Mr McLaughlin is entitled to his order for specific performance; and the remedy of Ms Duffill, if any, does not lie against him.  Lady Justice Smith:  I agree. Lord Justice Aikens:  I also agree. Order: Appeal dismissed