Shaw and another v Sequence (UK) Ltd

Estate agent — Fraudulent misrepresentation — Compensation — Measure of damages –Whether exchange of contracts for sale of property but for fraud — Claim allowed in part In 1999, the claimants, a husband and wife, purchased a large detached property in London for £310,000. They renovated it to a high standard at a cost of approximately £125,000. In 2003, they instructed the defendant estate agent to sell the property and entered into a six-week sole agency agreement with a suggested asking price of £1 million. By the end of that period, no offer had been received. However, G, an employee of the defendant, maintained that an offer of £950,000 had been made. That statement was in fact untrue. A few weeks later, the claimants became aware that no offer had been forthcoming. A new agent, as well as the defendant, continued to market the property. Two months later, the claimants withdrew the property from the market. They brought an action against the defendant, alleging breach of contract and negligence and fraudulent misrepresentation by G. Their application for summary judgment was granted by a master, who found that they were entitled to damages for fraudulent misrepresentation. The measure of damages depended mainly upon whether, but for the fraud, the claimants would have exchanged contracts before the property had been withdrawn from the market. Held: The claim was allowed in part. The claim for damages based upon a reduction in the equity in the property was unsustainable. Analysed fairly, it was clear that the property had been put on the market at a difficult time, and at an unattractive price. The fraud had been incidental to those matters and was an attempt on the defendant’s part to boost interest in the property. In all the circumstances, the court had been satisfied that the claimants would not have sold the property even had no fraud occurred. Many of the problems in this case appeared to flow from a failure to comprehend the nature of a contract with an estate agent. Contracts under which owners place the sale of their property in the hands of agents on commission terms do not constitute contracts of employment in the ordinary sense. An agent will be under no obligation to do anything. Such contracts merely represent promises that bind on the principal to pay a sum of money upon the occurrence of a certain event, which will involve the rendering of some service by the agent: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 considered. However, the claimants were entitled to general damages for worry, strain and inconvenience. The correct measure of damages for deceit was one that would put the claimant in the position that it would have been in had the false representation not been made, and not in the position that it would have been in had the representation been true. Thus, in the present case, the claimants were not entitled to be compensated as though a sale at £950,000 had proceeded. It was clearly established that such damages should, in principle, be modest, and £1,000 would be awarded to each claimant under that head. In addition, the defendant had aggravated the position by its over-contentious attitude and its failure to apologise for what had occurred. The court was therefore prepared to increase by £1,500 each the amount otherwise awarded, making a total of £2,500 each. David Stancliffe (Solicitor Advocate) (instructed by Southcombe & Hayley) appeared for the claimants; David Sears QC (instructed by Sequence (UK) Ltd) appeared for the defendant. Eileen O’Grady, barrister