Conway & Anor v Eze

On 7 August 2015 the parties exchanged contracts for the sale by the claimants, Mr and Mrs Conway, to the defendant, Prince Eze, of their property at 86 Uphill Road, London, NW7 4QE (“the Property”) for a price of £5 million. Prince Eze later decided not to proceed with the purchase and failed to comply with a notice to complete. In these proceedings the Conways claim damages for breach of contract; the substantial losses alleged include the difference between the price agreed with Prince Eze and the price achieved on the subsequent sale of the Property to another purchaser, as well as costs incurred by the Conways in respect of bridging finance to enable them to proceed with their purchase of another property. The Conways acknowledge that they must give credit for the deposit of £500,000 that was paid by Prince Eze upon exchange of contracts.

Prince Eze defends the claim on the principal basis that the contract was concluded following the Conways’ promise to pay a bribe or secret commission to his agent, Mr Richard Obahor; this, he says, rendered the contract void or at least voidable and unenforceable by them. He counterclaims a declaration to that effect and the repayment of his deposit. Alternatively, if the contract is enforceable by the Conways, Prince Eze takes issue with the amount of damages claimed.

For the reasons set out below, I find that the contract between the parties was valid and enforceable, that Prince Eze was not entitled to avoid the contract but was in breach of contract, and that the Conways are entitled to damages for breach of contract, though not to the full extent of their claim.

The remainder of this judgment will be structured as follows. First I shall say something about the four witnesses who gave evidence at trial; these are also the four most significant people in terms of the unfolding of events. Second, I shall set out the main facts in more detail. It is impractical and unnecessary to recite all of the twists and turns of the abortive sale, but the central issue in the case requires that sufficient minutiae be mentioned to give a reasonable picture of what happened. Third, I shall identify more precisely the issues that arise on the facts. Finally I shall address those issues in turn. My conclusions as summarised in paragraph 3 above mean that the lengthy discussion of two issues in paragraphs 115 to 156below does not form the basis of my decision but is strictly obiter.

I am grateful to Mr Matthew Collings QC and Mr Timothy Becker, who appeared for Mr and Mrs Conway, and to Mr David Mumford QC and Mr Edward Granger, who appeared for Prince Eze, for their helpful oral and written submissions.

Four witnesses gave evidence at trial: Mr Richard Conway, Prince Eze, Mr Richard Obahor and Mr Richard Howarth. They are also the key figures in the events that give rise to these proceedings.

Mr Conway is a businessman with a background in IT consultancy and project management. Although he and Mrs Conway made relevant decisions together, Mr Conway took the lead both in considering the detail and in negotiating the terms of the proposed sale of the Property. He had no particular expertise in property transactions but brought to bear on the matter his keen business sense and his temperamental disposition to get closely involved in what was happening and in the way that others, such as estate agents, were acting on his behalf. To put it another way: he had clear ideas both of what he wanted and of how it might best be achieved. As I shall mention in more detail below, the Conways had particular reasons for wanting the sale to Prince Eze to proceed, and Mr Conway did his very best to ensure that it would. I am unable to take the thoroughly benign view of his conduct that Mr Collings invites me to take. Nevertheless, nothing leads me to doubt his basic honesty, and I think that on the whole his evidence was truthful, although there were occasions when a combination of the natural imperfection of memory and his desire to reconstruct past events in the manner most favourable to his own interests made his evidence less than wholly reliable.

Mr Obahor is a UK-based Nigerian property developer, property manager and (as he describes himself) “acquisition agent”. His work as an acquisition agent involves finding UK properties for British and foreign investors. Sometimes he will look for a property on instructions from a specific client; sometimes he will find a property and then look for a client who would be interested in purchasing it. In either case his role typically involves not only finding the property at the outset but then coordinating the activities of all those involved in the transaction in order to ensure that they are doing what needs to be done and doing it at the right time. Mr Obahor carries on his business interests through a number of corporate vehicles, one of which is Fresco Property Services UK Limited (“Fresco”). It was Mr Obahor who negotiated the terms of sale and introduced the Property to Prince Eze. He, or more properly Fresco, received a payment of £150,000 from Prince Eze and the promise of a payment of £75,000 from the Conways. It is that promise of payment that Prince Eze relies on as entitling him to avoid the contract of sale.

Mr Obahor described himself in evidence as “a professional”. Mr Collings described him as “a chancer”. On the whole I prefer Mr Collings’ description. There is no doubt that Mr Obahor showed himself willing and able to perform his functions as an acquisition agent. However, his conduct in connection with this matter shows him to be someone who has an eye to making easy money by the exercise of brash self-confidence, plausible charm and as many lies as he deems necessary. In his evidence Mr Obahor adopted a penitential tone. Mr Mumford described his performance as a witness as calm, measured and convincing. It did not convince me. In my view he is quite happy to lie whenever he deems it to be in his own interest to do so. However, he does not lie for the sake of it; this means, strangely, that much of his evidence is truthful, accurate and reliable. There are two central areas in which it has to be viewed with particular caution: first, the supposed centrality of his role in the abortive purchase; second, the motivation of his conduct in the transaction.

Prince Eze is a prominent and successful businessman in Nigeria. His main business interests concern gas and oil holdings in Nigeria and across Africa. He also has some relatively small property investments in the UK. Because of the extent of his commercial interests and the pressures on his time, his way of doing business is brisk and focused. Meetings and telephone conversations will typically be concluded within a matter of minutes, and, certainly outside the sphere of his main activities, he delegates matters of detail and practicality to trusted advisers, taking himself only such decisions as merit his attention.

In his closing submissions Mr Collings did not challenge the basic veracity and sincerity of Prince Eze’s evidence, though he urged that on certain points the evidence be treated with caution. I think that caution is certainly required. However, on the balance of probabilities I accept the following important points in Prince Eze’s evidence: that he did not know Mr Obahor before the latter approached him about the opportunity to purchase the Property; that he did not trouble himself greatly about the finer details of the transaction, relying instead on others to take care of such matters; and that he did not know that the Conways had promised to make a payment to Mr Obahor or Fresco.

Nevertheless, there were several unsatisfactory features about Prince Eze’s evidence. First, he tried to make too much of some points that he clearly felt supported his case, such as the trust he reposed in Mr Obahor. Second, parts of his evidence were (in my judgment) simply untrue: for example, I do not believe what he told me concerning his reason for not proceeding with the purchase of the Property, as I shall explain below. Third, his evidence was at times difficult to understand. One reason for this is his obvious impatience with detail. Another reason, perhaps, is that, although he is reasonably proficient in English, it is not his first language or his natural medium of thought or expression. However, when all allowance has been made, Prince Eze’s evidence leaves the uneasy feeling that, as Mr Collings suggested, we have not got to the bottom of things. At this stage I mention only some related points concerning Prince Eze’s relationship with Mr Obahor.

Mr Richard Howarth is an independent private wealth adviser and by 2015 had acted in that capacity for Prince Eze for several years. His role in the proposed purchase of the Property was to arrange the financial side and to have general supervision of the transaction. As a witness he was patently honest, transparent, intelligent and helpful and, subject to the frailty of human memory, his evidence commands confidence.

Mr and Mrs Conway had lived at the Property since 2000 with their children. By 2010 they had decided that they would like to move to Cambridge. This was partly because they regarded Cambridge as a pleasant location with good schools for the children. It was partly also for financial reasons: Mr Conway, having sold his business, had no dependable source of income (certainly, by 2015, when Mr Conway was 60 years of age, the family was living almost entirely off capital), and the Conways hoped to use the proceeds of sale of the Property to discharge the mortgage on it, buy a new home and put some money aside for the future. Accordingly in 2010 they put the Property on the market for sale at an asking price of £7 million, which they reduced to £5,495,000 in 2012. Sometimes they marketed the Property through more than one estate agent at a time in order to maximise the exposure of the Property, in particular to potential purchasers from abroad, and, as the Property remained on the market without attracting acceptable offers, they changed their estate agents roughly every year.

In 2014 the Conways received the first offer to purchase the Property that they found acceptable. It was an offer of £4.8 million from a Chinese citizen called Mr Huang. Mr Huang was introduced not by the estate agent being instructed by the claimants at the time (Savills) but by another agent (Cosway), and an agreement was reached whereby Savills would share their fee with Cosway if the sale to Mr Huang proceeded. The Conways had been disappointed that the agents had not managed to achieve a higher offer from Mr Huang and had pressed Cosway and Savills to use their “collective negotiating skills” to get him to increase the offer to £5 million (Mr Conway’s email to Cosway on 7 May 2014). But they had reluctantly accepted the offer of £4.8 million after Cosway responded, “A property is only worth what one is willing to pay and must say (sic) that we have a fantastic offer for you and now decision time from your end.”

However, the sale did not proceed; Mr Huang withdrew from the transaction because, as an email at the time put it, he was “not happy with inventory list and payment of selling agent’s commission.” This latter reason was a reference to the fact that, as well as taking a fee from the vendor, Cosway was also requiring payment of a fee from Mr Huang. The Conways only learned that Cosway was seeking a fee from the purchaser as well as from them when Mr Huang gave it as a reason for withdrawal, and it came as a surprise to them because, as Mr Conway confirmed in evidence, this was the first time that they had encountered the practice of an introducing agent requiring a fee from both parties to the transaction. In his witness statement Mr Conway had said that a previous estate agent, Saffron, had told him and his wife that it was common practice, when dealing with international buyers, to charge a fee both from the vendor and from the purchaser. However, Saffron cannot have told him this before Cosway became involved; if they had, the Conways would not have been surprised at Cosway’s requirement of a fee from Mr Huang. I found Mr Conway’s attempts in cross-examination to explain at what other time he might have been told that this was common practice to be unconvincing. I accept only that, as a result of the abortive Huang transaction, the Conways knew that agents would sometimes seek a fee from both parties to the transaction.

After Mr Huang withdrew from his proposed purchase, the Conways received no further offers for the Property for several months. Therefore in March 2015 they instructed a different agency, Express Estate Agency Limited, which marketed the Property at an asking price of £5.5 million. The Conways had by now decided that the lowest price they could afford to accept was £5 million, if they were to discharge their borrowings, purchase a particular property in Cambridge that they had identified as suitable and have sufficient capital for the future. That was an optimistic figure. The increase in December 2014 of rates of stamp duty on high-value properties had the effect both of making the Conways’ intended purchase of a new property more expensive and of making the Property more expensive to any prospective purchaser. Mr Conway acknowledged in evidence that he had felt that the prospects of achieving a sale price of £5 million were not good. This is borne out by the expert evidence in the case. The market value of the Property in the period April to August 2015 was £4.2 million according to the defendant’s expert and between £4.5 million and £4.75 million according to the claimants’ expert.

Shortly after being instructed Express Estate Agency arranged a viewing for what they said was an interested international purchaser. The viewing took place on 6 April 2015 and was attended by Mr Obahor. The claimants were present and they and Mr Obahor met for the first time. Mr Obahor told the Conways that he was acting on behalf of a Nigerian person, whose identity had to remain confidential. That was untrue: at that time he had no client with an interest in acquiring the Property and was proceeding speculatively, in the hope of finding such a client, but he thought that the Conways would take his interest in the Property more seriously if they thought he was acting for a specific potential purchaser.

Mr Obahor was accompanied on this initial viewing by two other Nigerian men. Either on that occasion or at some later time, Mr Obahor gave the Conways to understand that these men were aides of his client. I think that he probably gave them this understanding on 6 April, because the Conways clearly did not believe that the men were just random people attending at the Property for no good reason. However, the Conways had no direct conversation with the men.

In the days following the first viewing, negotiations took place directly between Mr Obahor and Mr Conway, rather than through the estate agent. Mr Conway’s evidence, which I accept, was that he and Mrs Conway assumed all along that Mr Obahor had authority to act on behalf of his unnamed client under a power of attorney, though Mr Obahor had not said so in so many words and did not produce any written authority until much later. The Conways rejected an initial offer of £4.5 million. They tried to achieve a price of £5.1 million, but Mr Obahor said that his client would pay no more than £5 million, and within a few days a price of £5 million had been agreed. At this stage Mr Obahor was telling the Conways that his client was looking to exchange contracts around the first week of May and to complete the purchase by the end of May.

In his witness statement in these proceedings, Mr Obahor said that, although he regarded the agreed price as representing “an ok deal”, he would have made more effort to negotiate a lower price if he had been buying on his own account or focusing on the interests of the buyer: he stated, “the way I looked at it was that if I found a client who was happy to pay £5 million, then so be it.” That was also the tenor of his oral evidence. That evidence has an element of truth but is not to be accepted without qualification. It is certainly true that Mr Obahor was carrying out the negotiations neither for himself (in the sense that he was not intending to be the purchaser) nor for any other specific person, so he had no particular interests other than his own to consider. The kind of purchaser he would look for was unlikely to be much concerned with a few hundred thousand pounds here or there; if, however, he proved to be so concerned, that was no great matter to Mr Obahor, whose negotiations for the Property had been purely speculative. If he did find a purchaser willing to proceed at the agreed price, a percentage-based commission would be larger if the agreed price were higher. On the other hand, I am satisfied that the negotiations were genuine and were conducted over a full week and that Mr Obahor did not simply capitulate to the Conways’ demands. It seems to me probable that his instincts as a property speculator caused him to engage seriously in the competitive process of seeking to arrive at a favourable price.

The agreement was recorded in a memorandum of sale dated 15 April 2015, which named the purchaser as Roudo Limited, a Nigerian company in which Mr Obahor had an interest. Roudo Limited never had any genuine involvement in the proposed purchase; it was simply a convenient name to hold out as supposedly being the corporate vehicle of the unnamed individual on whose behalf Mr Obahor was supposedly acting.

Having reached the agreement to sell the Property, the Conways promptly reached an agreement, subject to contract, to purchase the property they wanted in Cambridge (“the New Property”) for £2.9 million.

The Conways instructed Chadwick Lawrence to act as their solicitors in the sale and asked Mr Obahor to send proof of funds to that firm. Proof of funds was received from Roudo Limited on 16 April. (Of course, there was in truth never any intention on Mr Obahor’s part that Roudo Limited would have anything to do with the purchase.) Mr Obahor told the claimants that his Nigerian contact wanted to complete the purchase by the end of May. However, he still did not have a purchaser; he mentioned a proposed timetable for the transaction in order “to maintain the excitement and momentum” it had generated.

On 18 April 2015 Mr Obahor visited the Property for a second time, when he again met the Conways. He had initiated the arrangements for this second visit by a text message to Mr Conway on the previous day:

“My clients has (sic) asked that we work towards exchanging contracts around first week/second week in May and aim to complete by the end of May. Also they briefly in town and would love to come round tomorrow evening by 5pm just to look at a few potential restructuring upstairs.”

At this stage, Mr Obahor had no client to give him instructions. He was accompanied on this second visit by one of the men who had attended on 6 April and by two women. He told the Conways that one of the women was his (still unnamed) client’s mistress. It remains unclear who these people were. However, it was not suggested at the trial that they had any connection with Prince Eze and I accept that they did not. Probably they were friends or family of Mr Obahor, attending at the Property in order to lend credibility to his claim to have a real client.

Mr Conway’s evidence was that it was at the meeting on 18 April that Mr Obahor first said that he might require the claimants to pay him a finder’s fee for bringing the sale about; the figure initially mentioned was 3% of the purchase price (£150,000), but in the course of the meeting this was negotiated down to 1.5% (£75,000). Mr Obahor’s evidence was that payment of a finder’s fee had been discussed during the initial negotiations, before the sale was agreed in principle, and that Mr Conway had then expressed willingness to pay a fee, though no figure had been agreed. In my view, Mr Obahor’s evidence is probably correct. First, I do not think that Mr Obahor has any obvious reason to lie about this matter; his evidence is not to be disregarded just because of the adverse view I have formed of his character. Second, the inherent probabilities are fairly evenly balanced: on the one hand, it might make sense for Mr Obahor to flag the matter up, as it were, in the initial discussions, in order to avoid wasted time and effort if payment of a fee proved later to be an insuperable obstacle; on the other, there might be advantage in waiting to broach the matter until a sale had been agreed and the Conways felt that they had achieved a satisfactory outcome and were less likely to be psychologically disposed to do anything that might jeopardise the sale. But the former is perhaps the more probable scenario, because the ostensible justification for a fee would be Mr Obahor’s role as the introducer of a purchaser, so that it would be strange not to mention it at the outset. And Mr Conway does not suggest that the initial mention of a fee was accompanied by any threat to scupper the deal if the fee were not paid. Third, Mr Conway’s evidence on the point is not very satisfactory. In his witness statement he said that, when the payment of a fee was raised for the first time on 18 April, the matter was mentioned only in passing, simply on the basis of a 1.5% fee, and that his response was non-committal. His evidence at trial, however, was that the discussion on that occasion included negotiation about the figure. I find that the possibility of a fee was mentioned by Mr Obahor but not fully discussed during the initial negotiations for sale; no figure was stated, and Mr Conway brushed the matter of with a non-committal response, which Mr Obahor took, probably correctly, to signify a willingness in principle. On 18 April there was a fuller discussion and Mr Conway indicated that, if necessary, he would be prepared to pay £75,000 but not £150,000. The important fact, however, is that not later than 18 April 2015 the Conways knew that Mr Obahor might require a fee from them and were willing to pay it.

In late April 2015 Mr Obahor thought of Prince Eze as a potential purchaser of the Property. They had not had any previous dealings and did not know each other, and Mr Obahor obtained an introduction through a mutual friend. By prior arrangement, on 27 April Mr Obahor made a telephone call to Prince Eze, who was in Nigeria. The conversation was brief, no more than about two minutes. The gist of the conversation is clear, though Prince Eze and Mr Obahor differed in some details of their recollection. Mr Obahor mentioned the Property; he described its general location but probably did not state its address, which would have been an irrelevant detail for Prince Eze at that stage. Prince Eze recalled that Mr Obahor said that he had negotiated a good price, though the price itself was not stated. I think it more likely that, as Mr Obahor said in evidence, he actually said that he had negotiated the price down from £5.5 million to £5 million and that he expressed the opinion that it was a good deal. It was certainly understood that Mr Obahor wanted Prince Eze to pay a fee. Again, Mr Obahor is probably correct in his recollection that he mentioned a specific figure, namely 3%, to which Prince Eze agreed. Prince Eze made it clear that he wanted to proceed (“I said, ‘Go ahead!’”) and told Mr Obahor to get in touch with Mr Howarth to progress matters.

In his first witness statement in these proceedings, Mr Obahor said this about his initial telephone conversation with the defendant: “I did not tell the defendant that the claimants had in principle agreed to pay me a fee for locating a buyer for the Property. I thought this would cause him to query whether or not this was such a good deal and I wanted him to pay me a fee as well. Clearly he would not agree if he thought I was already being paid by the vendors.” Despite reservations that I have mentioned above, I accept on the balance of probabilities that neither in the initial telephone conversation nor at any other time until after these proceedings had commenced did Mr Obahor or anyone else tell Prince Eze that the vendors of the Property would or might pay Mr Obahor a fee. The explanation for why he did not inform Prince Eze of this is probably no more involved than that it did not occur to him that he should; it was an arrangement with another party and did not call for mention.

Prince Eze said in his first witness statement: “Had I known that Mr Obahor was to receive a fee from the claimants in respect of the transaction I would have scrutinised the deal much more closely because I would not have felt that I could rely on Mr Obahor having my best interests at heart. I also would not have agreed to pay him a fee. Since I rely so heavily on my advisors I doubt I could have got comfortable with the idea that the person advising me to purchase the Property was being paid by the vendors.” I think that this evidence is coloured by the benefit of hindsight and the context in which it was given. At one point in his oral evidence Prince Eze said that from the outset he trusted Mr Obahor because he had been introduced by a third party whom he trusted. However, his attitude at the time of the telephone conversation on 27 April 2015, even if not its precise words, is shown in two brief passages in the course of cross-examination:

“So then he call me. He tell me about the property. I said, ‘Go ahead, but contact Howard [scil. Richard Howarth], a British man.’ When I found out it’s a Nigerian I say, ‘Get in touch with the British man so I can know the truth what’s going on.’ Then I phoned Howard and said, ‘This man is going to call. Please monitor what’s going on, tell me the truth regards …’”

“I just ask him, ‘Go ahead’—and it is less than two minutes—‘Go ahead, contact Richard.’ [Q. And that was really it?] Yes, because I know Richard, I don’t know Obahor very well. So get in touch with Richard. Richard will advise me, tell me truth.”

After he had spoken with Mr Obahor, Prince Eze made a telephone call to Mr Howarth to tell him to expect a call from Mr Obahor. He told Mr Howarth the nature of the business in hand. The tenor of his instructions to Mr Howarth was that he should “monitor what’s going on” (as Prince Eze put it in evidence) and “oversee the mechanics of the transaction” (in Mr Howarth’s words). More particularly, it was to be his responsibility to identify the appropriate corporate vehicle to be used in the purchase, to ensure that adequate Know Your Client information (KYC) was provided, and to arrange the necessary finance.

Later on 27 April 2015, Mr Obahor made a telephone call to Mr Howarth. Mr Howarth told him that Prince Eze would purchase the Property through Azarvale Limited. Azarvale is a company incorporated in the British Virgin Islands and owned by Prince Eze and was at the material time administered by Confiance Limited, a financial services company based in Guernsey. Mr Howarth decided that it was convenient to use it for the purchase, because he understood that the transaction was to proceed with some urgency and considered it sensible to use an existing entity. It may be noted that the use of a limited company to purchase the Property introduced an element of control by the directors and Confiance.

That same day Mr Howarth sent an email to Mr Gary Chick of Confiance, by way of introduction to Mr Obahor and to the intended purchase, and Mr Chick replied: “We look forward to receiving the relevant property details in order for the directors to make a more informed decision on the proposed property purchase.” Mr Obahor replied immediately with details of the address of the Property and the agreed price. His email said:

“Special Conditions: agreed exchange between Friday 1^st of May and Friday 8^th of May and Completion 27^th of May.”

On 28 April Mr Obahor sent an email to Mr Chick, copied to Mr Howarth: “Just a quick follow up email to check on next stages of the proposed transaction.” Mr Chick replied, asking whether Mr Obahor could provide anything further in relation to the purchase, such as a brochure from the estate agents, and saying that Confiance would need to appoint a solicitor. On 29 April Mr Obahor responded to Mr Chick, again copying the email to Mr Howarth:

“Just a subtle chase up for solicitors details and company address so that the vendors (sic) solicitors can progress the case.

The vendors (sic) situation requires that contracts are exchanged no later than next week Friday and completion by the end of the month and this was pre-agreed as special conditions early on in the transaction. At the moment the vendor has started to panic as he is concerned we might not meet the deadlines. As earlier advised we will [be] sending copies of searches already conducted to facilitate the process.

Kindly assist to threat [treat?] with urgency.”

In the following days and weeks Mr Obahor communicated with the Conways and with persons on Prince Eze’s side of the transaction, with a view to progressing matters. I shall mention some of the main occasions when he had active involvement in the matter, as well as other significant developments and communications.

On 29 April Mr Obahor informed the claimants that the purchaser would now be Azarvale. On 30 April 2015 Mr Chick confirmed that Azarvale’s solicitor in the purchase would be BPE Solicitors, and Mr Obahor immediately passed that information to Mr Conway.

On 30 April Mr Chick sent an email to Mr Howarth, asking him to provide the due diligence documentation regarding Azarvale that BPE Solicitors had requested. That email was not copied to Mr Obahor. Mr Howarth immediately forwarded the email to Prince Eze and asked him to provide the necessary documents and instructions regarding tax advice. Again, that email was not copied to Mr Obahor. However, Prince Eze did not provide the information promptly.

On 6 May Mr Obahor sent an email to Mr Howarth to see how things were progressing, as “we are intending/working towards a Friday exchange of contracts.” (Friday was 8 May.) Mr Howarth replied: “That looks distinctly unlikely, given that we have yet to receive KYC information from Prince Eze.” He explained that Azarvale’s directors would want to receive all the moneys required for completion before they exchanged contracts. He wrote: “Are you able to speak to Prince Eze to move things along?” Mr Obahor replied:

“Prince has clearly indicated he wants all requirements/funding instructions to come from you. So please do send him or call him with all the instructions as required i.e. the need to have full funds at the point of exchange. I understand that this new development might push us back a couple of days, however, I am in direct contact with the respective solicitors and they are moving things along as well. Kindly keep me updated.”

Text messages between Mr Conway and Mr Obahor confirm that they were discussing a date of 8 May for exchange of contracts. On the evening of 8 May Mr Obahor texted: “I can [scil. can’t] seem to get a clear reason why we couldn’t exchange today, I will follow up all over the weekend and we can still work [towards] exchanging on Monday/Tuesday and still work closely within our targets.” Text messages from Mr Conway on Monday 11 May showed that he understood from his solicitors that there was “a problem with funds”. That is consistent with Mr Chick’s stance on behalf of Azarvale. Contracts were not exchanged on 11 or 12 May, and by email on 12 May Mr Obahor informed Mr Chick and Mr Howarth that the vendors had re-instructed their selling agents and given an ultimatum of 15 May for exchange of contracts and that he was going that evening to Nigeria to meet Prince Eze with a view to addressing outstanding matters; he asked them for “a list of everything that is required for this to progress”. However, that afternoon Mr Obahor informed BPE Solicitors that he had spoken to Mr Chick, matters had been “thrashed [out]” and the outstanding matters were “being dealt with now”, and asked them to assure the Conways’ solicitors that the matter was still proceeding. Two things make it doubtful whether Mr Obahor really had any substantial ground for optimism at that stage: first, the subsequent history of delay; second, the fact that he forwarded his email to BPE Solicitors to the Conways, which suggests that it was motivated more by a desire to reassure them than by a desire to impart information to the solicitors. Consistently with this, by text message on the following day he informed Mr Conway that his client had told him not to bother coming to Nigeria: “[My client] has promised that he would attend to the issues with utmost urgency. He is also facilitating the transfer of the full purchase funds.” Yet on 13 May Mr Chick asked Mr Obahor for an update, writing: “if we do not receive the documents shortly it will become increasingly unlikely that we will not (sic) be able to exchange on Friday”; and Mr Obahor replied to the effect that somebody else had gone instead of him to Nigeria and understood the urgency of the situation. It is clear that Mr Obahor was not being straight with everyone. It is unclear whether he was being straight with anyone.

In the following days the funding of the transaction continued to cause problems. On 15 May Mr Obahor received from Nigeria scanned bank statements for Oranto Petroleum Limited, one of the companies owned by Prince Eze, and forwarded them to Mr Chick. He also forwarded them to the Conways. On the following day Mr Conway sent an email acknowledging receipt of the statements and asking Mr Obahor to take certain steps with regard to proof of funding as “we have to build confidence as our purchase [i.e. of the New Property] is really looking very shaky indeed.” In evidence Mr Conway confirmed that he sent the email because he regarded Mr Obahor as having the ability and authority to facilitate the progress of the purchase of the Property. Later on 16 May Mr Conway sent a further email to Mr Obahor:

“On Monday [18 May] could you get a letter from Azervale (sic), sent to BPE stating that they will transfer the money to BPE immediately on receipt and enclosing the formal transfer note to Azervale. Then, when the transfer to BPE is initiated, that note should be sent to them.

By sending this through BPE, you will be ensu[r]ing confidentiality and giving more confidence.”

It was put to Mr Conway that this email amounted to giving instructions to Mr Obahor and that the reference to confidentiality and confidence was an attempt to ensure that the purchaser did not discover that confidential documents had been passed to Mr Conway. However he denied this, and I accept that the email was intended as a request made to the other side of the transaction and that the reference to confidentiality and confidence was to the security of confidential information and to the need to give ground for confidence that the funds were in place.

On receiving the scanned bank statements, Mr Chick made clear to Mr Obahor that, if the funds for the purchase were to come from a company, due diligence would be required in respect of the company; it would be preferable, therefore, if the funds came from Prince Eze personally. Mr Obahor asked Mr Howarth to contact Prince Eze about the matter. The issues of funding were unresolved by 21 May.

On 21 May 2015 Mr Obahor attended at the Property for a third time, this time for the primary purpose of discussing the fee of £75,000 that he had previously mentioned. He told the Conways that, as his Nigerian client would not pay him a finder’s fee (Mr Obahor told them that, as he was a member of the same tribe as the client’s mistress, he felt inhibited from asking the client for a fee), they would have to do so, and threatened that, if they would not pay, he would abort the transaction and introduce his client to a different property instead. Mr Conway was unenthusiastic at the prospect of having to pay such a large amount of money and unhappy about what he considered Mr Obahor’s improper threat. However, he did not want the sale to fall through. In his witness statement he said that he and his wife “were not wedded to this particular sale” but that “things had dragged on a bit and it would obviously be good to sort it all out”. That hardly does justice to the situation. I am satisfied that the Conways felt they were unlikely to get such a good offer again, at least without the prospect of a long delay, and that they were very eager not to lose the sale. Anyway, they reluctantly agreed to pay Mr Obahor’s fee, if he really could not persuade his client to pay it.

Mr Obahor procured the Conways’ oral agreement and their subsequent written agreement to pay him a fee by means of two lies. First, it was not true that the purchaser was refusing to pay him a fee. Second, the implicit assertion that he intended to scupper the sale if the Conways would not pay him a fee was, as I find, false. In cross-examination Mr Obahor insisted that he really would have caused the prospective sale to come to nothing if the Conways had not agreed to pay him; he said that he could have found another property to interest Prince Eze and in that way have ensured receipt of commission from both vendor and purchaser. I do not believe that evidence. It is unlikely that Mr Obahor would have jeopardised his commission from Prince Eze, which had been easily won, on the chance of both finding another suitable property and persuading Prince Eze that there were good reasons for discarding the Property and beginning again with another property. Mr Obahor gave evidence that was deliberately untruthful, because he saw it as being to his advantage to assist Prince Eze’s case by giving the false impression that his conduct was motivated above all by the promise of payment by the Conways.

Issues of funding and due diligence remained unresolved during May. As the Conways became increasingly anxious about the transaction, so Mr Obahor became ever more inventive in his efforts to give them false comfort. Thus on 23 May he forwarded by email to Mr Conway a telex supposedly relating to the transfer of funds by his client to a UK company called Valeska Tankers, which was to provide the purchase moneys to Azarvale. In fact the telex had nothing to do with the matter and Prince Eze had nothing to do with a company called Valeska Tankers. Mr Obahor gave an added appearance of significance to the telex by ending his email: “This is more than enough information that I should provide and I believe I have breached my clients (sic) confidentiality and I expect that his information is kept.” Of course, release of the telex was not a breach of confidentiality to the purchaser. But Mr Conway did not know that, yet was still content to deal with Mr Obahor. In cross-examination Mr Conway said that he had raised concerns over the divulging of confidential information but that Mr Obahor had “made us feel confident that he was acting in everybody’s best interests as a broker, trying to make sure that the deal happened.” That evidence was first and foremost an exercise in self-deception. Mr Conway must have known, and I am satisfied that he did know, that his collusion with Mr Obahor was improper, according to the facts as he understood them to be. It may be noted that on another occasion Mr Obahor patched the Conways into a confidential telephone conversation with Mr Howarth, without the latter’s knowledge. Mr Conway’s evidence was that this was an attempt to give him and his wife greater confidence in the deal and that, though they were not happy with being secretly patched in to the private conversation, they were “accepting of it”. All that this means is that they were prepared to be privy to what they understood to be a breach of confidence by the purchaser’s agent, and that they rationalised the matter to themselves on the basis that it was all in a good cause.

On 26 May Mr Obahor forwarded to the Conways an email he had received from Mr Chick, and wrote:

“[I]n my honest opinion at this point I suggest we let them [scil. Azarvale] carry on with what they need to do. My client has shown that he is ready. I really wouldn’t want to push them any further so that I don’t give the impression that there’s something sinister going on.”

It was put to Mr Conway that the reference to “something sinister” indicated that he and Mr Obahor shared a deliberate intention to keep secret from Prince Eze a dishonest arrangement between them. He denied this, and I accept his evidence on the point. Despite the way he now seeks to portray matters, Mr Obahor was merely adverting to the risk that any further attempt to push his client towards a quick exchange might prove counter-productive by arousing unfounded suspicions of impropriety. (The same observations apply equally to a text message that Mr Obahor sent to Mr Conway on 4 June, in which he said that the reason why he was not pushing his client harder was lest he send out “the wrong message”.)

On 27 May 2015 Mr Chick advised Mr Obahor that the solicitors were satisfied with the due diligence procedure, but he asked that a survey be undertaken. Mr Obahor instructed Aspect Surveyors Limited (“Aspect”) to produce a valuation of the Property, though not a survey report. On 1 June 2015 two surveyors from Aspect attended to inspect the Property, and on 2 June they produced a valuation report that valued the Property at £5 million.

Mr Obahor had not previously had dealings with Aspect. There is no reason to see anything amiss in his decision to instruct them. Nor is there any reason to suppose that Aspect carried out their instructions with anything less than full integrity, albeit that the expert evidence in this case calls into question the accuracy of the valuation they produced. Mr Obahor’s evidence was that he had deliberately instructed the surveyors to produce a valuation report rather than do a full survey, because he did not want to jeopardise the transaction or his commission from the Conways. However, I regard that as a further example of his attempt to explain his motivation in ways he thinks most helpful to Prince Eze.

Mr Obahor sent the valuation report to Mr Chick, who responded that he had thought there was to be a survey rather than merely a valuation. Mr Obahor replied: “Because there’s no Mortgage lender involved in the purchase, I believe the buyer can elect the level/type they want. I believe this should be sufficient for the purpose.” This reply appeared initially to satisfy Mr Chick, but on 4 June he asked Mr Obahor to procure from Prince Eze a letter confirming that he was happy to proceed on the strength of the valuation report and indemnifying Azarvale’s directors against any loss resulting from the failure to obtain a survey report. The documents contain no further reference to this request. Mr Obahor says that he did not ask Prince Eze for a letter of indemnity; he considered that it was unnecessary and that the scope of his authority from Prince Eze meant that he could proceed with the transaction on the basis of the valuation, and he informed Mr Chick accordingly. I do not see why Mr Chick or the directors of Azarvale should have been satisfied with such an assurance, and in the absence of any further documentation I think it more likely that Mr Obahor said nothing and thereafter the matter was overlooked. In re-examination Mr Obahor said that his unwillingness to obtain a letter of indemnity was influenced by his desire for a fee from the Conways, but that evidence was encouraged by loaded questioning by Mr Mumford and was typical of Mr Obahor’s general and unconvincing attempt to attribute all his misdeeds to a desire to get a fee from the Conways.

Mr Obahor attended at the Property on 1 June 2015 at the same time as the surveyors. When the surveyors had finished their inspection and had gone, he produced to the Conways for their execution a document containing an agreement for payment to him of an introduction fee. The document was retyped by Mr Conway with a slight modification and was signed by both claimants and by Mr Obahor “for and on behalf of Fresco Property Services Ltd”. It was addressed to the Conways’ solicitors and headed “Agreement of Fees for the Sale of 86 Uphill Road, London NW7 4QE” and was in the following terms:

“We, Mr Richard Conway and Mrs Deborah Conway of 86 Uphill Road, Mill Hill, London NW7 4QE, hereby instruct you to pay the sum of £75,000, inclusive of all sales and other taxes, to Fresco Property Services UK Ltd upon completion of the sale of the property known as 86 Uphill Road, Mill Hill, London NW7 4QE for the sum of £5,000,000 (five million pounds) providing the client was introduced by Fresco Property Services.

Once this authority is given, both sides agree that the agreement cannot be revoked.”

(The addition of the words “providing the client was introduced by Fresco Property Services” was the material alteration made by Mr Conway to Mr Obahor’s original draft.) The claimants have called this agreement “the Introduction Fee Agreement”. The defendant insists that it is better called “the Secret Commission Agreement”. I shall call it “the Disputed Payment Agreement”; that may be inelegant but is I hope neutral as between the competing cases. Under the Disputed Payment Agreement, payment of the commission was conditional on completion of the sale at the previously agreed price of £5 million. Mr Conway accepted in cross-examination that, although the payment was to be made to Fresco, he had understood that Mr Obahor would benefit from it.

The claimants retained a signed copy of the Disputed Payment Agreement but did not forward it to their solicitors. Mr Obahor took away another signed copy. Mr Conway’s evidence was that Mr Obahor told them that he would send a copy of the agreement to their solicitors; he assumed he had done so, but he did not take any steps to verify that he had done so. Mr Conway said in evidence that he gave no thought to the question whether Mr Obahor would send a copy of the agreement to Prince Eze, but he assumed he would at least mention it to him. In answer to the question why the claimants had not themselves brought the Disputed Payment Agreement to the attention of Prince Eze, Mr Conway said that Mr Obahor had told them that they were not to communicate directly with his client. I accept this evidence and I specifically reject Mr Obahor’s evidence that he and the Conways agreed that the Disputed Fee Agreement was to be kept secret from Prince Eze. The Conways failed to ensure that the agreement was brought to the attention of the purchaser, but they did not try to keep it secret. Mr Obahor’s evidence on this point is another attempt to assist Prince Eze’s case by attributing a corrupt motive to the Conways.

By the end of May it had become apparent that difficulties experienced by Confiance in obtaining from Prince Eze satisfactory information concerning the source and availability of the funds were slowing the process down. On 28 May Prince Eze assured Mr Obahor that he was in the process of transmitting the funds, including money for Mr Obahor’s fee. However, the funds did not appear. When Mr Obahor asked Mr Howarth to try to get Prince Eze to move more quickly, as he himself was “struggling to get [the urgency of the situation] across to him”, he received this response from Mr Howarth by email on 1 June:

“My advice, for what it is worth, is to concentrate on your end of the transaction and leave Prince to his side. If he is serious then you will get the funding, but in his time, which no amount of pushing and shoving will alter. He will understand the urgency—it is your job to buy him as much time as you can.”

Later that day Mr Obahor confirmed to Mr Howarth by email that Prince Eze had advised that he was “ready to send the 10% exchange funds immediately”, but that Azarvale required to know the source of the funds; there was no problem if they came from Prince Eze himself, because Azarvale had already conducted due diligence for him, but if the funds came from a company there would have to be further due diligence. Mr Obahor’s email ended by warning that, as for “buying time” for Prince Eze, he had “pushed the vendors to the extreme” and there was a risk that they would lose the property they intended to purchase and would then refuse to proceed with a sale to Prince Eze.

On 4 June Mr Obahor sent an email to Mr Chick, asking him to inform BPE Solicitors that he had “managed to negotiate” a later date for exchange of contracts, namely 12 June, and a completion date of 3 to 24 July. That was clearly designed to give the impression that Mr Obahor had agreed these dates with the Conways. However, an exchange of text messages between Mr Obahor and Mr Conway on the same date shows that, on the contrary, Mr Obahor was putting forward the dates as being a proposal of the purchaser and Mr Conway was disinclined to agree to them. Moreover, I accept Mr Obahor’s evidence that he had no instructions from Prince Eze regarding the dates mentioned. He was misleading everyone, in order to keep the transaction alive. On receiving Mr Obahor’s email, Mr Chick replied to the effect that he could not instruct the solicitors that those dates were agreed unless he received “confirmation of the bank details” (that is, details of the source of the purchase moneys) that day. “Without the funds we cannot fully commit to an exchange because we do not have all the components required.” What this exchange highlights is that, although Mr Obahor was acting as a go-between and was the point of contact with the Conways, he was not in a position either to dictate to Azarvale with respect to the transaction or, though he certainly did communicate with BPE Solicitors, to give them instructions on Azarvale’s behalf.

Mr Obahor forwarded this exchange with Mr Chick to Mr Howarth, who replied that he thought it would make more sense for Prince Eze to acquire the Property in the name of his children, thereby ending Confiance’s involvement, and that he would contact Prince Eze in that regard. Emails between Mr Obahor and Mr Howarth on 5 June show that Mr Obahor’s preferred course was that the purchase be in Prince Eze’s name rather than in the names of his children. I accept Mr Obahor’s evidence that he had a telephone conversation with Prince Eze on 21 June, when he told him that Azarvale’s involvement jeopardised the purchase and that it would be better if he purchased in his own name. Although it is impossible to know with confidence the terms of the conversation, doubtless Mr Obahor said to Prince Eze something to the effect that the purchase represented a good deal. Prince Eze decided to purchase in his own name, and the decision was recorded in an email sent by Mr Obahor on 21 June to Mr Howarth and to Prince Eze at an email address on the account of his company, Oranto Petroleum Limited:

“As discussed/agreed/requested earlier by Prince, the purchase will now be proceeding without Azarvale Ltd.

I will communicate this with BPE first thing in the morning so that we can arrange to exchange contracts tomorrow with completion in 60 days. I will also advise if there are any amendments to the existing paperwork so that this can be quickly conveyed to Prince.”

Mr Obahor also informed the Conways that Prince Eze would now be the purchaser.

In truth, the identity of the nominal purchaser was something of a sideshow. The true reason for the delay, as Mr Howarth indicated in an email on 5 June, was that Prince Eze did not have the ready funds required for the purchase and was waiting until he did so. That is why Mr Howarth had wanted Mr Obahor to buy as much time as he could.

On 18 June Mr Conway sent an email to Mr Obahor in an attempt to make progress:

“If what you are saying is correct, it sounds like you need to get Nicky [Corner, of BPE Solicitors], Gary [Chick] and Prince together to establish the whole chain of money and who has to do what and what they need from each other and when, for this to happen.

Then you will be in a position to give dates that can be believed. I feel that currently you are just guessing and no one has oversight of all the tasks required.”

Mr Mumford suggested that this was an instance of Mr Conway directing Mr Obahor as to what to do. However, in my view it is better seen as an attempt to get the other side to the transaction to (so to speak) get its act together.

On 22 June Nicky Corner of BPE Solicitors sent an email to Mr Obahor confirming that, upon receipt of funds from a UK bank account in Prince Eze’s name, she would have everything necessary in order to proceed. She continued: “I will need an authority from the Prince for me to take instructions from yourself—as you will understand! If you could let me have a form of authority duly scanned it would be helpful.” The email referred to other documents that would be provided for Prince Eze’s signature, including the contract and transfer and BPE Solicitors’ terms and conditions of business. The email also dealt with a discrete issue:

“I believe that an outstanding item refers to the leak in the swimming pool and the condenser unit. No documentation has been produced to substantiate the state and condition of the swimming pool, but you need to let me know what the Prince would like me to do about this. We were informed that the leak had been traced to a pipe supplying water to the pool and the seller’s (sic) would pay for the repair. No mention has been made of the condenser unit however.”

On the hard copy of this email there is a manuscript note, “do nothing”, under this passage; it is believed to have been written by someone at BPE Solicitors and to reflect their instructions. When asked about this matter in re-examination, Mr Obahor said that he had told the solicitors not to worry about the condenser unit because he felt that it was not an issue. Indeed, so far as I can see, there is no reason to believe that there actually was any issue concerning the condenser unit, as distinct from the supply pipe.

By email on 22 June Mr Obahor advised Prince Eze that the “amended documents/purchase contracts” were ready for his signature and that he would bring them to him at Prince Eze’s earliest convenience. However, he was unsuccessful in his efforts to arrange an early meeting.

On the morning of 24 June Mr Obahor sent an email to Mr Howarth, attaching four documents for Prince Eze’s signature: the TR1 transfer form; the contract of sale; a letter authorising Mr Obahor to act (Mr Obahor commented in the email: “As the acquisition agent Prince needs to authorize me so that I can process manage the transaction”); and BPE Solicitors’ terms and conditions of business. The email read in part:

“I tried arranging an appointment with Prince yesterday to get him to sign the relevant docs but I haven’t had any joy, I am assuming this is because he wants you to be the one to present the docs to him for signing. I assume so because he had previously requested/insisted that everything comes through you.”

Exactly when Prince Eze had requested or insisted that everything come through Mr Howarth is uncertain, but he clearly had done so, at least vis-à-vis Mr Obahor. This is consistent with the tenor of the evidence of Mr Howarth and Prince Eze that Mr Howarth as a longstanding and trusted adviser was to have some form of general oversight of the entire transaction, albeit that he was not being looked to for advice on its merits. However, Mr Howarth confirmed in evidence that Prince Eze had never told him that everything was to go through him.

The same email also mentioned that the Conways had claimed to have a new purchaser for the Property and were threatening to deal with that person instead of Prince Eze if there were no progress that day. Mr Obahor expressed suspicion that they were not being truthful about the alternative purchaser but said that he did not want to put the matter to the test. It is interesting, therefore, to note that he forwarded the email to the Conways. This was the first of a sequence of emails in which communication between Mr Obahor and Mr Conway was not open and above board. One consequence of the forwarding of this particular email was that Mr Conway could see that Prince Eze was being asked to sign a letter giving Mr Obahor authority to act for him in the purchase. (The terms of the letter are mentioned below.)

On the evening of 24 June Mr Conway sent two emails to Mr Obahor within a couple of minutes of each other. The first simply said: “After consideration, unless we do exchange contracts, we will be instructing our solicitors tomorrow to withdraw contracts on Friday as we no longer believe your client will be in a position to exchange for some time.” That email was clearly intended to be disclosed by Mr Obahor to Prince Eze, if need be. The second email was not; it began, “I thought I would send you some reasoning behind the email I sent as we have built up a working relationship. It is not meant to be passed on.” The email went on to summarise the delay and excuses that the Conways had put up with, said that there was another interested purchaser who was pressing them to make a decision not to proceed with Prince Eze, and said:

“We would like to sell to your client as that is the quickest path and if it does not go ahead with you, we do not want to lose another potential buyer. I have explored with my wife as to a non-returnable deposit in return for a delay in the cut-off date, but this would leave us without a buyer should you not proceed. Please let me know your intentions. I am willing to discuss this matter with you.”

The substantive content of the email seems to me to be unexceptionable, as an effort to obtain an indication of good faith from the purchaser. However, the use of a private communication that was intended not to be divulged to Prince Eze is striking.

That evening Mr Obahor sent another email to Mr Howarth, saying that the Conways had made good on their threat and were now proceeding to sell to the new buyer. Picking up a suggestion mentioned by Mr Conway in an email that day, Mr Obahor continued:

“I will have a chat with them tomorrow but I strongly believe if we can make even a small commitment of £100,000 tomorrow, that will help sway them. According to them, there has been nothing concrete from us to show commitment and this is what is causing them the concerns. Can we engage any desperate measure to achieve this tomorrow?”

The email also stated that Mr Obahor had arranged to meet Prince Eze at 8 o’clock the following morning, when he would get the necessary documents signed. Mr Obahor did not tell Mr Howarth about the second email from the Conways. He did, however, forward to the Conways his own email to Mr Howarth.

Mr Howarth replied on 24 June that he saw no reason why a payment of £100,000 could not be organised through HSBC on the following day. It is uncertain whether this email was forwarded to the Conways; I have not seen any document that proves that it was, though in cross-examination Mr Conway appeared to accept that it had been. Mr Obahor was keen that this should be done in order to prevent the Conways from withdrawing, and on 25 June he sent another email to Mr Howarth: “Please note that a minimum of £100,000 should be sent to the solicitors this morning to secure the transaction. Also note that the funds ‘MUST’ come from Prince’s personal account and not his corporate account. … Please advise me once payment has been effected so that I can update the solicitors.” Despite this, in the event no such payment was made.

On 25 June 2015 Prince Eze met Mr Obahor in London and, at his request, signed his part of the contract for the purchase of the Property and the transfer form TR1. The completion date was left blank on those documents. He also signed two other significant documents. One was a letter dated 23 June and addressed to BPE Solicitors, in the following terms:

“Re: Purchase of 86 Uphill Road, Millhill London NW7 4QE

I Prince Arthur Ikpechukwu Eze of [address in Nigeria] write to confirm that I have authorised Mr Richard Obahor of Fresco Property Services UK Ltd to act on my behalf for the purchase of my the (sic) above property.

Mr Richard Obahor will be in regular contact with you throughout the whole purchase process, kindly avail him of what is necessary to facilitate the process as and when required.”

Mr Howarth’s evidence was that it was very unusual to confer on an acquisition agent such as Mr Obahor authority of this kind to give instructions to solicitors. The role of the acquisition agent was normally only to source the property for the client and then co-ordinate the various parties to the transaction to make sure that everything went according to plan.

Also signed by Prince Eze on that occasion was an agreement headed “Property Acquisition Terms of Engagement”, and dated 23 June, between Fresco (“the Provider”) and Prince Eze (“the Buyer”). The agreement extended over two pages and much of it had little application to the particular circumstances of the purchase of the Property; Mr Obahor said, no doubt correctly, that he had used Fresco’s standard terms. Under the heading “About Our Services” it said:

“We acquire properties from the whole UK market. If you require, we will advise and make a recommendation for you after we have assessed your needs. However, in some circumstances you will not receive advice or a recommendation from us. We may ask some questions to narrow down the selection of products that we will provide details on. You will then need to make your own choice about how to proceed. The precise level of service provided to you will be agreed prior to any further action.”

In the present case, as Prince Eze acknowledged in evidence, Fresco and Mr Obahor did not make a recommendation based on an assessment of his particular needs. Rather, without a prior relationship of any sort, they presented him with a property that he might be interested in, though encouraging him to proceed by presenting it as a good deal. Another section of the document, headed “Respecting Your Privacy”, gave an assurance that Fresco would do just that; in fact, as already mentioned, it did not. The final section of the agreement was headed “Your specific purchase”:

“A.

Fresco Property Services UK Ltd and ‘The Buyer’ have entered into a primary agreement that ‘the provider’ (sic) will source for a property for the buyer (sic) for residential or investment purposes.

B.

Fresco Property Services UK Ltd has succeeded in securing for your purchase 86 Uphill Road, Millhill London NW7 4QE

C.

‘The Buyer’ agrees to pay A.Fresco (sic) Property Services UK Ltd the fee of £150,000 (One Hundred and Fifty Thousand Pounds) being 3% of the purchase price for this service facility. The Buyer agrees to pay the fee on the day of the completion via the solicitors.

D.

This Agreement shall be governed by and construed in accordance with the laws of England and Wales.”

Despite clause C of the Property Acquisition Terms of Engagement, Prince Eze paid to Fresco the fee of £150,000 in cleared funds on Monday 29 June, without waiting for exchange of contracts, far less for completion of the purchase. His evidence on this point was to the effect that Mr Obahor had done his work by introducing the Property to him and that immediate payment was no problem to him and would make Mr Obahor happy. On 30 June Mr Obahor sent him an email:

“I can now confirm receipt of £150,000 sent. I also want to thank you for your very kind gesture on Saturday, God bless you richly.

We have advised the sellers that they will hopefully receive the £500,000 exchange funds on Wednesday.”

The reference to Prince Eze’s “very kind gesture on Saturday” is puzzling. Both Prince Eze and Mr Obahor were asked about it in cross-examination. Prince Eze said that the gesture was simply the payment of the £150,000. The main reason for doubting that explanation is that the thanks seem clearly to be for a gesture distinct from the payment. Further, although it was indeed on Saturday 27 June that Prince Eze informed Mr Obahor by email that he had instructed his bank to pay the £150,000 fee, it would seem strange to express thanks for a received payment by reference to the date when one received notification of the instruction to pay. Mr Obahor said that the “very kind gesture on Saturday” was a gift of £1000 for taxi fares, made at the meeting when the documents were signed. However the meeting on 25 June was on a Thursday, not a Saturday. Mr Obahor gave no evidence about a further meeting on Saturday 27 June; if there was such a meeting, it remains entirely unexplained. At one point of his evidence, Mr Obahor mentioned that Prince Eze had told him something when they “had a sit down to have a meal”. He quickly resiled from this, explaining that it was a slip of the tongue and that he meant the occasion when the documents were signed. I did not find that explanation convincing. Intriguingly, in the course of a confusing passage of his evidence in cross-examination concerning what he had been told about the value of the Property, Prince Eze came out with the date 27 June; but the reference passed without comment and was not followed up. This is one of the areas where, as Mr Collings said, we have not got to the bottom of things.

Mr Obahor has complained that from around the third week of June 2015 Mr Conway started behaving aggressively to him and treating him as though he were an employee. The simple truth, however, is that, having been thoroughly messed around for the previous two months by a combination of Prince Eze’s lack of concern and Mr Obahor’s lack of honesty, the Conways were at their wits’ end. During the last week of June and early July the number and urgency of the text messages from Mr Conway to Mr Obahor increased, with the former urgently trying to get Mr Obahor to take action to persuade Prince Eze to do whatever was necessary to achieve exchange of contracts.

On 27 June Mr Conway, still trying to achieve progress, perhaps overplayed his hand by purporting to terminate the proposed sale in favour of another interested party, and Mr Obahor called his bluff by wishing him well in his new sale. By early afternoon, however, things had moved on. Mr Obahor gave confirmation that his “clients” would be in a position to exchange contracts on the following Wednesday, 1 July, and that, if in the meantime the other interested party incurred surveyors’ costs, those would be reimbursed. Mr Conway then demanded the inclusion in the contract of a special condition requiring payment by Prince Eze of £50,000 for each month or part month in the event of late completion. Mr Obahor replied, “regarding the £50,000 per month clause I see no reason why that should be a problem. I will forward unto the solicitors.” In fact, it does not appear that such a provision was ever raised with the parties’ solicitors, and it was not included in the contract upon exchange. Contracts were not exchanged on 1 July.

After Prince Eze had signed the relevant documents, Mr Howarth began to facilitate the movement of funds from Prince Eze’s account with HSBC Bank to BPE Solicitors’ client account. On 2 July he sent an email to Prince Eze with a view to ensuring that matters were handled in a way that demonstrated clearly to HSBC that the transaction was legitimate. There was to be a payment to Prince Eze by one of his companies, Atlas Petroleum Limited, followed by payment from Prince Eze’s account of a 10% deposit on the purchase of residential property for his occupation. Mr Howarth offered to speak to HSBC on Prince Eze’s behalf. The email ended: “I know Richard is keen to tie up this transaction on your behalf, so the quicker we can get the money over and contracts exchanged, the better.”

Prince Eze provided a letter of authority for Mr Howarth to deal on his behalf with HSBC and made attempts to arrange a transfer of funds from HSBC to BPE Solicitors, but the fact that he was in Nigeria and communicating by email meant that matters were again held up. On 16 July Mr Howarth sent an email to Prince Eze, copied to Mr Obahor, asking him to write a cheque for £500,000; this, he said, was the only chance of getting funds to BPE Solicitors in good time.

Meanwhile Mr Conway continued to press Mr Obahor, trying urgently to achieve progress. For example, on 6 July he sent a text saying: “It is 5.15 [p.m.] and no funds have been transferred. You and Richard need to chase this first thing tomorrow. I expect to exchange tomorrow with the changes to the contract.” Over the next few days it was envisaged that exchange of contracts would take place on Monday 13 July. With that in mind, on 12 July Mr Conway sent to Mr Obahor an email headed “Completion—some suggestions”. The email began half-jokingly with anticipation of the excuses that would be given on the following day for failure to exchange. It then made three specific suggestions as to what Mr Obahor ought to do in order to ensure that exchange took place. Then it continued:

“Due to the delay, and assuming that the money moves OK, this is what we would ideally like to agree:

•

Because of the difficulty you have had in moving money and the worry that it has caused, we insist on the addition of the clause that if Prince defaults on the completion date, in addition to costs under clause 7.2 of the cont[r]act, any costs on our clients associated purchase that your clients will also pay a fee of £50,000.00.

•

Completion 22/7/15

•

Allow us to stay in the house for up to 1 month

In exchange for this, we will argue that the payment for the [other interested purchasers’] survey should not be paid as we did not hear from them this week.”

Exchange of contracts did not take place on 13 July. On 14 July there was an exchange of text messages between them. Mr Conway wrote:

“Call me in the next 5 mins. To get the info on why the chaps payment did not occur I will go to Richard howarth and prince (sic) if necessary.”

Mr Obahor replied:

“Richard going directly [to] Richard or Prince will be a breach of our agreement and confidence and I don’t see any value. I just managed to get through to Richard and he said he called HSBC severally yesterday but couldn’t get through to them. He sent Janet a mail but she hadn’t responded till now. He was driving and has promised that as soon as he parks he will ask Prince to call them for the exact position of things and I will update you afterwards. Regards.”

In cross-examination Mr Conway denied that his message was a threat to reveal to Prince Eze the existence of the Disputed Payment Agreement, or that Mr Obahor’s reference to “our agreement and confidence” was to an agreement to pay a secret commission or bribe behind Prince Eze’s back. I accept Mr Conway’s evidence on this point. Mr Obahor had impressed on him that he was not to deal directly with anyone but him and the Conways had agreed to conduct their dealings with him on that basis. Now they were threatening to approach Prince Eze and Mr Howarth directly. Mr Obahor was concerned at this and sought to prevent it by portraying it as a breach of the confidence on which their dealings depended. The texts have no greater significance.

On 20 July Mr Obahor sent an email to Mr Howarth, suggesting that the impasse would be broken if they reverted to the original plan and used a company of Prince Eze’s (he did not specify which one; Mr Howarth says it would probably have been Atlas Petroleum Limited) to take the transfer, instructing not BPE Solicitors but a firm that he normally used. Mr Obahor forwarded that email to the Conways. Mr Howarth thought that the suggestion of using the company was “a decent plan” and said he would raise it with Prince Eze. Some KYC information was indeed obtained, but before matters in that regard were progressed Prince Eze sent a cheque for £500,000, drawn on his personal account with HSBC in favour of BPE Solicitors’ client account. The cheque was dated 23 July and was received by Mr Howarth and paid in by him on 27 July. The covering letter described the money as “a down payment for the purchase of [the Property]” and ended, “I look towards the finalization of the transaction”, meaning presumably the purchase.

On 29 July the Conways borrowed £1 million against the security of the Property. They used the advance to discharge an existing second charge on the Property. They obtained a valuation for the purposes of this re-financing; this valued the Property at £4.1 million. Mr Conway said in evidence that he had been told that valuations for finance purposes were always far more conservative than other valuations. He also said that he believed that Mr Obahor had told him that the valuation report obtained in June had valued the Property at £5 million; his point was that he regarded the valuation of £4.1 million as being less than the Property was worth. However, in October, when efforts were being made to get Prince Eze to complete the purchase, Mr Becker as counsel directly instructed by the Conways wrote to Prince Eze’s solicitors a letter containing the following sentence: “It is the Claimants’ position that on the open market a reasonable purchaser or reasonable surveyor would only value the property at or expect the property to sell for £4,000,000.” Mr Conway said that he had been given advice to this effect by the estate agents. That is likely to be right. But I do not accept that there was any advice to the effect that the market had altered since July. The truth is probably that well before contracts were exchanged the Conways realised that the sale agreed with Prince Eze represented a very good deal for them.

On 2 August Mr Conway sent another email to Mr Obahor, identifying three things that remained to be sorted out before exchange of contracts: first, confirmation that the cheque had cleared; second, inclusion in the contract of the penalty of £50,000 for late completion (see above); third, agreement on the completion date. As for the second of these points, the special condition was not included in the contract.

As for the completion date, Mr Conway’s evidence, which I accept, was that initially there was to be a six-week period between exchange and completion; then Mr Obahor asked for completion at the end of September and this was agreed; then Mr Obahor asked for completion to be put back to the end of October, and that too was agreed; and then Mr Obahor asked for the end of November; “and so we had no [choice] … it was either do that, or we thought it was going to be pulled.” Added colour is given to this summary of the negotiating process by a text message sent by Mr Obahor to Mr Conway at 5.20 p.m. on 6 August:

“Hi. Am just too emotional and upset to speak now. I will call you much later. He has now asked for an on or before date for the end of November[;] why he is doing this is beyond me. So I have told him that I [it?] wouldn’t work[,] that we might have to go somewhere else. I am trying to reach his mistress now about the whole episode. But I am spent.”

I am satisfied that the text message was simply Mr Obahor’s way of putting pressure on the Conways to agree to a date at the end of November, which they duly did. The contractual date for completion was 30 November 2015.

In his witness statement Mr Howarth said:

“So far as I know, the discussions about the completion date were between me and Mr Obahor. I assumed the defendant wanted to go ahead, but wanted to ensure his cash flows allowed him to complete. I very much doubt the defendant would have a clear idea about his cash flows or what an appropriate completion date would be, assuming he did want to go ahead. This is the kind of thing he would rely on advisers for. It therefore seems to me unlikely that the defendant would have nominated any completion date.”

In cross-examination he said that he had told Mr Obahor to get the longest possible period for completion, in order to give time for the funds to be put in place, and he had some recollection that 30 November had been mentioned to him as a possible completion date. I think it probable that Mr Obahor mentioned the date to Mr Howarth, who confirmed that it would be acceptable. However, as is mentioned below, Mr Obahor’s communications with Prince Eze immediately after contracts were exchanged state in terms that the completion date was in accordance with Prince Eze’s instructions. I find that Mr Obahor instructed the solicitors as to the completion date in accordance with his own express instructions from Prince Eze.

Contracts for the sale of the Property were exchanged on 7 August 2015. Mr Obahor gave the instructions to BPE Solicitors to exchange. One final issue arose immediately before exchange. On the morning of 7 August Nicky Corner sent an email to Mr Obahor:

“There is now an issue with the deposit as the ultimate seller wants the deposit to be released to them. This is not usual. Usually the deposit goes up the chain and is used for the sellers[’] own deposit but if no property is being purchased then the solicitor holds the deposit as stakeholder. I do not advise this but doubtless we can discuss.”

Mr Obahor replied:

“We have stretched the sellers to their limit and if drawing down on the deposit will make them comfortable then we don’t have an issue with that.”

The tenor of Mr Obahor’s evidence, when he was asked about this in cross-examination, was that he had taken the view that the transaction was going to proceed anyway and that the question concerning the deposit was not an important issue and could be disregarded. Insofar as it is suggested that the prospect of receiving the fee from the Conways motivated Mr Obahor to be cavalier in the matter, I reject the suggestion.

Also on 7 August, the claimants exchanged contracts for the purchase of the New Property for a price of £2.9 million including contents. The contract provided for completion on or before 30 November 2015; the Conways needed to have simultaneous completion of both transactions, because they were intending to use the proceeds of sale of the Property to pay the purchase price of the New Property. Upon exchange of contracts for the New Property they paid a deposit of £287,500.

At 12.15 p.m. on 7 August Mr Obahor sent an email to Prince Eze:

“Just advising that we succeeded in exchanging contracts on the property today and we have set a completion date for the 30^th of November as instructed.”

Less than an hour later he sent a text message to similar effect:

“This is just to say a very big thank you. We did the exchange today and the completion is set for 30^th of November as you instructed. Stay Blessed Sir.”

It is clear from this and from Mr Obahor’s evidence that he genuinely believed that Prince Eze wanted him to instruct the solicitors to exchange contracts. As I have mentioned, I consider that the communications also show that the completion date was fixed in accordance with Prince Eze’s instructions.

Prince Eze’s evidence was that he was surprised to receive information that contracts had been exchanged, because he had not given instructions to Mr Obahor to exchange and wanted to know what the implications were. It is certain that he attempted to speak to Mr Obahor by telephone on the morning of 8 August; Mr Obahor, having missed the call, tried unsuccessfully to return it and then sent a brief text message. It appears that there was no subsequent conversation between them at that stage. There is no independent evidence to show what was the intended subject matter of the conversation Prince Eze wanted to have on 8 August.

More than a fortnight later, on 24 August, Prince Eze spoke to Mr Howarth by telephone, when he expressed unhappiness at the fact that Mr Obahor had proceeded to exchange of contracts. In evidence Mr Howarth described Prince Eze as “quite agitated and upset” in the conversation. An email sent by Mr Howarth to Prince Eze the following morning shows the nature of the conversation:

“Following our telephone conversation last night I am enclosing a copy of the agreement you entered into with Richard Obahor along with a copy of the letter given to the solicitors authorising him to act on your behalf.

I will speak to Nicky Corner this morning and report back with her summary of the position and recommendations for the way forward.

If you no longer with [scil. wish] Richard Obahor to be involved then it would be sensible to send BPE Solicitors a letter along the lines of the attached.

I will report back as soon as I have further news.”

An attachment to the email was a draft letter from Prince Eze to BPE Solicitors rescinding Mr Obahor’s authority, instructing them to act only on his (Prince Eze’s) instructions, but permitting them to discuss all matters relating to the transaction with Mr Howarth. Prince Eze signed the letter. It is uncertain whether he sent it to the solicitors, but his evidence was that he had done so.

I did not find Prince Eze’s evidence on these matters at trial very easy to understand, but, taking it in the round, I think that it was to the following effect. He was fully intent on going ahead with the purchase of the Property and, having agreed to pay £5 million, was not concerned over the price. (In part of his evidence that never became wholly clear, he said that in June Mr Obahor had mentioned £4.2 million, £4.5 million and £5 million. Whether this had been mention of other properties available at lower prices or, on the contrary, the possibility that the Property might have a value less than £5 million, is something I could not clarify to my satisfaction. The main point, however, was clear: Prince Eze was perfectly happy to pay £5 million for the Property.) However, the one condition was that he must see the Property for himself before going ahead. The £500,000 deposit was a non-returnable fee to hold the Property in the meantime. If he liked what he saw when he visited the Property, he would proceed with the purchase. If not, he would forfeit the deposit. But he did not expect to become contractually bound to purchase the Property until he had seen it. The earliest opportunity for him to see the Property would be in late November, as he had told Mr Obahor. He viewed the exchange of contracts in August as an attempt to rush him into a commitment (he said he had never before seen such a hurry), apparently for fraudulent motives. From the moment he learned that contracts had been exchanged, he decided not to proceed with the purchase and to have nothing more to do with Mr Obahor.

There are a number of difficulties with Prince Eze’s evidence.

The findings I make, on the balance of probabilities, are as follows. Prince Eze did give Mr Obahor instructions to exchange contracts with a completion date at the end of November. That is why Mr Obahor believed he had those instructions. For some reason, Prince Eze’s attitude to the purchase cooled; this may have been on account of a re-appraisal of his ability to fund the purchase from his expected sources of cash-flow. He did not think that Mr Obahor had behaved from any improper or fraudulent motive; to the extent that he implied the contrary in his oral evidence, I reject his evidence. He did not think that he was being rushed or hurried.

In the third week of September Prince Eze informed Mr Obahor that he did not want to proceed with the purchase and asked what the consequences would be if he pulled out. Mr Obahor told him that he believed the only consequence would be the loss of the deposit. Mr Obahor informed the Conways by email on 23 September that Prince Eze did not wish to proceed with the purchase. On instructions from Prince Eze, he put to the Conways an offer whereby the deposit would be forfeit but they would not seek compensation for any other losses. The Conways rejected that offer and said that, if the Prince Eze failed to complete, they would seek damages, which would include the losses sustained along the conveyancing chain. Mr Obahor then advised Prince Eze to proceed with the purchase and, if need be, sell the Property on thereafter; and he offered to try to find a new purchaser. In his evidence Mr Obahor said that he was mindful that, if the purchase did not proceed, he would lose his fee from the Conways, whereas if it proceeded he would both receive that fee and stand to earn further commission on a re-sale by Prince Eze.

However, Prince Eze was now determined not to proceed at all. He did, however, instruct Mr Obahor to try to find another interested person who might step in as purchaser before the contractual completion date. No substitute purchaser was found. On 9 October 2015, which was before the contractual completion date, the Conways served a Notice to Complete. They served a further notice to complete on the contractual completion date, 30 November 2015, giving Prince Eze fourteen days in which to complete the purchase. However he did not complete it.

The failure of their sale of the Property placed the Conways in difficulty regarding their purchase of the New Property. They did not want to default on their contract for the New Property, partly because they were fully prepared mentally and in practical terms to move to Cambridge and partly because, if they broke their contract, they would forfeit the deposit and be exposed to a potential liability for further damages. However, they had intended to use the proceeds of sale of the Property to fund the purchase of the New Property and were not otherwise able to pay the price from their own assets. There were at least three reasons why they could not raise the necessary money by taking a further loan under their existing mortgage: first, they would not have qualified for such a loan, because they did not have a significant income; second, they would not have been able to make the monthly payments under such an extended loan but were reliant on rolling up the interest until the loan were repaid; third, the arrangements for a further advance under the existing mortgage would have caused a delay.

Therefore the Conways sought bridging finance, secured on the Property, with a view to discharging existing charges on the Property, paying the purchase price for the New Property and putting aside a small amount to cover ongoing expenses and living costs. Two initial applications for bridging finance, to Precise Mortgages and to United Trust Bank, were declined because the valuations obtained by those potential funders valued the Property at only £4.2 million. Eventually the Conways obtained bridging finance from Masthaven Bank on 15 December 2015 and were able to complete the purchase of the New Property on 17 December 2015.

The Conways commenced these proceedings on 4 March 2016.

On 16 May 2016 the Conways exchanged contracts for the sale of the Property to a third party for a price of £4.2 million, of which £1 million was paid on exchange of contracts and the balance on completion on 13 July 2017.

Initially Prince Eze defended the present claim on grounds no longer relied on. By a letter dated 15 December 2016 his solicitors gave notice that they had recently learned of the Disputed Payment Agreement and would, by amendment of the pleadings, rely on it in defence to the claim and as the basis of a counterclaim for the return of the £500,000 deposit. The pleadings were duly amended and the Disputed Payment Agreement has become the focus of the central issues in the case, although the quantum of the Conways’ claim for damages also remains in issue.

The case advanced by the Conways raises one broad issue, namely the quantum of the damages to which they are entitled for breach of contract.

The case advanced by Prince Eze disputes the validity of the contract of sale and, accordingly, the entitlement of the Conways to any damages. His case may be summarised as follows. First, the Disputed Payment Agreement constituted the promise of payment of a bribe or secret commission to Prince Eze’s agent Mr Obahor. Second, the effect of the promise was to vitiate any actual authority that Mr Obahor had to act on behalf of Prince Eze, and the Conways, having knowledge of the vitiating factor, could not rely on any apparent authority; and as the alleged contract was concluded by Mr Obahor it is a nullity for want of authority. Alternatively, third, the effect of the promise was to render the contract voidable in law or at equity at the election of Prince Eze and there is no lawful basis for denying rescission. Alternatively, fourth, if the contract is capable of being upheld, the effect of the promise is to entitle Prince Eze to damages for bribery, which must equal any liability he has incurred under his primary or secondary duties under the contract; thus the same result as rescission is achieved by a circuitous route.

Accordingly, at trial counsel developed their submissions by reference to the following four issues, which (at the risk of a little awkwardness of exposition) I shall consider below:

The law on bribes and secret commissions is considered in detail in paragraphs 116 to 157 below, in connection with the second and third issues. At this point, some introductory remarks will suffice. The basic rationale of the rules against bribes and secret commissions was succinctly, albeit not comprehensively, stated by Millett J in Logicrose Limited v Southend United Football Club Limited [1988] 1 W.L.R. 1256, 1260: “A principal is entitled to the disinterested advice of his agent free from the potentially corrupting influence of an interest of his own.” In Novoship (UK) Limited v Mikhaylyuk [2012] EWHC 3586 (Comm) at [106]-[109], Christopher Clarke J considered the nature of a bribe and of the circumstances in which the law on bribes might apply; the following passages are sufficient for present purposes:

“106.

The essential character of a bribe is … that it is a secret payment or inducement that gives rise to a realistic prospect of a conflict between the agent’s personal interest and that of his principal.

107.

The payments (or other benefits) do not have to be made directly to the fiduciary. Bribes may be paid to third parties close to the agent, such as family members or discretionary trusts, or simply to those whom the agent wishes to benefit. The test is whether the payment (or other benefit) puts the fiduciary in a real (as opposed to a fanciful) position of potential conflict between interest and duty.

108.

The recipient of the bribe (or the person at whose order the bribe is paid) must be someone with a role in the decision-making process in relation to the transaction in question e.g. as agent, or otherwise someone who is in a position to influence or affect the decision taken by the principal. …

109.

The payment need not be linked to a particular transaction …. It is sufficient if the agent is tainted by the bribery at the time of the transaction between the payer of the bribe and payee’s principal. If that is so, the agent’s conflict of interest means that the principal has been deprived by the other party to the transaction of the disinterested advice of his agent and is entitled to a further opportunity to consider whether it is in his interests to affirm it. It follows that subsequent transactions may be tainted by payments linked to an earlier transaction between the parties, or by a payment not linked to any particular transaction. ‘If a secret payment is made to an agent, it taints future dealings between the principal and the person making it in which the agent acts for the principal or in which he is in a position to influence the principal's decisions, so long as the potential conflict of interest remains a real possibility’: see Fiona Trust at para 73.”

Whether Mr Obahor was, for the purposes of the intended purchase of the Property, such a person as Christopher Clarke J described is an issue between the parties. The matter was put before me on the basis of agency, though with due regard to the breadth of the concept of agency and the variety of forms that agency can take.

Article 1 of Bowstead & Reynolds on Agency (21^st edition) (“Bowstead”) gives the following definition of agency (here and elsewhere I omit the footnotes):

“(1)

Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation. The one on whose behalf the act or acts are to be done is called the principal. The one who is to act is called the agent. Any person other than the principal and the agent may be referred to as a third party.

(2)

In respect of the acts to which the principal so assents, the agent is said to have authority to act; and this authority constitutes a power to affect the principal’s legal relations with third parties.

(3)

Where the agent’s authority results from a manifestation of assent that he should represent or act for the principal expressly or impliedly made by the principal to the agent himself, the authority is called actual authority, express or implied. But the agent may also have authority resulting from such a manifestation made by the principal to a third party; such authority is called apparent authority.

(4)

A person may have the same fiduciary relationship with a principal where he acts on behalf of that principal but has no authority to affect the principal’s relations with third parties. Because of the fiduciary relationship such a person may also be called an agent.”

In London Borough of Haringey v Ahmed [2017] EWCA Civ 1861, Hamblen LJ, with whom Lewison LJ agreed, described Bowstead’s definition as “helpful” at [27] and continued at [28]:

“The usual characteristics of an agency relationship may be said to be authority for the agent to affect the principal’s relationship with third parties, a fiduciary duty owed by the agent to the principal, and an ability on the part of the principal to exercise a degree of control over the agent. As this court observed in UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH [2017] EWCA Civ 1567 at [91]: ‘the absence of any of these main characteristics must ... be a significant pointer away from the characterisation of a particular relationship as one of agency, even though there may be rare exceptions.’”

The first of the three usual characteristics of agency identified by Hamblen LJ, namely authority to affect the principal’s relationship with third parties, is discussed in Bowstead at para 1-020 under the heading “Incomplete agency: internal relationship only—the ‘canvassing’ or ‘introducing’ agent”:

“Article 1(4) seeks to achieve completeness by taking in a well-established type of intermediary who makes no contracts and disposes of no property, but is simply hired, whether as an employee or independent contractor, to introduce parties desirous of contracting and leaves them to contract between themselves. In effecting such introductions he is remunerated by commission, which he may sometimes take from both parties. Such a person is a common figure in most western legal systems and may well be referred to as an agent. The most obvious example of such an intermediary in the English cases is the estate agent, who introduces purchasers to vendors and tenants to lessors of houses, and vice versa. … Canvassing agents are on the fringe of the central agency principles used by the common law, since their powers to alter their principals’ legal relations are at best extremely limited. They often, however, have authority to receive and communicate information on their principals’ behalf, and in so doing have the capacity to alter their principals’ legal position. They also usually act in a capacity which may involve the repose of trust and confidence, and hence may be subject in some respects to the fiduciary duties of agents towards their principals. They are also subject of typical rules, largely developed in estate agent cases, as to entitlement to commission, which are normally regarded as part of agency law and are relied on also by agents who have greater powers to bind their principals. They may sometimes hold money (e.g. deposits) for their principals. The rules applicable to the internal relationship between principal and agent will therefore apply as appropriate … Canvassing agents are persons to whom the internal parts of agency law may apply, but who, because of the limited nature of their external powers to affect their principals’ legal positions, are not agents in the full sense of the word. They may therefore be said to provide an example of ‘incomplete agency’.”

A footnote to the word “hired” in the first sentence of this passage observes: “A fiduciary relationship, central to this category, would be difficult to attribute without a contract between principal and agent.”

The second usual characteristic of agency identified by Hamblen LJ is the existence of a fiduciary duty. In Bristol and West Building Society v Mothew [1998] Ch 1, Millett LJ said at 18:

“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. As Dr Finn pointed out in his classic work Fiduciary Obligations (1977), p. 2, he is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.

…

The nature of the obligation determines the nature of the breach. The various obligations of a fiduciary merely reflect different aspects of his core duties of loyalty and fidelity. Breach of fiduciary obligation, therefore, connotes disloyalty or infidelity. Mere incompetence is not enough. A servant who loyally does his incompetent best for his master is not unfaithful and is not guilty of a breach of fiduciary duty.”

In the context of bribes and secret commissions, a broad view is taken of the necessary fiduciary relationship in appropriate circumstances. In Reading v The King [1949] 2 K.B. 233, 236, Asquith LJ delivering the judgment of the Court of Appeal said:

“In most of these cases [viz. cases in which the servant or agent has realised a secret profit, commission or bribe in the course of his employment] it has been assumed that the plaintiff, in order to succeed, must prove that a ‘fiduciary relation’ existed between himself and the defendant and that the defendant acted in breach of this relation. But the term ‘fiduciary relation’ in this connexion is used in a very loose, or at all events a very comprehensive, sense. A consideration of the authorities suggests that for the present purpose a ‘fiduciary relation’ exists (a) whenever the plaintiff entrusts to the defendant property … and relies on the defendant to deal with such property for the benefit of the plaintiff or for purposes authorized by him, and not otherwise … and (b) whenever the plaintiff entrusts to the defendant a job to be performed, for instance, the negotiation of a contract on his behalf or for his benefit, and relies on the defendant to procure for the plaintiff the best terms available …”

In the House of Lords, Reading v Attorney-General [1951] A.C. 507, Lord Porter, with whose speech Viscount Jowitt LC concurred, agreed at 516 with Asquith LJ that “the words ‘fiduciary relationship’ in this setting are used in a wide and loose sense”. Lord Radcliffe expressed entire agreement with the Court of Appeal, and Lord Normand and Lord Porter also agreed with the Court of Appeal subject only to minor reservations that are not relevant for present purposes. While in no way derogating from Asquith LJ’s dictum, however, one may note that the case was unusual, in that it concerned the abuse of a military uniform, and the remarks elicited in that particular context do not abrogate the requirement to consider carefully whether the specific facts of an instant case are such as to engage the policy and principle behind the bribes cases.

At para 6-037, Bowstead, picking up the earlier discussion in para 1-020, observes that:

“not every person who can be described by the word ‘agent’ is subject to fiduciary duties; and that a person who certainly is so to be described may owe such duties in some respects and not in others. … Rather than talk of a ‘non-fiduciary agent’ it seems better to say that where an agent does not act in a fiduciary capacity (e.g. because he simply carries out specific instructions), this is a reflection of the scope of his duties and the boundaries of the equitable rules.

… [T]he fact that an agent in the strictest sense of the word has a power to alter his principal’s legal position makes it appropriate and salutary to regard the fiduciary duty as a typical feature of the paradigm agency relationship. To do so will not mislead so long as two things are borne in mind.

The first is that the word ‘agent’ can be used in varying senses, and not all persons to whom the word is applied are agents in the full (or sometimes, any) legal sense. A canvassing, or introducing agent, for instance, may do no more than bring two parties together and thus may in many situations do little involving the incidence of fiduciary responsibilities at all; though equally he can … in some circumstances become liable for breach of such duties, as when he conceals from his principal the existence of further offers. …

The second matter which should be borne in mind is that the extent of an agent’s equitable duties (a phrase that embraces more than the strictly fiduciary duties to avoid conflicts of interests and not to profit) and also common law duties may vary from situation to situation. For example, a person who is certainly an agent in general, but who is authorised on a particular occasion to carry out an exactly specified act, may on the occasion act in no more than a ministerial capacity, even though he affects his principal’s legal position. … In many situations the duty may be, by virtue of the circumstances, limited; or restricted or even excluded by contract. ‘The precise scope of [the obligation] must be moulded according to the nature of the relationship.’”

(The concluding internal quotation is from the opinion of Lord Wilberforce in New Zealand Netherlands Society “Oranje” Inc v Kuys [1973] 1 W.L.R. 1126, 1130.)

The third usual characteristic of agency identified by Hamblen LJ, namely an ability on the part of the principal to exercise a degree of control over the agent, does not require further comment here.

Thus the agreement between the parties is of the first importance. Such agreement may be express or implied. Article 8 of Bowstead provides:

“Agreement between principal and agent for the conferral of authority may be implied in a case where one party has conducted himself towards another in such a way that it is reasonable for that other to infer from that conduct assent to an agency relationship.”

In London Borough of Haringey v Ahmed, Hamblen LJ referred to Article 8 and said at [26]:

“Assent to an agency relationship may therefore be inferred and it is not necessary for parties to have directed themselves to whether an agency relationship exists between them – see, for example, Garnac Grain Co Inc v HMF Faure & Fairclough [1968] AC 1130 at 1137C per Lord Pearson.”

In Kelly v Cooper [1993] A.C. 205, 213-4, the Judicial Board of the Privy Council identified “two fundamental propositions”:

“first, agency is a contract made between principal and agent; second, like every other contract, the rights and duties of the principal and agent are dependent upon the terms of the contract between them, whether express or implied. It is not possible to say that all agents owe the same duties to their principals: it is always necessary to have regard to the express or implied terms of the contract.”

Later, on 214:

“Similar considerations apply to the fiduciary duties of agents. The existence and scope of these duties depends upon the terms on which they are acting.”

Bowstead, at para 6-035, doubts the emphasis of these dicta. Though it is correct to observe that agency does not necessarily arise only out of contract and that fiduciary obligation is independent of contract, I see no reason to take issue with the point being made by the Board. In Kelly v Cooper itself, estate agents who had acted for two competing vendors without disclosing the fact were held not to be thereby in breach of fiduciary duty to one of the vendors. The discussion at 214-215 shows that the Board did not doubt the existence of a fiduciary relationship, though it considered that the relationship had to accommodate itself to and conform to the terms of the contract: “the scope of the fiduciary duties owed by the defendants to the plaintiff (and in particular the alleged duty not to put themselves in a position where their duty and their interest conflicted) are to be defined by the terms of the contract of agency.”

In the light of the law as surveyed above, I turn to consider the circumstances of the present case. At the outset, I agree with two preliminary submissions made by Mr Mumford. First, I do not think that the involvement of Azarvale at one stage of events is in any way determinative, as though the interposition of one of Prince Eze’s companies itself negatived any relevant relationship between him and Mr Obahor. This is in part because in substance Prince Eze was at all times from 27 April 2015 the proposed purchaser, acquiring the Property for his own benefit, providing the funds, choosing whichever purchasing vehicle he thought fit upon advice, and thereby personally controlling the transaction. It is also because he eventually decided to purchase in his own name and, some six weeks after that decision had been made and communicated, was the contracting party. Second, I do not think that the involvement of Fresco as the party both to the Disputed Payment Agreement and to the Property Acquisition Terms of Engagement is significant. Mr Obahor was the only person by whom Fresco acted at all; for practical purposes, he was Fresco. If his agreement with the Conways would otherwise have been a bribe or secret commission such as to vitiate the purchase contract, it cannot make a difference that he made his contracts in the name of a company. This is a fortiori when he used the same company in dealing with both parties to the purchase contract.

I shall summarise very briefly the main points made for each party. For Prince Eze, Mr Mumford submits that Mr Obahor was in a position to affect Prince Eze’s decisions and influence the terms on which the transaction proceeded or whether it proceeded at all. Mr Obahor made recommendations to Prince Eze from the very first conversation until preparation of the contractual documents, and he did so in circumstances where Prince Eze was familiar neither with the property market nor with the Property and was reliant on others for his information. He co-ordinated all that happened on Prince Eze’s side of the transaction and actually arranged property insurance himself. He selected the surveyors and was responsible for deciding the scope of their instructions. He was responsible for negotiating significant matters of detail, such as the date for completion, the inclusion of special conditions regarding late completion (no penalty was actually included, but the matter was within Mr Obahor’s power and he could have included it if he had wanted), and the terms on which the deposit was to be held. And from 25 June 2015 he had full authority to instruct the solicitors. The supervisory role fulfilled by Mr Howarth does not detract from the significance of Mr Obahor’s position; on the contrary, it tends to highlight it.

For Mr and Mrs Conway, Mr Collings submits that Mr Obahor’s involvement with the Property transaction initially involved no agency at all; he simply negotiated on his own behalf and presented a proposal to Prince Eze. Thereafter his role was essentially to “process manage the transaction”, as he put it in his email to Mr Howarth on 24 June. He did not instruct the solicitors; Mr Chick did that. He did not arrange finance; that was Mr Howarth’s role. Although he instructed the surveyors, he did so at Mr Chick’s bidding. Until late June his role was one of “co-ordinating” the transaction, as Mr Howarth put it, chivvying and chasing the various people who were arranging specific matters. The letter of authority dated 23 June did indeed give to Mr Obahor an authority that, as Mr Howarth said, was unusual for a person in his position. But even then his authority was essentially ministerial: it was given in order “to facilitate the process”; it did not involve any authority in respect of finances; and there were closely defined parameters to Mr Obahor’s right to instruct the solicitors. Thus he was to exchange contracts in accordance with instructions, he was required to obtain as long a period as possible for completion and actually received approval of the chosen date, and the terms of the contract had already been agreed in all material respects.

In my judgment, the relationship between Mr Obahor and Prince Eze was not such as to engage the law on bribes.

The rationale of that law (see paragraph 96 above) directs attention to the state of affairs as it actually was, as distinct from how the Conways believed it to be. The starting point is that initially Mr Obahor was nobody’s agent. Though pretending to act for a confidential principal, he was acting on his own behalf. When he was negotiating to purchase the Property, he was not doing so on behalf of Prince Eze or, for that matter, of anyone else. As I have mentioned, there were occasions when Mr Obahor did business by agreeing to source a property for a client. But this was not such a case.

When Mr Obahor first contacted Prince Eze, on 27 April 2015, he told him of the opportunity to purchase the Property, told him it was a good deal, and told him of his requirement for a commission of 3% of the purchase price. Prince Eze said that he would proceed with the purchase and told Mr Obahor to contact Mr Howarth in order to progress matters. None of that involves either agency or any other kind of relationship that could fall within the scope of the rules on bribes or secret commissions. Mr Obahor was, so to speak, presenting a pre-packaged deal for which, if it were taken up, he required a percentage commission. So far from being an agent, he was in substance a salesman acting on his own behalf and for his own commercial interest. Nothing in the initial conversation entitled Prince Eze to assume that Mr Obahor would not get paid by the vendors. There was no inherent reason why he should not be paid by either side or, indeed, by both. There is nothing untoward or particularly unusual in an introducing agent receiving commission from both parties to a transaction; cf. Bowstead at para 1-020, above. In the present case, Mr Obahor had not even acted as agent for Prince Eze in sourcing the Property. Further, by 27 April the Conways had already agreed in principle to pay a fee to Mr Obahor. As a matter of fact there was nothing objectively wrong in them so agreeing. Prince Eze did not know that the Conways were to pay Mr Obahor, but nor did they know that Prince Eze was to pay him. That is the context in which subsequent events are properly to be considered.

Mr Obahor was told to contact Mr Howarth in order to progress matters. He was not thereby made an agent in any significant sense of the word. Despite his efforts to persuade me of the contrary, Prince Eze was looking to Mr Howarth to oversee matters and give him any necessary advice. That does not, of course, mean that he expected Mr Howarth to give advice as to the property market or the merits of the Property. It means, rather, that, trusting Mr Howarth from long association, Prince Eze was relying on him to ensure that the transaction proceeded properly—to “tell [him] the truth”, as he put it. As Mr Obahor had acknowledged on 6 May (with particular reference to finance) and again on 24 June (with more general reference), Prince Eze wanted everything to go through Mr Howarth. As Prince Eze acknowledged, he did not have any real knowledge of Mr Obahor. Contrary to his present claims to the contrary, he did not regard Mr Obahor as a trusted adviser; rather he was someone who could provide a ministerial service in progressing matters.

What followed until late June 2015 was at most an attenuated form of agency. Mr Obahor was not being instructed to do anything beyond facilitate the progress of a transaction that was desired by both vendor and purchaser and was intended to be to their mutual advantage. He had authority to receive and communicate information but he had no ability to affect Prince Eze’s legal position vis-à-vis the Conways. The directors of Azarvale, acting through Mr Chick, had the legal control of the transaction and Mr Howarth was in charge of the financial side. Mr Obahor’s function was to chivvy them and Prince Eze to do their bit when required and to encourage the Conways in the face of prolonged delays. In instructing surveyors, he was performing a ministerial function on the instructions of Mr Chick for Azarvale. I reject the suggestion that the fact that he either did or could perform that function in a manner that was capable of affecting the outcome of the process constituted him a fiduciary within the terms of Christopher Clarke J’s dictum properly understood. Whether the information provided by the surveyors was satisfactory for the purposes of the purchase was a matter for the directors of Azarvale and, subsequently, for Prince Eze. The context, already mentioned, remains important: Mr Obahor had introduced the transaction as a salesman, not as an agent; he had his own commercial interest in the transaction proceeding, and there was nothing untoward in either or both parties paying for the introduction. The only promise of payment by the Conways was of commission for the introduction, upon completion. They did not, for example, promise to pay a fee for the use of a particular surveyor. In my judgment, matters stood essentially as they had done at the outset on 27 April.

The final stage came with the signing of the documents on 25 June. It is at this stage that Prince Eze gave to Mr Obahor an authority that was, as Mr Howarth observed, very unusual for an acquisition agent. However, the following matters need to be borne firmly in mind. First, the agreement to pay Mr Obahor was made in principle before there was any relationship at all between him and Prince Eze and was formalised at a time when Mr Obahor was not Prince Eze’s agent in any relevant sense. Second, the basic context, as mentioned above, remained unchanged. Third, Prince Eze had signed the purchase contract. The only provision remaining to be completed was the completion date. Fourth, the authority given to Mr Obahor was for the purpose of dealing with the solicitors to bring the purchase to fruition. Having regard to the terms of the letter of authority and to the fact that Prince Eze had signed the contract, Mr Obahor’s authority could not properly be construed as extending to anything other than progressing the purchase in accordance with the agreed terms of the contract. Mr Obahor certainly did have authority to instruct the solicitors to exchange contracts; that, however, was simply authority to instruct them to make the contract that Prince Eze had signed. There is nothing to indicate that he had authority to change the terms of the agreement. Fifth, the only contractual term that remained outstanding was the completion date. This concerned not the substance of the agreement but the time when the agreement would be completed. Even if the promise of payment made at a time when no relevant agency existed could in principle engage the law on bribes, it is fanciful to think that in the circumstances as they obtained the question concerning the completion date created a position of potential conflict of interest and duty. Moreover, the facts show that on this matter Mr Obahor acted on instructions from Mr Howarth and Prince Eze himself. The true position, in my judgment, is that Mr Obahor’s authority was, as Mr Collings submits, ministerial for the purpose of facilitating the progress of the contract that Prince Eze had signed and wanted brought to fruition. Insofar as this involved him in making decisions on what he rightly regarded as minor points, there was no real as distinct from fanciful conflict between his interest and his duty.

If I had reached a different conclusion on the first issue, I should have held that the Disputed Payment Agreement was an agreement to pay a bribe or secret commission.

As this issue remained hotly contested at trial, I shall deal with it at some length, even though, by reason of my conclusion on the first issue, it does not arise for decision. However, the issue seems to me to be straightforward and the law well established and my reasoning can be stated shortly. The promise of payment in the Disputed Payment Agreement was not disclosed to Prince Eze. It is no answer for the Conways to say that they believed Mr Obahor would disclose it to him, because they are deemed to have taken the risk that he would not. It is irrelevant that the promise of payment was not made with any intention of suborning Mr Obahor but simply on account of his threats and deceit as described above; once the promise of payment is made, the law will not enquire into the motive. It does not matter that the promised payment was not made, because the promise, having been accepted by the agent, is treated as having the same effect in depriving the principal of his agent’s disinterested services. It is irrelevant whether in fact Mr Obahor was in any way influenced by the promise of payment; Prince Eze was (ex hypothesi)deprived of his disinterested services simply by virtue of the fact that he had acquired an undisclosed interest in the transaction. Finally, it is more satisfactory to speak of a “secret commission” than of a “bribe”, because the latter more obviously connotes a corrupt motive on the part of the payer, which is lacking in this case. However, there is no legal distinction between the two, the expression “secret commission” being used only to avoid any unnecessary appearance of the imputation of corruption. Whether the presence or extent of any actual corruption is relevant to questions of remedy will be considered in connection with the third issue, below.

It is convenient to begin with Panama and South Pacific Telegraph Company v India Rubber, Gutta Percha, and Telegraph Works Company (1875) L.R. 10 Ch. App. 515 (“Panama”). A telegraph works company contracted with a telegraph cable company to lay a telegraph cable. Payment for the work was to be, in part, by instalments payable upon receipt of certificates issued by the cable company’s engineer, who was named in the contract. After the contract had been made, the cable company’s engineer entered into a contract with the works company, whereby he would lay the cable and be paid in instalments when the works company received its instalment payments from the cable company. When it learned of the engineer’s contract with the works company, the cable company claimed to be entitled to rescind its contract and sought repayment of all moneys paid under it to the telegraph works company. The claim succeeded. James LJ considered the issue too straightforward to have justified the lengthy trial. He said at 525-6:

“As far as I am personally concerned, the whole of the long and elaborate argument which has occupied so many days of the time of the Court has been entirely thrown away. From the moment when I understood what the case was—what was the contract between the two companies, and what was the sub-contract between the one company and the agent for the other company—I have been of opinion, and I am now of opinion, that the right of the Plaintiffs to the relief which they have asked, and which has been given to them, is a matter of course, according to the view of the law which I have learnt as student, practitioner, and Judge for nearly half a century.

According to my view of the law of this Court, I take it to be clear that any surreptitious dealing between one principal and the agent of the other principal is a fraud on such other principal, cognizable in this Court. That I take to be a clear proposition, and I take it, according to my view, to be equally clear that the defrauded principal, if he comes in time, is entitled, at his option, to have the contract rescinded, or, if he elects not to have it rescinded, to have such other adequate relief as the Court may think right to give him.”

That dictum, which I take to reflect the ratio of Panama, supports the proposition that a contract between A and B is voidable at B’s election if there has been “any surreptitious dealing” between A and B’s agent. Although that proposition is capable of some degree of refinement, in my judgment it continues to be an accurate statement of law.

In Shipway v Broadwood [1899] 1 Q.B. 369, the plaintiff sued on a stopped cheque that had been given by the defendant in respect of the price of horses he had agreed to buy from the plaintiff. The defendant had agreed to buy the horses in reliance on a certificate from his agent, Pinkett, that the horses were sound. At trial it appeared that the plaintiff had offered payment to Pinkett if the horses were sold; it appeared also that the offer had been accepted. The Court of Appeal gave judgment for the defendant. Chitty LJ said at 373:

“Directly it is established that money was paid or promised to the agent of the other party, it is quite unnecessary to go further and see what effect that had on the mind of the person to whom it was paid or to be paid. The plaintiff placed Pinkett in a position in which his duty conflicted with his interest. In Thompson v. Havelock (1808) 1 Camp. 527 Lord Ellenborough said, ‘No man should be allowed to have an interest against his duty.’ That great principle has been applied in cases innumerable, and it has never been held to be a proper subject of inquiry what was the effect on the mind of the recipient of the bribe. … It was the plaintiff’s duty to inform the defendant of the promise made to Pinkett if he wished to escape the consequences of having made it. I wish to state again emphatically that in such a case as this it is an immaterial inquiry to what extent the bribe or the offer of it influenced the person to whom it was given or offered. A contrary doctrine would be most dangerous, for it would be almost impossible to ascertain what had been the effect of the bribe; and, further, the real evil is not the payment of money, but the secrecy attending it.”

Two relevant points appear from Shipway v Broadwood. First, actual payment of the bribe is not required; it suffices that the agent accepted the offer of a bribe. Second, it is unnecessary for the principal to show that his agent was actually influenced by the bribe.

In Hovenden and Sons v Millhoff (1900) 83 L.T. 41, the plaintiffs had over some years bought tobacco from the defendant and had used agents to negotiate the terms of the purchases. The plaintiffs, on learning that their agents had been receiving monetary gifts from the defendant, brought an action alleging a conspiracy between the defendant and the agents to defraud the buyers and claiming payment of the amount of the gifts, the amount by which the defendant had overcharged the plaintiffs for the tobacco products, and damages. The jury found that there was no conspiracy to defraud and that the prices charged for the tobacco products were not excessive, but that the gifts did have an effect on the agents in inducing them to place orders for the products at the prices demanded by the defendant. The trial judge dismissed the claim, but the Court of Appeal held that the plaintiffs were entitled to judgment for damages in the amount of the gifts. Concurring with Smith and Williams LJJ, Romer LJ delivered the following judgment at 43; it is worth setting out in full:

“The courts of law of this country have always strongly condemned and, when they could, punished the bribing of agents, and have taken a strong view as to what constitutes a bribe. I believe the mercantile community as a whole appreciate and approve of the court’s views on the subject. But some persons undoubtedly hold laxer views. Not that these persons like the ugly word ‘bribe’ or would excuse the giving of a bribe if that word be used, but they differ from the courts in their view as to what constitutes a bribe. It may, therefore, be well to point out what is a bribe in the eyes of the law. Without attempting an exhaustive definition I may say that the following is one statement of what constitutes a bribe. If a gift be made to a confidential agent with the view of inducing the agent to act in favour of the donor in relation to transactions between the donor and the agent’s principal and that gift is secret as between the donor and the agent—that is to say, without the knowledge and consent of the principal—then the gift is a bribe in the view of the law. If a bribe be once established to the court’s satisfaction, then certain rules apply. Amongst them the following are now established, and, in my opinion, rightly established, in the interests of morality with the view of discouraging the practice of bribery. First, the court will not inquire into the donor’s motive in giving the bribe, nor allow evidence to be gone into as to the motive. Secondly, the court will presume in favour of the principal and as against the briber and the agent bribed, that the agent was influenced by the bribe; and this presumption is irrebuttable. Thirdly, if the agent be a confidential buyer of goods for his principal from the briber, the court will assume as against the briber that the true price of the goods as between him and the purchaser must be taken to be less than the price paid to, or charged by, the vendor by, at any rate, the amount or value of the bribe. If the purchaser alleges loss or damage beyond this, he must prove it. As to the above assumption, we need not determine now whether it could in any case be rebutted. As at present advised, I think in the interests of morality, the assumption should be held to be an irrebuttable one; but we need not finally decide this, because in the present case there is nothing to rebut the presumption.”

In Re a Debtor [1927] 2 Ch 367, the debtor engaged one Latter to act for him as his agent in negotiating a loan from a money-lender and paid Latter a commission for so acting. The loan was negotiated and made but, unbeknown to the debtor, the money-lender, who knew that Latter was the debtor’s agent, paid a commission to Latter. The Court of Appeal held that the debt could not be enforced against the debtor. At 373 Lord Hanworth M.R. said:

“I respectfully agree with what was said by Chitty L.J. in Shipway v. Broadwood[1899] 1 Q.B. 369, 373, that ‘Directly it is established that money was paid or promised to the agent of the other party, it is quite unnecessary to go further and see what effect that had on the mind of the person to whom it was paid or to be paid.’ It would therefore appear that, if money were paid by the lender to the borrower’s agent without the consent of the borrower, whose agent Latter was, that is sufficient. Mr Wallington [counsel for the lender] has suggested that there is nothing to show that the commission paid by the lender to Latter was not paid as a matter of generosity, or that it altered, to the debtor’s disadvantage, the terms of the loan, or induced Latter to act against the interests of his principal, the debtor, and that such a commission was not fraudulent unless paid with the object of inducing Latter to act in the interest of the lender only; but it seems to me, following Shipway v. Broadwood, that if a sum is offered by the money-lender to the borrower’s agent, it can only be accepted with the knowledge and assent of the borrower.”

(This makes it clear that the actual effect of the bribe on the agent’s mind and conduct is irrelevant. Of course, it does not touch on the prior question of whether the recipient of the bribe was an agent in the relevant sense.) The Master of the Rolls confirmed that the effect of the secret commission was to render the loan agreement voidable at the election of the debtor. At 374 he said:

“The act of bankruptcy in this case was committed by a man who, if and when he knew the facts, had a right to set aside the contract as voidable. That follows from the decision in Shipway v. Broadwood and from what was said in Panama and South Pacific Telegraph Co. v. India Rubber, Gutta Percha, and Telegraph Works Co. (1874-5) L.R. 10 Ch. App. 515, that such a contract is voidable. The appellant did not know until the hearing before the registrar that at the time of the transaction, he, being unaware of the commission given by Bennett to Latter, was entitled to declare the contract void, and therefore now having discovered his right he is entitled to set it up, though it is said that as he did not put it forward before he cannot now rely upon it. It was argued before the registrar that the transaction ought not to be treated as one originally voidable or void, as the borrower never offered to pay back the money borrowed.”

Scrutton LJ, concurring, referred to the view of the registrar at first instance that Latter was acting as agent for both parties to the transaction and was not acting corruptly, and said at 376:

“That conclusion of the registrar is a very dangerous one to the commercial world and to commercial morality. A man who is the agent of A in a transaction between A and B, and who also acts secretly for B in the same transaction, is presumed to act corruptly. Common law authorities require the Court to hold that that is a corrupt practice, and, in my opinion, the Court ought to presume fraud in such circumstances. It seems to me a dangerous thing to allow a man to say: ‘Although you did not know it, I was also agent for the other party.’”

He agreed that the effect of the bribe or secret commission was to make the loan contract voidable, not void, and, with hesitation, that the law’s lack of sympathy with those who bribe the agents of others meant that rescission would be permitted without requiring the borrower to repay the money he had received. Sargant LJ gave a short concurring judgment.

These cases were followed by Slade J in Industries & General Mortgage Co Ltd v Lewis [1949] 2 All ER 573; his judgment is the locus classicus for the common-law definition of a bribe. The defendant was interested in purchasing a property. He had been introduced to the property by one V, to whom he had promised a share of the profits upon resale of the property. The defendant engaged V to act as his agent in approaching the plaintiff with a view to it procuring for him a loan to enable him to complete the purchase. The plaintiff procured the loan and the defendant agreed to pay it a commission for doing so. Later the plaintiff sued the defendant for payment of part of the commission. At trial the defendant learned for the first time that the plaintiff, knowing that V was his agent, had agreed to split the commission with V. Slade J found that the plaintiff’s agreement to pay V was not made with the dishonest intention of causing V to persuade the defendant to accept the commission demanded by the plaintiff or to urge him to act in any way disadvantageously to the defendant's own interest. However, he held that the motive behind the payment to V was immaterial and that the payment constituted a bribe, which the defendant could recover as damages on his counterclaim. (The case did not concern rescission.) At 575 he said:

“A large number of authorities have been cited. Sometimes the words ‘secret commission’ are used, sometimes ‘surreptitious payment’, and sometimes ‘bribe’. For the purposes of the civil law a bribe means the payment of a secret commission, which only means (i) that the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) that he makes it to that person knowing that that person is acting as the agent of the other person with whom he is dealing; and (iii) that he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to be the other person's agent. Those three are the only elements necessary to constitute the payment of a secret commission or bribe for civil purposes. … I hold that proof of corruptness or corrupt motive is unnecessary in a civil action, and my authority is the decision of the Court of Appeal in Hovenden and Sons v Millhoff …”

Slade J analysed carefully the judgment of Romer LJ in the Hovenden case. He said at 576-7:

“Romer LJ in his judgment, said (83 LT 43):

‘It may, therefore, be well to point out what is a bribe in the eyes of the law. Without attempting an exhaustive definition I may say that the following is one statement of what constitutes a bribe. If a gift be made to a confidential agent with the view of inducing the agent to act in favour of the donor in relation to transactions between the donor and the agent’s principal and that gift is secret as between the donor and the agent—that is to say, without the knowledge and consent of the principal—then the gift is a bribe in the view of the law.’

I emphasise the learned judge’s words: ‘If a gift be made to a confidential agent with the view of inducing the agent’ because counsel for the plaintiffs rightly emphasised those words. Romer LJ proceeds (ibid):

‘If a bribe be once established to the court’s satisfaction, then certain rules apply. Amongst them the following are now established, and, in my opinion, rightly established, in the interests of morality with the view of discouraging the practice of bribery. First, the court will not inquire into the donor’s motive in giving the bribe, nor allow evidence to be gone into as to the motive.’

In other words, the learned judge is saying that once the bribe is established, there is an irrebuttable presumption that it was given with an intention to induce the agent to act favourably to the payer and, thereafter, unfavourably to the principal. Romer LJ continues:

‘Secondly, the court will presume in favour of the principal, and as against the briber and the agent bribed, that the agent was influenced by the bribe; and this presumption is irrebuttable.’

That means that the motive of the donor in making the payment to the agent or donee is conclusively presumed against the person who makes the payment, and, secondly, it is conclusively proved against the person making the payment that the donee is affected and influenced by the payment. The lord justice goes on:

‘Thirdly, if the agent be a confidential buyer of goods for his principal from the briber, the court will assume as against the briber that the true price of the goods as between him and the purchaser must be taken to be less than the price paid to, or charged by, the vendor by, at any rate, the amount or value of the bribe.’

That is to say, it must be presumed that the price is loaded as against the purchaser at least by the amount of the bribe. Counsel for the plaintiffs says: ‘Yes, but earlier the learned judge has said that if a gift be made to a confidential agent with a view to inducing him, it is a bribe, and, therefore, in using the later language and referring to bribes the learned judge is in effect saying: “I am using these later presumptions in cases where a bribe has been established and I have already defined a bribe as being only something which has been established as being paid with a certain motive”. That, of course, would tear up the whole of the learned judge’s observations because he says lower down that the courts will not receive evidence as to what is the motive of the person making the payment. The motive will be conclusively inferred against him.”

Slade J also cited the passage in Scrutton LJ’s judgment in Re a Debtor set out above and said at 578:

“I most respectfully concur in that portion of the judgment of that very learned judge and for the purposes of a civil action, where you have two parties to a contract introduced by an agent of one of them, once it is established that one of the parties to a contract makes a secret payment to the person whom he knows to be the agent of the other, the law will presume against him that he has acted corruptly, that the agent has been influenced by the payment to the detriment of his principal, and that the principal, the defendant in this case, has suffered damage to at least the amount of the bribe.”

Mr Collings submitted that Slade J fell into error in rejecting the plaintiffs’ argument that the motive of the payment or promise of payment was relevant; the presumptions mentioned by Romer LJ apply only where there is a bribe, and a bribe involves, as Romer LJ said, a gift made “with the view of inducing the agent to act in favour of the donor in relation to transactions between the donor and the agent’s principal”. I do not accept that Slade J fell into any error. The argument that he rejected involves ascribing patent incoherence to Romer LJ’s observations—as Slade J put it, it would have the effect of “tear[ing] up” those observations—because it would be to construe his first rule (“the court will not inquire into the donor’s motive in giving the bribe, nor allow evidence to be gone into as to the motive”) in a sense flatly contradictory to what he had said moments before. The relevant connection of the payment to the transaction in question does not rest on its direct link to that or any other specific transaction; it suffices that the agent be tainted by the bribery at the time of the transaction between the payer of the bribe and the payee’s principal: cf. Novoship (UK) Limited v Mikhaylyuk, per Christopher Clarke J at [109].

The claimants placed particular reliance on the judgment of Millett J in Logicrose Limited v Southend United Football Club Limited [1988] 1 W.L.R. 1256. The chairman of the football club, who also held a controlling shareholding as nominee of one J, negotiated the grant to Logicrose of a licence to operate a market on the football club’s land. He did not disclose to the board of directors that, acting on the instructions of J, he had required Logicrose to make a large payment to an off-shore company controlled by J; nor did he disclose that the grant of the licence was against the advice of the football club’s solicitors. The board learned of the payment shortly after the grant of the licence, and it managed to obtain the greater part of the £70,000. Some time later the football club served notice to terminate the licence for breach of covenant. Logicrose brought a claim for a declaration that the notice was invalid and for the return of the £70,000 or damages for fraud. The football club counterclaimed for rescission of the licence. The football club succeeded.

Millett J set out the applicable law at 1260-1:

“It is well established that a principal who discovers that his agent in a transaction has obtained or arranged to obtain a bribe or secret commission from the other party to the transaction is entitled, in addition to other remedies which may be open to him, to elect to rescind the transaction ab initio or, if it is too late to rescind, to bring it to an end for the future: Panama and South Pacific Telegraph Co. v India Rubber, Gutta Percha, and Telegraph Works Co. (1875) L.R. 10 Ch. App. 515 and Armagas Ltd. V Mundogas S.A. [1986] A.C. 717, 742-743.

The remedy is not confined to cases where the agent has taken a bribe or secret commission in the strictest sense. It is available whenever, without his principal’s knowledge and consent, the agent has put himself in a position where his interest and duty may conflict. A principal is entitled to the disinterested advice of his agent free from the potentially corrupting influence of an interest of his own. Any such private interest, whether actual or contemplated, which is not known and consented to by his principal, disqualifies him: see the Panama case, L.R. 10 Ch.App. 515, 528-529 and Parker v McKenna (1874) L.R. 10 Ch.App. 96, 118. It is immaterial whether the agent’s mind has been affected or whether the principal has suffered any loss as a result: ‘the safety of mankind requires that no agent shall be able to put his principal to the danger of such an inquiry as that’: Parker v McKenna, at pp. 124-125 per James L.J.; see also at p. 118 per Lord Cairns L.C. and Shipway v Broadwood [1899] 1 Q.B. 369, 373 per Chitty L.J. The principal, having been deprived by the other party to the transaction of the disinterested advice of his agent, is entitled to a further opportunity to consider whether it is in his interests to affirm it.”

Mr Collings submitted that in the present case it was relevant to ask whether the promise of payment from the Conways had in fact affected the advice given and services rendered by Mr Obahor to Prince Eze; if it had not, then it could not be said that Prince Eze had been “deprived by [the Conways] of the disinterested advice of his agent”. In my judgment, that submission is clearly wrong. A secret commission necessarily gives the agent a personal interest in the transaction, with the result that he is no longer disinterested and that his principal is deprived of his disinterested services. This is clear in principle and is authoritatively demonstrated in the earlier cases mentioned above: see Shipway v Broadwood, per Chitty LJ at 373; Hovenden and Sons v Millhoff, per Romer LJ at 43; Re a Debtor, per Lord Hanworth MR at 373 and per Scrutton LJ at 376. It is also made clear in this very passage of Millett J’s judgment, where he refers to the entitlement of a principal to “the disinterested advice of his agent free from the potentially corrupting influence of an interest of his own” and states that it is “immaterial whether the agent’s mind has been affected”.

In Logicrose Millett LJ considered at 1261-2 the requisite state of knowledge of the party paying the bribe or secret commission. As he pointed out, in all the reported cases the party paying the bribe had done so himself and had been “fully aware of the agent’s personal interest”: 1261E-F. (That is so in this case also.) Therefore there was no direct authority on the degree of knowledge that the paying party must possess of the agent’s personal interest. He said at 1261:

“With one reservation to which I shall come in a moment, however, and which goes only to the facts of which knowledge must be proved, I accept the submission made on behalf of the plaintiffs that nothing less than actual knowledge or wilful blindness will suffice. In particular, constructive notice will not do.”

He continued at 1262:

“My one reservation, which I make for the sake of completeness, is this. It is clear that, where one party to a transaction takes what Collins L.J. described as ‘the hazardous course’ of making a payment for the personal benefit of the other’s agent, and does not disclose it to the principal, he cannot afterwards defend the transaction by claiming that he believed the agent to be an honest man who would disclose it himself: Grant v. Gold Exploration and Development Syndicate Ltd. [1900] 1 Q.B. 233, 249–250. Where, therefore, knowing that the agent has an interest of his own he does not himself disclose it to the other party, then in the words of Collins L.J., at p. 249: ‘he must at least accept the risk of the agent’s not doing so.’ In my judgment, the converse must equally apply: if a man deals secretly with another’s agent behind the back of his principal, knowing that the agent intends to conceal the dealing from his principal and that he may be intending to obtain some private advantage for himself, he takes the risk that he does intend to do so. The two are only different aspects of the same general principle, expressed in varying terms and contexts but always forcibly and to the same effect: ‘any surreptitious dealing between one principal and the agent of the other principal is a fraud on such other principal, cognizable in this court’: see the Panama case, L.R. 10 Ch. App. 515, 526 per James L.J.; and ‘the real evil is not the payment of money, but the secrecy attending it’: Shipway v Broadwood [1899] 1 Q.B. 369, 373 per Chitty L.J.”

In the present case, the Conways made the promise of payment directly to Mr Obahor and failed to bring the promise to the attention of Prince Eze. According to Millett LJ’s “one reservation”, therefore, it is of no assistance to them to say that they expected Mr Obahor to tell Prince Eze about the promise.

The “one reservation” mentioned by Millett LJ was considered by the Court of Appeal in UBS v Kommunale Wasserwerke Leipzig GmbH [2017] EWCA Civ 1567. Mr Collings relied heavily on the majority judgment of Lord Briggs and Hamblen LJ (Gloster LJ dissented in the result and in part of the reasoning), and it is therefore necessary to refer to the case in some detail.

The facts of the UBS case, slightly simplified, were as follows. KWL, a municipal body, sold certain derivatives to a bank, UBS. Upon the occurrence of certain events specified in the derivatives documents, KWL became liable to UBS for large amounts of money. KWL sought to rescind the derivatives transactions on the ground that it had been persuaded to enter them by its financial advisers, VPG, who had paid a bribe to one of KWL’s two managing directors. UBS was not aware of the bribe; however, unbeknown to KWL, it had an arrangement with VPG, whereby VPG would advise its municipal clients, of whom KWL was one, to enter into the derivatives transactions with UBS regardless of the interests of those clients. The judge at first instance held that KWL was entitled to rescind the derivatives transactions on the grounds of bribery and conflict of interest. The Court of Appeal dismissed the appeal, though for reasons that differed in part from those of the trial judge.

As the majority noted at [103], the only basis on which KWL had sought at trial to make UBS legally responsible for the bribe was by means of the argument that in paying the bribe VPG was acting as UBS’s agent. The trial judge had accepted that argument, but the Court of Appeal rejected it. The reasons why it did so were specific to the facts of the case, but it is interesting to note why the Court found that there was no relevant agency: first, VPG’s pre-existing agency relationship with KWL counted against its subsequent relationship with UBS being itself an agency relationship; second, the dishonest arrangement between UBS and VPG depended on VPG abusing its fiduciary relationship with KWL, which meant that it had to continue to appear to act loyally towards KWL; third, the arrangement between UBS and VPG did not give VPG any authority to affect legal relations between UBS and any third party; fourth, on the facts VPG did not owe any fiduciary duty to UBS.

However, the Court of Appeal held at [103]-[121] that KWL was entitled to rescission on account of the bribe because, even though the bribe had been given by a stranger (i.e. not by UBS or its agent), UBS’s conscience was affected by it. In view of Mr Collings’ reliance on the UBS case, it is important to be clear that the jurisprudential basis of relief was not the legal rules on bribes enunciated by Romer LJ in the Hovenden case and by the courts consistently in the cases cited above. Rather it was the power of the court to grant relief in equity against a party that had dishonestly assisted the other party’s agent in the abuse of fiduciary duty. The principle in the case is very similar, therefore, to the factually very different case of Hurstanger Limited v Wilson [2007] EWCA Civ 299, [2007] 1 W.L.R. 2351, which is discussed below in connection with the third issue in this case. (Cf. also Millett J’s observation in Logicrose at 1261H, that the distinction between the “bribery” cases and the “knowing assistance” cases lies in the remedy sought rather than in the degree of knowledge required.)

The dispute on this point in the UBS case concerned what was required to affect UBS’s conscience sufficiently for rescission to be an available remedy; this appears from [106], where the nub of the argument accepted by the majority is also set out:

“In this court counsel on both sides were substantially agreed that the question whether it would be inequitable for a party to resist rescission of a contract procured by a bribe of the other party’s agent would depend upon whether the first party’s conscience was sufficiently affected by the payment of the bribe. On this appeal Mr Lord [for KWL] … submitted that where (as in the present case) a party dishonestly assists the other party’s agent in the abuse of its fiduciary duty to that other party and a contract ensues then, if that abuse of fiduciary duty included the payment of a bribe, the conscience of the dishonest assister will be affected by it even if it was unaware that a bribe had been paid.”

At [110] in the UBS case, the majority said that Millett J’s analysis in Logicrose “broadly confirm[ed] the general rule that, for the conscience of the contracting party against whom rescission is sought to be affected, he must know about the bribe or other breach of fiduciary duty committed by his counterparty’s agent.” In the same paragraph the majority observed that Millett J’s “one reservation” was obiter in Logicrose, and went on to ask whether it was correct and whether it applied in the UBS case itself. The discussion that follows at [111]-[112] is not, in fact, addressed to the relatively simple proposition comprised in Millett J’s “one reservation”. Rather it involves reasoning from the specific case of a bribe paid by the counter-party or his agent to the wider underlying principle aimed at preventing the mischief of “the secret deprivation of the principal of the disinterested advice which he is entitled to expect from his fiduciary” by “any surreptitious dealing between one principal and the agent of the other principal”. Thus the conclusion was stated at [113]:

“In our judgment, the general principle to be derived from the Logicrose case and the earlier cases cited by Millett J in the passage quoted above [i.e. the “one reservation” paragraph], which is applicable to the present case, is as follows. Where a party to an intended transaction deals with the other party’s agent secretly and behind his back, and dishonestly assists that agent to abuse his fiduciary duties to the other party so as to bring that transaction about, then the first party’s conscience may be affected not merely by the particular form of abuse by the agent of which it actually knew, but also by any other abuse which the agent chose to employ to bring about the transaction with the first party.”

This casts no doubt on Millett J’s “one reservation”, which is indeed supported by the authorities cited by him.

If (contrary to my finding) the Disputed Payment Agreement constitutes a contract to pay a secret commission to a fiduciary, what consequences follow?

Mr Mumford’s primary submission is that the purchase contract is void for want of authority on the part of Mr Obahor to make it. The argument, shortly stated, is that an agent’s authority only extends to acting for the benefit of the principal; an agent has no authority to act against the principal’s interests. Mr Obahor used his alleged authority to procure the exchange of contracts. Having received an interest in the transaction by the promise of a secret commission or bribe—and indeed, on his evidence, having been influenced in his conduct by that interest—he was committing a fraud on his principal and his authority was lost. As the Conways knew of the matter that deprived him of authority, they cannot rely on his ostensible authority to act for Prince Eze. Therefore the purchase contract was void for want of authority on Mr Obahor’s part. Mr Mumford relies on the principle set out in Article 23 in Bowstead; see paragraphs 3-010 to 3-011.

In my judgment, that argument is clearly wrong. One reason will suffice. The contract was made in the normal way, namely by the exchange of contracts by the respective solicitors. The relevant question concerns the authority of BPE Solicitors to effect exchange. They held a letter authorising Mr Obahor to give them instructions. Even if it be correct to say that Mr Obahor’s actual authority had been terminated by his breach of duty to his principal, no grounds have been shown for suggesting that the solicitors were not entitled to act on the basis of Mr Obahor’s apparent authority to instruct them to exchange contracts.

It is unnecessary, therefore, to consider whether Mr Obahor’s actual authority to act on Prince Eze’s behalf had been terminated by reason of his (assumed) improper use of his authority. It seems to me doubtful that it had been terminated. Whatever Mr Obahor’s motives, he was doing what he had been instructed to do, which was not obviously against his client’s interests. The case is different from an agent who misuses his authority to do what he has no business doing. However, I do not need to decide this point.

Mr Mumford’s second submission is that by reason of the undisclosed Disputed Payment Agreement the purchase agreement was voidable at the election of Prince Eze. His primary argument is that it was voidable at law, by the act of Prince Eze without need for the court’s involvement apart from directing relief consequential upon the rescission. His alternative argument is that it was voidable in equity and that, where no recognised bars to rescission exist, such as delay or affirmation, the court is not entitled in its discretion to refuse to grant rescission in equity.

The authorities cited above clearly support Mr Mumford’s second submission, and in its stronger form.

In response, Mr Collings relied on two more recent cases: Hurstanger Limited v Wilson [2007] EWCA Civ 299, [2007] 1 W.L.R. 2351, and UBS v Kommunale Wasserwerke Leipzig GmbH [2017] EWCA Civ 1567. He submitted that these authorities showed that, even in a bribery case, the court has a discretion in equity to refuse rescission if to grant it would lead to an unjust result. I reject that submission.

In Hurstanger the defendants took a loan from the claimant pursuant to a regulated consumer credit agreement. The loan was arranged for the defendants by a broker. The claimant disclosed to the defendants the possibility that it would pay commission to the broker but it did not disclose that it had actually done so. The Court of Appeal awarded the defendants equitable compensation of £240, the amount of the undisclosed commission, on the ground that the claimant had procured the broker to breach his fiduciary duty to them; however, it refused to grant rescission of the loan agreement, holding that to do so would be unfair and disproportionate. Tuckey LJ, with whom Jacob and Waller LJJ agreed, observed at [33] that the defendants were entitled to expect the broker to get them the best possible deal, but that by obtaining commission for himself the broker acquired an incentive to look for the lender who would give him the biggest commission. At [38] he stated the orthodox position on the effect of receiving secret commission:

“38.

Obviously if there has been no disclosure the agent will have received a secret commission. This is a blatant breach of his fiduciary duty but additionally the payment or receipt of a secret commission is considered to be a form of bribe and is treated in the authorities as a special category of fraud in which it is unnecessary to prove motive, inducement or loss up to the amount of the bribe. The principal has alternative remedies against both the briber and the agent for money had and received where he can recover the amount of the bribe or for damages for fraud where he can recover the amount of any actual loss sustained by entering into the transaction in respect of which the bribe was given: Mahesan s/o Thambiah v Malayasia Government Officers’ Housing Co-operative Society Ltd [1979] AC 374, 383. Furthermore the transaction is voidable at the election of the principal who can rescind it provided counter-restitution can be made: Panama and South Pacific Telegraph Co. v India Rubber, Gutta Percha, and Telegraph Works Co. [1875] 9 Ch App 515, 527, 532-3.”

At [43]-[44] Tuckey LJ said that the commission to the broker was not a secret, because the claimant had told the defendants that a commission might be paid. On the other hand, the defendants’ informed consent had not been obtained, because they had not been told clearly that a commission was being paid or how much it was, and they had not been asked to consent. Then he stated his conclusions as to the available remedies:

“45.

So for these reasons I do not accept either party’s submissions about the disclosure. This is a half-way house case. The claimant did not pay the broker a secret commission but procured the broker’s breach of fiduciary duty by failing to obtain the defendants’ informed consent to the broker acting in the way he did.

46.

This conclusion means that the defendants are not entitled to deploy the full armoury of remedies which would have been available if this had been a true secret commission case. If it had been, a difficult question would have arisen as to whether they were entitled to rescission as of right. As the loan agreement was voidable and the defendants had elected to avoid it, the argument would be that the agreement had gone and they were entitled to rescission simply on terms as to counter-restitution. In other words the equitable remedy of rescission would simply be deployed in aid of the common law to ensure that its consequences were dealt with fairly between the parties.

47.

But no such difficulty arises when considering the appropriate remedy for breach of fiduciary duty for which purely equitable relief is available. Here there is no doubt that the court has a discretion as to whether or not to grant rescission. This is illustrated by Johnson v E.B.S. Pensioner Trustees Limited [2002] Lloyd’s Rep PN 309 where this court had to consider, among other things, whether a guarantee given by one of the defendants as security for a loan made by solicitors to his company should be rescinded because the solicitor acting for him had a conflict of interest and had been in breach of his fiduciary duty by failing to disclose that his firm received service charges on the loan. The court (Mummery and Dyson LJJ and Douglas Brown J) upheld the Judge’s refusal to grant rescission and rejected the submission that rescission was available as of right in such circumstances. The remedy was discretionary. Dyson LJ said, at para 79:

‘When exercising its equitable jurisdiction the court considers what fairness requires not only when addressing the question of the precise form of relief, but also when considering whether the remedy should be granted at all.’”

I make a number of observations about this passage. First, the reasoning rests on distinguishing the case from a secret commission case. The point was not that it was a secret commission but not a bad one; rather it was a case not of secret commission but of procuring breach of fiduciary duty. Therefore the established rules about bribes and secret commissions did not apply. Second, the case is accordingly not authority for a flexible approach to remedies in secret commission cases. Third, the ratio of Hurstanger as set out in this passage does not apply to the present case, because this is not a “half-way house” case. Mr Collings accepted this third point.

Fourth, Tuckey LJ did not at [46] explain why, if Hurstanger had been a secret commission case, the availability of rescission as of right would have been “a difficult question”, or why he mentioned rescission only as an equitable remedy rather than as a legal right. Since Load v Green (1846) 15 M & W 216, it has been accepted that fraud renders a contract voidable at law upon the election of the innocent party. (Previously, fraud was regarded as making the contract void ab initio.) Bribery is treated as a special form of fraud at common law: see the discussion by Lord Diplock in Mahesan v Malaysia Government Officers’ Co-operative Housing Society Ltd [1979] A.C. 374, esp. at 383; also per David Steel J in Petrotrade Inc v Smith [2000] 1 Lloyd’s Rep. 486, 490. The discretionary remedy of rescission in equity does not abolish the position at law. The courts in the line of cases from Panama onwards, cited above, were not dealing with an equitable remedy; to construe them in such a manner would be to falsify their basis in the interests of introducing a breadth of discretion that they are at pains to exclude. Hurstanger involved rescission in equity, but that was because it was not a true secret commission case. Thus Geraint Howells, The consumer credit litigation explosion, (2010) L.Q.R. 617, 636, comments in connection with Tuckey LJ’s remarks: “If fraud is in fact proved the common law is strict, and rescission will only be barred in limited circumstances, such as where the parties cannot be restored to the exact position they were in, which is not a problem with a money loan.” That seems to me to be correct, and it is reflected in the uncompromising stance that the common law has for centuries adopted against secret commissions.

In Ross River Ltd v Cambridge City Football Club Ltd [2007] EWHC 2115 (Ch), where the football club sought rescission of several contracts made with the claimants on the ground of bribes paid to its agent, Briggs J summarised the position at [203]:

“Bribery is committed where one person makes, or agrees to make, a payment to the agent of another person with whom he is dealing without the knowledge and consent of the agent's principal. Where a contract ensues from those dealings, the principal is entitled to rescission if he neither knew nor consented to the payment. If he knew of it, but did not give his informed consent, the court may award rescission as a discretionary remedy, if it is just and proportionate to do so: See Wilson v Hurstanger Ltd [2007] EWCA Civ 299 per Tuckey LJ at paragraphs 47 to 51, following Johnson v EBS Pensioner Trustees Ltd [2002] Lloyd’s Rep PN 309.”

I understand this passage, with its distinction between entitlement to rescission in a true bribery case and discretionary rescission in equity in a half-way house case, to be an orthodox statement of the law.

In the UBS case, as explained above, the Court of Appeal’s decision rested on the finding that UBS had dishonestly assisted VPG in the abuse of fiduciary duty owed to KWL. The result was that UBS was visited with the remedial consequences of the bribe. However, those consequences lay in equity, not at common law, because it was a dishonest assistance case. As Millett J had observed in Logicrose, the distinction between bribery cases and dishonest assistance cases lies not in the requirement of knowledge (a point specifically accepted in UBS at [111]-[113]) but in the available remedies. In UBS at [169] the majority commented that, as between the trial judge’s conclusion that UBS had legal responsibility for the bribe and their own conclusion that UBS’s conscience was affected by the bribe, there was “in substance no real distinction … for the purpose of the exercise of this equitable discretion”, viz. the discretion to grant or refuse equitable rescission. That observation was undoubtedly true; however, it does not mean that the equitable remedy abolishes the legal remedy (which did not arise for consideration), only that for the purposes of a court of equity UBS was just as bad as one who actually pays a bribe.

In considering the “undoubted discretion to refuse to give effect to a prima facie right to rescind in equity where to do so would be unfair or disproportionate”, the majority in UBS relied on the decision of the Court of Appeal in Johnson v EBS Pensioner Trustees Ltd [2002] Lloyd’s Rep PN 309. The relevant facts of the Johnson case may be taken from the summary of them by the majority in UBS at [163]. The second defendant, Mr O’Shea, was the surety under a lease granted to his property development company. The reversion in the lease was assigned to his pension trustees, who included the claimant, Mr Johnson, a solicitor and partner in the firm that had arranged the lease. The development company had also received a loan arranged by Mr Johnson from clients of his firm. The lenders paid what was described as a modest “service charge” to the firm in connection with the loan. Mr Johnson did not disclose that payment to Mr O’Shea. Mr O’Shea sought equitable rescission of his surety obligation by reason of that non-disclosure. The Court of Appeal granted him an account of the service charge but refused him rescission. It observed that, leaving aside the service charge, there was nothing remotely unfair about Mr O’Shea’s surety obligation, which he had undertaken as an astute and experienced businessman.

The legal basis of the grant of relief in the Johnson case was breach by the claimant of the fair-dealing rule applicable to fiduciaries. Mummery LJ, with whose reasoning Dyson LJ and Douglas Brown J concurred except as to one particular point, observed at [38] that Millett LJ in Bristol and West Building Society v Mothew [1998] Ch 1 had recognised the important distinction between “(a) a solicitor acting for a client in respect of a transaction in circumstances where breach of fiduciary duty may result from his also acting as solicitor for another party to the transaction with conflicting or potentially conflicting interests, and there has been no informed consent from both sides; and (b) a solicitor who personally deals with or enters into a transaction, either on his own behalf or on behalf of another, with a client, or even a former client, lacking independent advice.” The facts of the Johnson case were considered to fall within (b), not (a): see [40]. The relevant part of Millett LJ’s judgment in Mothew was the parenthesis at 18D-E (cf. Mummery LJ at [40] and Dyson LJ at [67]):

“(In this survey I have left out of account the situation where the fiduciary deals with his principal. In such a case he must prove affirmatively that the transaction is fair and that in the course of the negotiations he made full disclosure of all facts material to the transaction. Even inadvertent failure to disclose will entitle the principal to rescind the transaction. The rule is the same whether the fiduciary is acting on his own behalf or on behalf of another …)”

The one point of disagreement among the judges in the Court of Appeal in Johnson was that Mummery LJ considered that the service charge was not a fact material to the transaction, whereas Dyson LJ and Douglas Brown J considered that it was a material fact. However, all were agreed that, even if it were a material fact, rescission ought to be refused. Mummery LJ said at [57]:

“The judge rightly held that the right to rescission on the grounds of abuse of confidence or breach of fiduciary duty depends on the exercise of discretion by the court to intervene in the enforcement of legal rights. I also agree with the judge that, if the matter of the service charge was a case of material non-disclosure, the court ought nevertheless to refuse rescission. As Millett LJ said in Dunbar Bank plc v Nadeem [1998] 3 All ER 876 at 884H-J:

‘The remedy of rescission is an equitable remedy. It is well established that it is a condition of relief that the party obtaining rescission should make restitutio in integrum or, in modern terminology, counter restitution to the other party. If counter restitution cannot be made the claim to rescission fails: see Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218. I reject Mr Price’s submission that, had the cross-appeal not succeeded, Mrs Nadeem would have had an unqualified unconditional right to rescission. She never had any such right. Her right to rescission was conditional on her making counter restitution.”

Mummery LJ confirmed at [58] that, even if he had considered the non-disclosure to be material, he would have refused rescission on the ground of Mr O’Shea’s failure to make counter-restitution. A number of observations may be made. First, the statement that the remedy of rescission is an equitable remedy is true, but only of rescission in equity. Rescission at common law is a legal, not an equitable remedy. The two remedies are closely similar but not identical. Second, in Dunbar Bank plc v Nadeem only rescission in equity arose for consideration; Mrs Nadeem’s claim for rescission was based on an allegation of undue influence. Third, the cause of action relied on in the Johnson case to ground a claim for rescission was also equitable; see above. Fourth, counter-restitution is also a condition of rescission at common law, though it is applied with greater flexibility in equity. Mummery LJ’s reasoning did not identify a peculiarly equitable reason for refusing rescission. Fifth, his reasoning does not support any idea that the equitable remedy has displaced the legal remedy. In particular, it is important to be clear that mention of the court’s “discretion … to intervene in the enforcement of legal rights” is a reference to the legal rights under the transaction of which rescission is sought (there, the contract of suretyship), not the legal right to rescind (which did not arise for consideration and was accordingly not mentioned).

Both Dyson LJ at [76]-[82] and Douglas Brown J at [84] considered the position in equity more broadly, concluding that it would be unfair and unjust to grant rescission in equity. Dyson LJ said:

“78.

In relation to rescission, in my view the judge was right to say (paragraph 46) that, whatever the position in relation to a claim to rescind based on misrepresentation, the right to rescission on grounds of undue influence, abuse of confidence or breach of fiduciary duty depends on the exercise of the discretion by the court to intervene in the enforcement of legal rights. I refer to the passage in the judgment of Millett LJ in Dunbar Bank Plc v Nadeem [1998] 3 All ER 876, 884 H-J, which Mummery LJ has already cited.

79.

When exercising its equitable jurisdiction, the court considers what fairness requires not only when addressing the question of the precise form of relief, but also when considering whether the remedy should be granted at all. …”

This passage, again, relates to rescission in equity. It lends no support to any idea that the equitable remedy has displaced the legal remedy.

The result of this lengthy discussion is that, in a bribery case, the wronged party has a right of rescission at common law. The right is not absolute; thus it may be lost by affirmation and will be unavailable where the wronged party is unable to make counter-restitution. (In the latter case, the more generous approach of equity to counter-restitution may permit the grant of the equitable remedy where the legal remedy is unavailable.) In the present case, no such bars are said to exist. The position is accurately stated in Snell’s Equity (33^rd edition) at 15-011:

“The common law recognises rights to rescind in a limited class of cases including most saliently fraudulent misrepresentation, bribery, duress and non-disclosure in relation to insurance policies. Where the ground for rescission sounds at law, provided rescission has not become barred, the claimant has a power to bring the contract to an end by announcing their election to rescind. The bars to rescission, particularly the restitutio in integrum impossible bar, are applied quite strictly at law, so that self-help rescission is only available exceptionally outside of executory contracts and the insurance and sale of goods context.

Where a party with a legal power to rescind announces their election to do so, the consequences take effect automatically. The role of the court in such cases is to pronounce upon the efficacy of that election and give effect to its consequences by awarding judgment on claims and cross-claims for restitution of benefits that have previously passed under the contract. There is no scope for the exercise of judicial discretion in deciding whether to rescind or what the consequences should be.”

(For the relationship between the equitable and legal remedies, see also O’Sullivan, Elliott and Zakrzewski, The Law of Rescission (2^nd edition), at 10.01 to 10.14, and Heydon, Leeming and Turner, Meagher, Gummow & Lehane’s Equity[:] Doctrines & Remedies (5^th edition), chapter 25.)

Even if I had taken a different view and had concluded that rescission was available only in the discretion of the court in equity and should be refused if the remedy would be unjust and disproportionate, I would (if I had answered the first issue differently) have granted rescission. The law has long set its face hard against bribes or secret commissions. The notion that, in a case falling within the bribery rules, relief should turn on discretionary assessments of culpability is clean contrary to the settled approach in the case-law. Moreover, the present case cannot (on the hypothesis now being considered) be regarded as lying outside the mischief to which the law’s uncompromising approach has been directed. The Conways fully believed that Mr Obahor was the purchaser’s agent. They promised to pay him in order to ensure that they did not lose the deal—a deal that they had good reason to suppose was particularly advantageous to them, which is doubtless a reason why they did not want to lose it. Thereafter they actively sought to influence Mr Obahor in their favour in the course of negotiations. And they failed to take steps to ensure that Prince Eze was aware of the arrangement they had reached with Mr Obahor. The case falls squarely within the scope of the relevant authorities (assuming, for the present, that Mr Obahor was a person within the scope of the rules on bribery). It is said that the Conways were victims of Mr Obahor. That is true, though I cannot say that I see anything remarkable about a case where the secret commission is paid to someone who dishonestly demands one. However, the Conways had a choice: instead of paying a commission to someone they knew (ex hypothesi) to be their counter-party’s agent, they could have refused to do so; at least they could have satisfied themselves that the counter-party knew of and approved the arrangement. Instead they acted in their own interests to avoid the loss of the sale. Having made that choice, they cannot claim to be relieved of its consequences on the grounds of their own innocence.

In the light of my decision on the first issue, the quantum of damages falls for determination. The basic principles that govern the award of damages for breach of contract in this case are as follows.

Damages are compensatory and, subject to the matters mentioned below, are intended to place the innocent party in the same position that it would have been in if the contract had been performed, so far as an award of money is capable of achieving that result.

Damages will only be awarded for a loss that can properly be said to have been caused by the breach of contract. What this means was explained by Glidewell LJ in Galoo Limited v Bright Graeme Murray [1994] 1 WLR 1360, where after a review of the authorities he said this at 1374-5:

“The passages which I have cited from the speeches in Monarch Steamship Co. Ltd. v. Karlshamns Oljefabriker A/B [1949] A.C. 196 make it clear that if a breach of contract by a defendant is to be held to entitle the plaintiff to claim damages, it must first be held to have been an ‘effective’ or ‘dominant’ cause of his loss. The test in Quinn v. Burch Bros. (Builders) Ltd. [1966] 2 Q.B. 370 that it is necessary to distinguish between a breach of contract which causes a loss to the plaintiff and one which merely gives the opportunity for him to sustain the loss, is helpful but still leaves the question to be answered ‘How does the court decide whether the breach of duty was the cause of the loss or merely the occasion for the loss?’

The answer in my judgment is supplied by the Australian decisions to which I have referred, which I hold to represent the law of England as well as of Australia, in relation to a breach of a duty imposed on a defendant whether by contract or in tort in a situation analogous to breach of contract. The answer in the end is ‘By the application of the court’s common sense.’”

Even losses that have been caused by the breach of contract will not be reflected in damages if they are too remote. In the words of the Court of Exchequer in Hadley v Baxendale (1854) 9 Ex. 341, 355-356:

“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them.”

Subsequent cases have made clear that the test for remoteness, though divided into two limbs, is a single test, the two limbs mentioned in Hadley v Baxendale concerning only different kinds or sources of knowledge. One way of stating the unitary test is that the loss must be foreseeable as a “not unlikely” consequence of the breach: Koufos Appellant v C. Czarnikow Ltd (The Heron II) [1969] 1 A.C. 350, per Lord Reid. However, as the passage in Hadley v Baxendale itself makes clear, the test does not simply turn on calculations of probability. In Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48, [2009] 1 A.C. 61, Lord Walker of Gestingthorpe mentioned the various ways in which the House in The Heron II had expressed the appropriate degree of probability and observed at [78]:

“To my mind, however, the diversity of opinion in The Heron II has another and more important significance. Other passages in the speeches show that their Lordships had well in mind (but did not, perhaps, spell out at length) that it is not simply a question of probability. It is also a question of what the contracting parties must be taken to have had in mind, having regard to the nature and object of their business transaction. If a manufacturer of lightning conductors sells a defective conductor and the customer's house burns down as a result, the manufacturer will not escape liability by proving that only one in a hundred of his customers’ buildings had actually been struck by lightning. The need to take account of the nature and object of the contract is recognised, I think, in the passage from Lord Reid’s speech, at p 385, which I have already quoted; in Lord Morris’s speech, at pp 398–399; in Lord Pearce’s speech, at pp 416–417 (with the example of the court ceiling collapsing during a sitting); and in Lord Upjohn’s speech, at pp 424–425. The need for the loss suffered to be within the horizon of the parties’ contemplation (Lord Pearce, at p 416) makes it less important to define its degree of probability with any precision. Arguably a vague expression (such as ‘real possibility’) is actually preferable, because it is more flexible, once it is understood that what is most important is the common expectation, objectively assessed, on the basis of which the parties are entering into their contract.”

A claimant has what is commonly, if inaccurately, referred to as a duty to act reasonably to mitigate its loss. What this means was succinctly expressed by Leggatt J in Thai Airways International Public Company Limited v KI Holdings Co Limited [2015] EWHC 1250 (Comm) at [33]:

“The basic test which the doctrine of mitigation involves is whether the claimant has acted reasonably in response to the defendant’s wrong. Insofar as the claimant has acted reasonably, costs and benefits accruing to the claimant are included in the calculation of damages. Insofar as the claimant has not acted reasonably, the claimant’s damages are assessed as if it had. In the words of Scrutton LJ in Payzu Ltd v Saunders [1919] 2 KB. 581, 589:

‘[the claimant] can recover no more than he would have suffered if he had acted reasonably, because any further damages do not reasonably follow from the defendant’s breach.’”

From the rest of Leggatt J’s helpful discussion of mitigation at [31]-[38], I need refer only to the observations at [38], omitting the references for brevity:

“The standard of ‘reasonableness’ is, however, applied with some tenderness towards the claimant having regard to the fact that the claimant’s predicament has been caused by the defendant’s wrongdoing … Thus, the claimant is not expected to take steps which would involve unreasonable expense, risk or inconvenience … In addition, the burden of proof is on the defendant to show that there was a course of action which it was reasonable to expect the claimant to adopt that would have avoided all or an identifiable part of the claimant’s loss … Furthermore, there is often a range of responses available to the claimant which will be regarded as reasonable …”

The losses for which the Conways seek damages, as set out in a detailed Scott schedule and a helpful Schedule of Loss, fall under three broad heads: first, losses in respect of the loss of the sale of the Property and the need to market it and sell it again; second, losses in respect of the cost of obtaining bridging finance to enable them to proceed with their purchase of the New Property; third, miscellaneous losses. In addition to a number of specific challenges to particular items of loss, Mr Mumford raises several major objections to the claims advanced.

First, Mr Mumford submits that no damages should be awarded under the second head of claim, on the ground that the cost of bridging finance was not within the reasonable contemplation of the parties when contracts were exchanged and is too remote in law, because the Conways’ inability to finance the purchase of the New Property was due to Mr Conway’s lack of income, which was not a matter known to Prince Eze or Mr Obahor at the relevant time. Mr Mumford submits that the most the defendant might reasonably have contemplated was that the claimants would suffer a loss in the use-value of the proceeds of sale at the contractual rate for late completion, namely the Law Society rate.

I reject that submission. It is very common that persons selling their home will need to look to the proceeds of sale to pay the purchase price of a new property and will need recourse to bridging finance if their own sale falls through. In my judgment such an eventuality ought to have been within the contemplation of the parties as a not-unlikely consequence of failure by Prince Eze to complete the purchase. It is hardly to be expected that a vendor in such circumstances will be able to purchase a new property with the use of a conventional purchase-moneys mortgage; this is all the more the case in view of the high value of the Property, the likely nature of any new property that the Conways would buy, and the existence of secured borrowing on the Property, clearly shown on the Land Register. The specific contractual provision in the Standard Conditions of Sale for interest to run at the Law Society rate in the case of late completion has no application to the case of failure by the purchaser to comply with a notice to complete and seems to me to be of no assistance in assessing what ought reasonably to have been in the parties’ contemplation as a not-unlikely consequence of a breach of the latter kind. Accordingly I hold that the Conways are entitled in principle to recover damages in respect of the cost of bridging finance.

In those circumstances, Mr Mumford submits, second, that no damages ought to be allowed for the costs of seeking bridging finance from two lenders who refused to make an advance because the valuations they obtained for the Property did not support the required lending (see paragraph 89 above). He contends that these matters ought not reasonably to have been in the parties’ contemplation when the contract was made.

I reject that submission. It was not unlikely that, in consequence of Prince Eze’s failure to complete, the Conways would have recourse to bridging finance. It has not been suggested or established that the Conways acted unreasonably in applying to Precise Mortgages and United Trust Bank for finance. Those applications were turned down because the lenders concluded that the Property was worth only £4.2 million, which, on the basis of the expert evidence in this case, seems probably to have been correct. It is not disputed that the primary measure of damages in this case is the difference between the contract price (£5 million) and the lesser price achieved on re-sale (£4.2 million). Therefore, as it ought to have been within the reasonable contemplation of the parties that the Conways would have to seek bridging finance secured on the Property, there is no good reason for holding the costs of their reasonable efforts to seek bridging finance to be too remote by reason of the low valuations obtained by the prospective lenders.

The third major objection taken by Mr Mumford to the damages claim relates to losses resulting from the particular terms of the re-sale of the Property to Mr and Mrs Phillips. Contracts were exchanged on 16 May 2016. The sale price was £4.2 million, which corresponded to the true value of the Property. However, the deadline for completion was 13 July 2017, fifteen months after exchange; completion did indeed take place in July 2017. In a sale of this sort completion would usually be expected within two months of exchange. The result of prolonging the period for completion by one year was significantly to reduce the true value of the sale, because the Conways incurred one year of additional expenditure in respect of bridging finance and maintaining the Property. This reduced the value of the purchase price, in real terms, to approximately £3.7 million. Mr Mumford submits that it was unreasonable of the Conways to agree to a sale on these terms and that the costs of finance and of maintaining the Property after July 2016 and any additional costs referable to the particular terms of the sale to Mr and Mrs Phillips ought to be regarded as having been caused by the Conways or by their failure to mitigate their losses.

To consider this submission it is necessary to look at the facts in some more detail. The Property was re-marketed in 2016 at an asking price of £4.5 million. By February 2016 the estate agent, Knight Frank, had received an offer of £4 million from a Mr Badayev, which he increased to £4.2 million when he was told of Mr and Mrs Phillips’ interest in the Property. Mr Badayev purported to be a cash buyer who could proceed very quickly to exchange and completion. On 24 February 2016 Knight Frank sent an email to Mr Conway setting out the current interest in the Property and proceeding to consider the market conditions:

“The market in general from the back end of last year and the start of this year has been very tough, in particular with the house market from £2 million plus. This has been felt across the whole of the London market and there is further uncertainty approaching at these price levels with the new stamp duty change on the 1^st April.

With this current state of the market and with what this year may still bring with the stamp duty changes in April I feel that if there is no further proceed able (sic) interest at this stage on the house from ourselves or the other agents then perhaps this is where the market feels the value of the house is at and perhaps these are the levels we should consider accepting.”

Mr Conway’s evidence, nevertheless, was that the estate agents had not positively advised that the asking price for the Property be reduced and that further efforts to contact Mr Badayev had been unsuccessful; it was believed that he had purchased another, less expensive property instead, and the agents had doubted that he was serious about his offer. In cross-examination it was put to Mr Conway that he had acted unreasonably:

“Q. But wasn’t the obvious and reasonable thing to do in circumstances where you’re contemplating effectively selling this house for 3.7 million to have a go at remarketing it at anything you can achieve that’s significantly north of that?

A.

There are always things that you can think of with hindsight, but at the time this is what was on offer and we were focused on getting a deal because of the house being on a bridging – on a massive bridging loan, and we didn’t want that. I mean, none of us want that bridging loan.”

I understand this answer to mean that, although hindsight suggests that there were other available options, in early 2016 the Conways were so desirous of achieving a re-sale and being assured of discharging the bridging loan that they judged it reasonable to accept the offer from Mr and Mrs Phillips as being the only subsisting offer. The answer may be taken together with Mr Conway’s evidence that he had known of the valuation of £5 million obtained by Mr Obahor, that he believed the valuations of £4.2 million obtained by the finance companies in late 2015 to reflect the cautious approach adopted to valuation by providers of bridging finance, rather than the true market value, and that he had not been advised by the estate agents to lower the asking price.

I have not found this question an easy one. However, I have come to the conclusion that Mr Mumford’s submissions are correct, though with some qualification. I bear in mind that the burden rests on the defendant to prove that the claimants failed to act reasonably in mitigation of their loss; that there might be a range of reasonable conduct rather than only one reasonable course of action; and that the criterion of reasonable conduct will be applied with some tenderness towards claimants who have found themselves in a predicament through the fault of the defendant and not of themselves. Nevertheless, on the basis of the available evidence I do not consider the Conways to have acted reasonably in the sale to Mr and Mrs Phillips. I am satisfied that the market value of the Property in the first half of 2016 was £4.2 million and that the Conways knew that; they had indeed asserted as much in their correspondence with Prince Eze’s solicitors since October 2015. The selling agents had not advised them to reduce the asking price from £4.5 million but had advised them to consider accepting offers of around £4.2 million. Nevertheless, they agreed a sale that would clearly have a real value of very much less than that in view of the envisaged timescale for completion. It is only the headline purchase price of £4.2 million that gives the Phillips’ offer the appearance of being a reasonable one to accept.

However, I do not think it fair and reasonable to assume that a sale at £4.2 million could have been achieved at the date when, on a normal two-month interval between exchange and completion, the sale to Mr and Mrs Phillips would have been completed. There is no evidence that Mr and Mrs Phillips would have agreed to such a timescale. It might be that the Conways ought to have accepted Mr Badayev’s offer of £4.2 million in or around February; however, little is known about that purchaser, and I cannot conclude that a sale to him would have proceeded. There is no evidence of any other prospective purchaser who might have completed the purchase by mid-July 2016. A degree of speculation is inevitable, because the court must assess the probabilities of what would have happened on the basis of uncertain evidence. Doing the best I can, I think it reasonable to suppose that, if the sale to Mr and Mrs Phillips had not been agreed, a sale at £4.2 million could have been completed by the end of October 2016.

Mr Mumford raises one further point that I may mention here. He submits that, if Prince Eze was in breach of contract, he has thereby saved the Conways the £75,000 they would otherwise have had to pay to Fresco and that their damages ought to be reduced accordingly. I reject that submission. Mr Obahor induced the Conways to agree to the payment by falsely representing to them that the purchaser would not pay him and that, if they did not pay him, he would scupper the sale. The Conways would have been entitled to avoid their agreement with Mr Obahor.

Having dealt with these general matters, I shall discuss the items of loss by reference to the numbering on the Schedule of Loss, which is not the same as that on the Scott schedule.

There is no dispute that certain items of loss are recoverable:

Item (4) is a claim for £29,745 in respect of “holding costs”, calculated at the rate of £3,966 per month for 7½ months (this figure is adjusted down from the originally claimed rate of £5343 per month). This is said to represent the cost to the Conways of maintaining the Property from the contractual completion date to the eventual sale. The figures claimed do not seem to have a firm evidential basis; this, I think, is reflected in the fact that the reduced figures were produced by Mr Conway at Mr Collings’ invitation after the close of the claimants’ case. Damages ought not to be awarded on a speculative basis, and it is not the court’s role to try to piece together a case that has not been clearly demonstrated on the evidence. On the other hand, there is no doubt that the Conways will have incurred significant costs in respect of the Property by reason of their failure to divest themselves of it. Having considered the explanation given by Mr Conway, I cannot see that the costs of maintaining the Property can have been less than £2000 per month, and I shall award damages on that basis. If there is any issue as to the appropriate period for which this head of loss ought to be awarded—a matter that was not explored in evidence, but which I understand to end when Mr and Mrs Phillips moved into the Property—I shall hear further submissions on the point.

Item (5) is a claim for £4,221 in respect of legal fees for the drafting of documents relating to the arrangement between the Conways and their eventual purchasers, Mr and Mrs Phillips. The solicitors’ invoice dated 22 July 2016 states that the work was “in relation to extensive drafting of documentation, including tenancy agreement and subsequent exchange of contracts in respect of the sale of [the Property]”. These fees were in addition to the basic conveyancing fees comprised in item (7), above. They arise from the particular arrangements agreed between the claimants and their purchasers. For reasons already stated regarding the nature of those arrangements, this head of claim is disallowed.

Item (6), as explained by Mr Conway during cross-examination, is a claim for £4,558.48 in respect of insuring the Property between the date of exchange of contracts for the re-sale to Mr and Mrs Phillips and the date of completion of that transaction. The head of loss is allowed in part; the cost of insurance is properly claimed until the end of October 2016, for reasons set out above.

Under this head are twenty-five items of loss, numbers (8) to (32), in respect of the cost of arranging and attempting to arrange re-financing and of the interest payable under the bridging loan that was taken out. The total claimed under this head appears to be £1,028,646.68, of which some seventy-five per cent is accounted for by three items (numbers 22, 24 and 26) relating to interest on the bridging loan. This total takes into account a deduction from the original claim of £17,578.51 in respect of the amount of the interest payments that is properly referable to the part of the loan that was used for living expenses. The Schedule of Loss in its revised form also includes a further reduction of £75,000 for the part of the loan (that is, the advance of capital) that was used for living expenses. I am not sure why such a reduction falls to be made; the claim does not include recovery of the loan or any part of it, only of interest payable on it. If necessary I shall hear further submissions on this point.

As I have held that the losses referable to the cost of bridging finance or of trying to arrange it are not too remote, but that a sale ought reasonably to have been achieved by the end of October 2016, the losses claimed under this head are recoverable, subject as follows:

There are now only two items claimed under this head. Item (33) is a claim for £5,153.44 for interest paid to the sellers of the New Property. Item (34) is a claim for £3,120 for fees paid to a removal company in respect of the abortive move from the Property to the New Property in November 2015. Neither of those items was agreed but the defendant did not strongly contest them. I consider both items to have been reasonably incurred and I allow them.

I hope that the parties will be able to reach agreement as to the final figures for damages, if necessary with the exercise of some pragmatism. However, I shall be willing to hear further submissions on points of detail arising out of my findings.