Summary

A managing agent who, in advance of completion of a deed of surrender, accepted the return of the keys, was liable in negligence to the landlord for the loss of the premium payable on completion: the landlord's solicitors were not negligent for having "affirmed" that surrender.

Facts

Claimant's action for negligence against the first defendant managing agents ('the agents') and/or the second defendant solicitors ('the solicitors'). The claimant was the freehold owner of a shopping centre, managed by the agents, and had agreed to accept a surrender of one of the units in the centre in return for the payment of a premium of #100,000. The agents knew, or ought to have realised, that the solicitors were preparing a deed of surrender and that the claimant only intended to take back possession of the unit on completion of that deed, and in particular only upon payment of the premium. The agents prematurely demanded and accepted the return of the keys to the unit and the delivery up of possession. The solicitors, following a conference with counsel, but without reference to the claimant, formed the view that a surrender by operation of law had probably been effected and decided not to return the keys, since they believed that the client's overriding commercial objective would be to retain possession at all costs. They chose not to put the surrender in issue but to demand payment of the premium on the basis that the keys had been accepted pursuant to the negotiated surrender. The tenant refused to pay the premium. The claimant, following unsuccessful proceedings against the tenant, sued both the agents and the solicitors in negligence.

Held

(1) The agents were plainly negligent in setting in train the retaking of possession without reference to the solicitors. A reasonably competent managing agent would be aware that the acceptance of keys tendered by the tenant might jeopardise the process towards a formal surrender in return for the payment of a premium by the tenant. In acting as they did the agents forced the claimant into making a choice between accepting the surrender and endeavouring to obtain payment of the premium from a position of weakness, or returning the keys, and perhaps seeing the unit sterilised whilst still endeavouring to recover the premium. In either event the prospects for the recovery of the premium were poor. It followed that the agents had caused the loss of the premium. (2) The solicitors had correctly anticipated their client's reaction to the dilemma caused by the agents, and they had therefore correctly surmised that their task was one of damage limitation. They had correctly balanced the commercial advantages and disadvantages of the two alternative courses of action open to their client, and had chosen the option which the claimant would have adopted if it had been offered the choice.

Judgment for the claimant against the agents. Claim against the solicitors dismissed.