De Gruchy (Trading as De Gruchy and Company) v Quenault

• Jurisdiction: Jersey
• Court: Petty Debts Court (Jersey)
• Judge: Short, Judge:
• Judgment Date: 07 February 1990
• Date: 07 February 1990

PETTY DEBTS COURT

Short, Judge:

C. M. B. Thacker for the plaintiff;

D.P. Huelin for the defendant.

Case cited:

(1) Christie Owen & Davies Ltd. v. Rapacioli, [1974] Q.B. 781; [1974] 2 All E.R. 311; (1974), 118 Sol. Jo. 167, considered.

Text cited:

Chitty on Contracts, 25th ed., vol. 2, para. 3157, at 541; para. 3163, at 544-545; para. 3164, at 545 (1983).

Land Lawchargescompletion of contractcompletion by signature of agreement and not by Royal Court's registration of charge against borrower's real property

Contractmisrepresentationnegligent misrepresentationinvestment consultant misrepresents rate of interest if quotation absurdly high in view of professed expertiseno misrepresentation if "going rate" offered without ascertaining rate operating in informal investment market of legal profession

Agencyremunerationprocuration feeinvestment consultant procuring loan from principal for borrower entitled to specify procuration fee payable on completioncompletion on signature of loan contract and borrower's subsequent withdrawal is breachprocuration fee is reasonably foreseeable damages recoverable

The plaintiff brought an action against the defendant for the payment of a procuration fee in respect of a loan he had arranged for the defendant.

The plaintiff, an investment consultant, arranged for his principal to make a loan of 80,000 to the defendant, to be secured by a charge registered in the Royal Court against the defendant's real property and to be repaid over a five-year period at a rate of interest of 14%. The plaintiff had recently borrowed from his principal at that rate for his own purposes and represented it to the defendant as the "going rate" without ascertaining the rate currently offered by the informal investment market operated by the legal profession. The defendant duly signed a document by which he agreed to pay the loan at the said rate and to pay a 1% procuration fee to the plaintiff. After the signing of the document, and before the registration of the charge, the defendant secured from his lawyer a loan for the same amount, at a rate of 12% over a three-year period, and consequently refused either to take up the loan from the principal or to pay the plaintiff's procuration fee. The plaintiff then brought the present proceedings.

He submitted that since (a) the defendant had freely entered into the loan agreement, which was completed upon the signing of the document; and (b) it was an implied term of the contract that the defendant would not do anything to frustrate the loan or to disentitle the plaintiff from his procuration fee, it followed that the defendant's withdrawal amounted to a breach and that the procuration fee should be paid as damages.

The defendant submitted in reply that (a) since he had withdrawn before the completion of the contract by the registration in the Royal Court of the charge against his real property, his withdrawal did not amount to a breach; and (b) in any case, even if the contract had been completed by the time of withdrawal, his withdrawal amounted to a valid rescission because the plaintiff (i) had fraudulently misrepresented the "going rate" of interest, or (ii) had negligently misrepresented it, by not having ascertained the rate offered by the investment market conducted by the legal profession.

Held, giving judgment for the plaintiff:

(1) Although the loan was secured against real property, the contract concerned the borrowing of money rather than the sale of real property and, as such, was completed upon the signing of the agreement rather than upon the subsequent registration of the charge in the Royal Court which was simply a formality available for the benefit of the plaintiff's principal (page 55, lines 12-33; page 56, lines 3-8).

(2) Moreover, the plaintiff had not fraudulently misrepresented the "going rate" of interest since he had recently borrowed money from his principal at the same rate as that which he had offered to the defendant and it could be inferred that he had offered that rate in good faith. Nor had he negligently misrepresented the going rate because although the rate was high it was not so absurdly high to be offered by someone having the expertise he held himself out as possessing. Since the loan was for a five-year period it was not unreasonable that it had been offered at a higher rate of interest than that subsequently negotiated by the defendant for a three-year period. Further, even though the plaintiff, as an investment consultant, owed a duty of reasonable skill and care to his client, he had not breached this duty by not having entered into the informal investment market conducted by the legal profession, because it was not clear that he would thereby have secured a lower rate of interest for his client. It followed that the defendant was not entitled to rescind for either fraudulent or negligent misrepresentation (page 53, line 36 - page 54, line 7; page 54, line 36 - page 55, line 1).

(3) Since the defendant had entered into and signed the agreement freely and without taking independent legal advice, and since he was not entitled to rescind on the ground of misrepresentation, it followed that his withdrawal amounted to a breach of contract and that the plaintiff as agent was entitled to obtain the amount of the procuration fee as damages reasonably foreseeable as flowing from the breach (page 57, lines 11-31).

SHORT, JUDGE: During May or early June of 1988, Mr. Quenault visited his solicitor, Mr. Huelin, of Messrs. Fiott and Huelin, to enquire about borrowing money.

Mr. Quenault is a farmer/businessman/racehorse owner of ample means. He was not financially embarrassed at the time but was in need of ready money fairly quickly, in particular to pay off an overdraft of 20,000 with the Midland Bank, who were becoming somewhat restless.

Mr. Huelin, his solicitor, had no money available from private lenders just then.

In June 1988, Miss Hughes, who occupies the unique position of the mistress of Mr. Quenault and the employee of Mr. de Gruchy, as a property negotiator, indicated to Mr. Quenault that Mr. de Gruchy might be able to put him in touch with a private source of borrowing money. Mr. Quenault contacted...