Conway v Eze: A residential conveyancing nightmare
Mr and Mrs Conway lived in a prestigious house in London, but in 2010 they decided to sell it with the intention of relocating to Cambridge. When their house first went on the market the asking price was £7m, but that reduced over time as they struggled to find a buyer. In 2015 they reduced the price to £5.5 and privately felt that the lowest offer they might accept would be for £5m.
In April 2015 the property was viewed by a gentleman called Mr Obahor. Mr Obahor told the Conways that he was acting on behalf of a Nigerian purchaser, whose identity he had to keep confidential. After the viewing there were some negotiations as a result of which the Conways and Mr Obahor agreed a sale price of £5m. On the strength of that the Conways reached a separate agreement, subject to contract, to buy a new home in Cambridge for £2.9m.
At first sight there is nothing too remarkable in the events described above. However, Mr Obahor was not being totally honest with the Conways: although Mr Obahor hoped to line up a purchaser for the property from Nigeria, he had no purchaser at the time of the viewing and was not then representing anyone in Nigeria. In fact, Mr Obahor was described as a “chancer” in Court and the Judge accepted that description of him. Mr Obahor’s involvement in the sale was the start of the nightmare for the Conways.
To pick up the story once more, Mr Obahor then visited the property a second time and again perpetuated the charade of having a buyer whom he was representing, when there was none. It was suggested in evidence at Court that at that meeting (or possibly the first one, the picture was unclear) Mr Obahor sought a payment from the Conways for bringing about a sale – a “finder’s fee” – of £75,000. It appeared that the Conways were prepared, in principle, to pay such a fee to Mr Obahor although noting was then agreed. Soon thereafter Mr Obahor found a potential buyer from Nigeria in the form of Prince Eze – the Prince wanted to proceed with the purchase quickly and was also willing to pay a fee to Mr Obahor of about £150,000 as he understood Mr Obahor was acting as his trusted agent. The trouble was that at this time the Prince did not know that Mr Obahor was also lining up a fee from the Conways and when he found out he would not be happy – Mr Obahor’s involvement in the sale was also the start of the nightmare for the Prince.
Things proceeded further and without being any wiser about what Mr Obahor was up to, the Prince and the Conways exchanged contracts for the property in August 2015. The Conways agreed to pay Mr Obahor the fee of £75,000 which he sought and the Prince (still unaware of the fee the Conways were paying) paid Mr Obahor a fee of £150,000. Not long afterwards the Conways also exchanged on the purchase of their new property. At this point things began to unravel in a big way. First, the Prince was unhappy at having exchanged contracts with the Conways – this had been orchestrated by Mr Obahor and the Prince did not feel he had been sufficiently involved in the process. The Prince decided that he did not want to proceed with the purchase of the Conway’s home and this prompted them to serve a “notice to complete” upon the Prince which he ignored.
The Prince’s failure to complete the purchase in turn caused the Conways a headache in relation to their own purchase: they no longer had the funds available from the sale of their London home to complete their purchase and were forced to seek expensive bridging finance to make up the difference. In addition they had to find another purchaser for their London home, which they eventually did, albeit for the lower price of £4.2m.
Having now been forced into a corner, the Conways sued Prince Eze for breach of contract and sought damages from him in the region of about £2m for failing to complete the house purchase. The Prince defended the claim using the following main arguments:
- The payment of £75,000 by the Conways to Mr Obahor was in effect a bribe to Prince Eze’s agent;
- The effect of the bribe was to was cancel Mr Obahor’s agency for the Prince and so the contract for the purchase of the Conway’s home was also cancelled; and
- The bribe also gave the Prince the right to elect to treat the purchase contract as void.
The Court heard the arguments each way over six days and finally decided in favour of the Conways. At first glance it seems that the Prince was bound to win the case as his agent, Mr Obahor, took a bribe from the selling party and therefore breached his duty as an agent to look out for the best interests of the Prince and not make any secret profits. It is clear and settled law that agents must have no conflict of interests with those they are acting for. However, the Court found that in fact Mr Obahor was not the Prince’s agent: instead it found that he was a “salesman acting on his own behalf and for his own commercial gain”. As an introducing agent of the buyer and seller he was able to take a commission from both of the parties.
The decision of the Court left the Prince with a liability to pay the Conways damages, but it is doubtful that the remedy provided by the Court will have made up for all the stress of the abortive sale to the Prince and the ensuing legal proceedings.
Property transactions normally involve various agents and normally nothing goes wrong. If you are involved in a purchase or sale and are unsure of the role of any third party involved it is advisable to speak to your solicitor about any concerns you have, thereby reducing the risk of any conveyancing nightmare of your own.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.