Representation: agent’s ostensible authority. When damages for purchaser’s repudiation to be assessed

In Montrio Ltd v Tse Ping Shun David ([2012] HKEC 1781, CA) P entered into provisional and formal agreements for the sale of property to D. D alleged that certain representations had been made to him by P’s agent concerning the size of the property and that these were false. P sought damages for D’s repudiatory breach and to forfeit the deposits he had received. D sought to rescind. P argued that damages should be measured by looking at the difference between the contract price and the market value at the time of breach. P succeeded.

It was accepted that P had not actually authorised the making of any representations as to the size of the property. He accepted that he had always known that it was likely that the agents would be taking some steps to market the property (even at times when he was not actively seeking to sell). D argued that the agents therefore had ostensible authority to make the relevant representations. This failed:

‘The mere expectation that an estate agent might try to market a property cannot be treated as any kind of permission or authority for the agent to do so. Nor was there any obligation on the owner’s part to stop or prevent an agent in attempting to find potential buyers as a broker …  In no way could the plaintiffs be regarded as having in some way instigated or permitted Ms Lam to make the Statement as their agent, nor had they put her in a position where she appeared to be authorised to make the Statement as their agent.’ (Kwan JA at [31])

The normal rule for assessing the damages would be to look at the difference between the contract price and the market value at the time of the breach ([58]). There was no reason to depart from that approach in the present case ([65]).

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