Barton and Others v Morris and another in place of Gwyn–Jones (Deceased)

Heard on 2 November 2022

Lady Rose ( with whom Lord Briggs and Lord Stephens agree):

A claimant who has performed a service for the defendant and wants now to be paid something for those efforts has to establish a legal entitlement to the money claimed. There are, broadly, two ways in which such an entitlement can be established. The first is where the parties are in a contractual relationship and the terms of their binding agreement define if and when the defendant will be bound to pay for the service. If there is no contract between them, the claimant may base a claim on the assertion that if the defendant does not pay, then the defendant will have been unjustly enriched at the claimant's expense. It is the intersection of those two kinds of legal entitlement – and the scope of any overlap between them — that generates the issue that arises in this appeal.

The First Respondent, Mr Barton, performed a service for the Fourth Respondent, Foxpace Limited, by introducing to Foxpace a buyer who ultimately bought a property that Foxpace owned and was keen to sell. The buyer, Western UK (Acton) Limited (“Western”), paid Foxpace £6 million for that property. The judge at first instance, HHJ Pearce sitting as a High Court Judge, held that Mr Barton was not entitled to any payment: [2018] EWHC 2426 (Ch). There was no written agreement on which Mr Barton or Foxpace could rely, but the judge found that they had arrived at a binding oral agreement. According to that agreement, Mr Barton would be paid £1.2 million for making the introduction if Western bought the property for £6.5 million. Since the contract made no provision as to what would happen if the property was sold to Western for anything less than £6.5 million, there was no contractual obligation on Foxpace to pay anything to Mr Barton. As regards Mr Barton's alternative claim in unjust enrichment, the judge relied on the principle he said emerged from the decision in MacDonald Dickens & Macklin v Costello [2012] QB 244. He held that that principle applied to preclude any claim for unjust enrichment because such a claim would undermine the contractual terms agreed between the parties.

The Court of Appeal allowed Mr Barton's appeal: [2019] EWCA Civ 1999, [2020] 2 All ER (Comm) 652. The main judgment was given by Asplin LJ. Males LJ and Davis LJ agreed with her reasoning and gave short concurring judgments. They held that the silence of the contract as to what would happen if the sale to Western was for less than £6.5 million meant that the contract did not rule out a claim in unjust enrichment. They held, further, that Foxpace would be unjustly enriched if it took the benefit of the introduction without paying Mr Barton a reasonable fee. Asplin and Davis LJJ suggested that the same result might have been achieved by the implication of a term into the contract that a reasonable fee would be paid if Western bought the property for less than £6.5 million.

HHJ Pearce had helpfully assessed a reasonable fee as being £435,000 in case he was wrong about liability and the Court of Appeal held that Mr Barton was entitled to that amount.

In the appeal before this court, the appellants are the personal representatives of the estate of Timothy Gwyn Jones who was the sole director of Foxpace at the material time. As HHJ Pearce explained in the introduction to his judgment, the issue falls to be determined in the context of Foxpace's insolvency. On 30 May 2017, Mr Gwyn Jones convened a meeting of the creditors of Foxpace at which he rejected Mr Barton's proof of debt in the sum of £1.2 million for voting purposes in the Foxpace liquidation and recorded the debt owed as being £1. Mr Barton appealed against that rejection pursuant to rule 15.35 of the Insolvency (England and Wales) Rules 2016 (SI 2016/1024), raising the issue as to what, if any, debt was owed to him by Foxpace arising from the transaction. Foxpace Ltd was joined as a defendant to that claim. That is how the issue as to Mr Barton's entitlement to some payment for the introduction of Western comes before this court. I shall refer to the appellant as Foxpace, even though they are formally the Fourth Respondent, since effectively they are the party which is challenging the existence of the liability which the Court of Appeal held was owed to Mr Barton.

There are three grounds of appeal. The first is that the Court of Appeal was wrong in law to hold that it was possible for Foxpace to have been unjustly enriched by Mr Barton's performance of the agreement given the terms of the agreement as found by the judge. The second is that the Court of Appeal was wrong to assume that there was an unjust factor sufficient to entitle Mr Barton to relief on the basis of unjust enrichment. The third ground challenges the Court of Appeal's alternative conclusion that Mr Barton might have been entitled to relief on the basis of an implied term. Foxpace does not challenge the judge's quantification of the reasonable fee at £435,000.

At the time of the agreement between Foxpace and Mr Barton, Foxpace owned a property known as Nash House in Northolt, London. Foxpace wished to sell Nash House but arrangements did not go smoothly. In December 2012, a company with which Mr Barton had strong links exchanged contracts for the purchase of Nash House for £6.3 million. The purchaser failed to complete despite having paid substantial sums to Foxpace in exchange for successive extensions of the period for completion. Foxpace rescinded the contract in May 2013. On 7 June 2013, Mr Barton exchanged contracts with Foxpace to buy Nash House himself for £5.9 million. Mr Barton paid an initial deposit but failed to make further payments as they fell due and Foxpace rescinded the agreement. The upshot of those two failed transactions was that deposits had been paid and costs incurred amounting in total to about £1.2 million, money which the parties treated as coming from Mr Barton. The judge accepted that Mr Barton “was about £1.2 million out of pocket across the two unsuccessful attempts to purchase Nash House”: para 64.

The discussions which led to the agreement about a commission for the sale ultimately to Western were conducted between Mr Barton on the one side and Mr Gwyn Jones, Mr Marcus Rooke who was Mr Gwyn Jones' assistant and Mr Nicholas Morris a solicitor acting for Foxpace on the other side. Shortly after the failure of the second sale of the property, Mr Barton discussed with them a possible sub-purchaser for Nash House if Mr Barton bought the property himself for £5.7 million. There was then a month or so of correspondence between the solicitors of the potential purchaser, the solicitors for Foxpace and Mr Barton trying to finalise the arrangements.

In parallel with this correspondence, Mr Rooke was corresponding with Mr Javed Hussain acting for a different potential purchaser who was interested in buying Nash House for cash. Heads of terms for the sale of Nash House to a Mr Kherallah for a price of £6.3 million were prepared. Those discussions contemplated the payment of an introduction fee to Mr Hussain of £490,000. That alternative deal, of course, fell away when the property was bought by Western.

I will come in more detail later to the judge's findings as to what was agreed between Mr Barton and Foxpace. Documents were drawn up for the sale of Nash House to Western for £6.55 million. However, towards the end of August 2013, it came to light that Nash House fell within an area safeguarded for the purpose of the construction of the HS2 rail link. Western wanted to make the contract conditional on the HS2 project not affecting the site, but Foxpace was not prepared to agree to that. It was therefore agreed that Western would purchase the property unconditionally for £6 million plus VAT. Contracts were exchanged on 10 September 2013 and the sale of Nash House was completed.

For present purposes there are three potential routes by which one could arrive at the conclusion that Foxpace is contractually bound to pay a fee to Mr Barton. The first is that it was an express term of the contract that he should be paid a fee in the events which have happened. The second is that a term should be implied into this particular contract in order to give effect to the unexpressed intention of the parties. The third is that there is a term implied by law as an incident of this kind of contract. I shall consider each of these in turn.

When dealing with an oral contract, the terms which the parties expressly agreed must be divined from the evidence before the judge. In Carmichael v National Power Plc [1999] 1 WLR 2042, Lord Hoffmann (with whom Lord Goff of Chieveley and Lord Jauncey of Tullichettle agreed) said at p 2049 that where the intention of the parties, objectively ascertained, has to be gathered partly from documents but also from oral exchanges and conduct, the terms of the contract are a question of fact. In that case the House of Lords restored the decision of the Industrial Tribunal which had found that the parties had intended that their agreement should be partly contained in letters, partly in oral exchanges at the job interviews or elsewhere and partly left to evolve by conduct as time went on: p 2050.

In the present...