Glentree Estates Ltd and Others v Favermead Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lady Justice Smith,Mr Justice Norris |
| Judgment Date | 21 December 2010 |
| Neutral Citation | [2010] EWCA Civ 1473 |
| Docket Number | Case No: A3/2010/1408 & A3/2010/1408(A) |
| Court | Court of Appeal (Civil Division) |
| Date | 21 December 2010 |
[2010] EWCA Civ 1473
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
SIR EDWARD EVANS-LOMBE
Royal Courts of Justice
Strand, London, WC2A 2LL
The Right Honourable Lord Justice Longmore
The Right Honourable Lady Justice Smith
and
The Honourable Mr Justice Norris
Case No: A3/2010/1408 & A3/2010/1408(A)
Mr Jonathan Gaunt QC & Mr Robert Deacon (instructed by Ckft Solicitors) for the Appellant
Mr John Wardell QC (instructed by Davenport Lyons) for the Respondent
Hearing date: 10 th December 2010
Introduction
Houses in Kensington Palace Gardens are expensive. No. 18–19 is no exception. It was bought in 1995 by a company owned and controlled by Professor Khalili, an expert in, and collector of, Middle Eastern and Oriental art. That company sold the house in September 2001 to a Liechtenstein trustee for the family of Mr Bernie Ecclestone of Formula 1 racing car fame for £50 million together with a share of profit on any re-sale. That Liechtenstein trustee in March 2004 sold the house to a company owned and controlled by Mr and Mrs Lakshmi Mittal, the Indian entrepreneurs, for US$105 million. The claimant estate agents say that they acted pursuant to instructions contained in agreements made with one of Professor Khalili's companies, Favermead Ltd ("Favermead"), in relation to both transactions and that they are entitled to a commission of £200,000 plus VAT in relation to the first sale and a commission of £1 million plus VAT in relation to the second sale. Sir Edward Evans-Lombe sitting as a judge of the Chancery Division has dismissed the claims of the estate agents who now appeal to this court with the permission of Lady Justice Arden.
The original agreement made between Mr Hewlett of Savills, who were the lead agents to the claimants, and Favermead was contained in a letter of 3 rd April 2001 written by Professor Khalili on Favermead headed paper in the following terms:—
"18/19 Kensington Palace Gardens, London W8
Thank you for your letter of 19 th March 2001 setting out the fee structure regarding the sale of the above property.
I agree that I have appointed FPD Savills, Glentree Estates and Beauchamp Estates to act as my joint sole agents in respect of the above property with FPD Savills acting as the main co-ordinating agent.
I confirm that I will pay a fixed fee of £1m (excluding VAT), on completion of the sale of the property. The matter of the sub-division of the fee is a matter solely for agreement between the three agents.
The Terms of Business for Sales which accompanied your letter to me does not form part of our Agreement.
I will pay the agreed fee on the basis that one of you introduces an applicant, who subsequently purchases the property from us.
If I procure a purchaser through my own endeavours, then you will be entitled to a reduced fee of 20% of the £1m.
I am not bound to pay fees to you under any other circumstances.
The content of this letter is our sole agreement and shall remain fully confidential."
Mr Bernie Ecclestone and the Liechtenstein trustee (whom I shall now call "Corfiducia") were in fact introduced to Professor Khalili and Favermead by other agents but two months after the sale to Corfiducia, Favermead confirmed by fax dated 16 th November 2001 to Mr Hewlett that the property was still for sale at the asking price of £85 million. On 19 th November 2001 Mr Hewlett met Professor Khalili and the agreement reached at that meeting was recorded in a letter of the same date from Mr Hewlett to Professor Khalili:—
"Further to our meeting this morning I write to confirm the outcome of our various discussions.
I understand from you that we are still instructed to continue to search and find a suitable purchaser for the above property. You informed me that Lovell White Durrant will be the solicitors should a purchaser be found.
Whilst writing I confirm that you have agreed to keep in place our agency agreement as per your letter 3 rd April 2001 though I understand that this fee is now to be shared by the three agents mentioned in the letter and a new fourth party. I am very grateful to you for this, as you have personally agreed to settle our fee should a buyer be found. This agreement also covers our fees should the clients of Clyde and Co purchase the house. I am sure that both Beauchamp Estates and Glentree will also be delighted to have this warranty from yourself.
In addition we discussed the offer received from Clyde and Co on the above property. You have stated to me that I should go back to them offering them a seven-day exclusive at £75 million subject to contract for the house and the contents. This price would be agreed on the following basis; £65 million for the house and £10 million for the extra contents non negotiable."
(The reference to Clyde and Co refers to an offer made by that firm of solicitors on behalf a client to purchase the property for £60 million which did not in the event proceed). This arrangement with Professor Khalili caused the claimants to circulate other agents including, by letter of 30 th January 2002, Knight Frank.
Favermead contend that the agreement made on 19 th November 2001 and reflected in the letter was that the claimants would waive any claim for commission arising from the sale to Corfiducia in exchange for the opportunity to continue as agents on the original terms so as potentially to earn commission on any re-sale to a fresh purchaser.
There matters seem to have rested until, over 2 years later, Mr Abrahmsohn of the first claimant in a letter of 4 th February 2004 drew the attention of Mrs Mittal to the property, on sale for about £85 million and, on 26 th February, a Mr Roddy Craggs of Knight Frank asked Mr Hewlett if the property could be viewed by him and an associate of his, Mr Jaideep Singh from Knight Frank's Indian department, to see if it might be suitable for the Mittals. The viewing took place on the next day. On 4 th March a further viewing took place with Mr Mittal and his son, Aditya, in attendance. At the end of that view, Mr Mittal asked if the owner would accept £65 million but Mr Hewlett said that any offer would have to be over £70 million.
A short time later rumours began to circulate that the property had been sold without any further involvement either of the claimants or of Knight Frank. Mr Jaideep Singh made inquiries of Aditya Mittal who told him that contracts had been exchanged. That occurred on 31 st March 2004. The purchaser was Laken Properties Ltd ("Laken"). The judge proceeded on the basis (but expressly made no findings (para 59)) that a friend of the Mittals, Mr Ashok Tandon, appeared on the scene and was introduced to a Mr Macdonald on behalf of Corfiducia, the vendor. Mr Tandon was shortly to marry Mr Mittal's niece and was shown round the property by Mr Macdonald and Mr Ecclestone. In the course of subsequent negotiations, Mr Mullens (to whom Mr Tandon seems to have been introduced by Mr Ecclestone as having authority to negotiate on behalf of Corfiducia) offered to pay Mr Tandon a commission of 3% of the purchase price if completion resulted. After completion Corfiducia paid US3,150,000 to Mr Tandon.
Savills considered the claimants were entitled to a fee of £1 million and served a statutory demand on Favermead for that sum. Favermead then issued proceedings to restrain the claimants from presenting a winding up petition. That application was granted by Patten J on 2 nd March 2005. These proceedings were begun on 4 th October 2007.
The judge listed 7 issues for decision:—
i) Did the sale by Favermead to Corfiducia trigger a right to recover commission of £200,000 plus VAT under the agreement of 3 rd April 2001?
ii) If so, was any right to that commission waived as a result of the meeting of 19 th November 2001?
iii) If it was, is there any basis for recovering it now?
iv) Was it a term of the agreement that the claimants had to be the effective cause of the sale by Corfiducia to Laken, the Mittals' company?
v) If so, were the claimants the effective cause of the sale to Laken?
vi) If so, does the fact that they used sub-agents disentitle them to their fee?
vii) Does the fact that the price was below £70 million give rise to a separate defence to the claim for commission on the sale to Laken?
He answered those issues:—
i) Yes
ii) Yes
iii) No
iv) Yes
v) Not Proved
vi) Not Applicable
vii) Not Applicable
and dismissed the claim
Rights under the first agreement of 3 rd April 2001
Favermead now accept that the claimants did acquire a right to £200,000 on the sale to Corfiducia. Professor Khalili did not accept that at the time and apparently persuaded Mr Hewlett of Savills that it was not a "real sale" because Corfiducia was intending to re-sell at a profit and that Professor Khalili or one of his companies would (as I have mentioned) share in such profit made on re-sale. This was to be achieved by an "overage agreement". Mr Hewlett did not ask too many questions about this but seems to have accepted either that commission would not be payable on what he called a "technical sale" in his witness statement or, at least, that he would not press any claim that there might be to the promised commission since he was now to have the opportunity, once again, of an introduction which would lead to the acquisition of a £1 million commission.
Mr Wardell QC argued that, although the intended re-sale could not mean that there...
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