Great Estates Group Ltd v Digby
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Toulson,Lord Justice Rix |
| Judgment Date | 13 October 2011 |
| Neutral Citation | [2011] EWCA Civ 1120 |
| Docket Number | Case No: B2/2010/2480 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 October 2011 |
[2011] EWCA Civ 1120
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE READING COUNTY COURT
MR RECORDER WIDDUP
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Rix
Lord Justice Lloyd
and
Lord Justice Toulson
Case No: B2/2010/2480
Duncan Henderson (instructed by Blythe Liggins) for the Appellant
Oliver Assersohn (instructed by Volks Hedleys) for the Respondent
Hearing date: 1 July 2011
Introduction
The Claimant, an estate agent, considers that it was cut out of its entitlement to commission on the sale of a property in London in the buoyant market of the summer of 2007. By these proceedings it seeks compensation for that loss.
On 1 August 2007 the Defendant signed an agreement with the Claimant which was described as a sole agency agreement. On the same day the Claimant introduced three potential purchasers to the property, one of whom made an offer at the asking price that same day. On the next day, however, the Defendant met another potential purchaser who made a higher bid. That bid proceeded to a contract within a fortnight, and to completion during September. Another agency was involved in that process at least to some extent, and the Defendant paid commission to that other agency. The Claimant alleges that this involved a breach of the agency agreement between it and the Defendant, and it sued for damages for loss of the commission that it claimed it would have earned under its agreement. The claim came to trial before Mr Recorder Widdup, who dismissed it. Lord Justice Moore-Bick granted permission to appeal, in part because of the general interest of points which arise under the legislation regulating estate agency activities.
As in the county court, before us the Claimant was represented by Mr Duncan Henderson and the Defendant by Mr Oliver Assersohn. We have a transcript of the hearing, at which oral evidence was given by Mr Morris, the principal of the Claimant, by Mr Digby, and by no other witness.
The contract
The material parts of the contract between the Claimant and the Defendant were as follows:
"This is a Sole Agency Agreement between:
The Great Estates Group Limited (The 'Agent') and
(The 'Client')
For the sale of: 151 Old Brompton Road, SW7 (the Property)
This agreement is for an Initial Period of:
six (6) weeks (the "Initial Period")
The Property will be presented at an initial asking price of:
£ 2,850,000 (The asking price is not a valuation but a figure for sales purposes)
Sole Agency Fees
Commission of 2% of the selling price for which contracts are exchanged … + VAT at 17.5% will be charged by the Agents if payable under the terms of this agreement.
Based on the asking price referred to above our fees will be £+ VAT £TOTAL: £.
Please note should the final sale price be higher or lower than the asking price our commission will be correspondingly higher or lower.
Additional Charges
The Agent may recommend additional marketing activity for the Client's property and will make a separate charge for this. The Agent will not commit to any additional marketing without asking and agreeing all costs with the Client first and in writing.
Settlement of Fees
(a) Fees Payable for Sole Agency
Commission fees are payable as a result of the circumstances outlined herein. Fees become due at exchange of contracts or (if there is no contract) upon completion of the sale.
[There was then provision as to the responsibility for fees and for interest on unpaid fees.]
Sole Agency
Where the Agent acts on the Client's behalf as Sole Agent, the Client will be liable to pay remuneration to the Agent, in addition to any other costs or charges agreed if at any time unconditional contracts for sale of the Property are exchanged
i) With a purchaser introduced by the Agent during the period of the Agent's Sole agency or with whom the Agent had negotiations about the Property during that period or,
ii) If a purchaser first introduced by the Agent goes on to buy the property (whether or not through another agent), in circumstances where that purchaser was reintroduced less than six months after the date this agreement ended.
Termination of agency
Either party can terminate the agency by giving fourteen days notice to the other in writing. The fourteen days notice may be given at any time to terminate the agency at the end of or after the last day of the initial period specified within this agreement. The Client agrees that all outstanding fees will be paid within the fourteen-day period.
Offers
The Agent will promptly forward details in writing of all offers received from potential purchasers at any time up until contracts have been exchanged, unless the offer is of any amount or type which the Client has specifically instructed the Agents, in writing, not to pass on. In turn, the Client must promptly inform the Agent of all enquiries or discussions which the Client may have with any prospective purchaser which are not made via the Agent."
The issues on the appeal
The first issue on the appeal concerns the meaning and effect of this contract. Was it a breach of the contract for Mr Digby to sell to a purchaser if another agent was instrumental in that sale and the Claimant was not? The appellant accepts that it is not inconsistent with the sole agency agreement for the client to sell to a purchaser who he himself finds without the involvement of any other agent.
One could have a contract under which the client could not sell independently or, to put it differently but with much the same economic effect, under which the agent is entitled to commission even if the sale is to a purchaser found by the client himself without any agent being involved. Such a contract is sometimes referred to as a sole selling agency, or as giving sole selling rights, as distinct from a sole agency. The appellant contended that if another agency is in any way involved in the eventual sale, that is inconsistent with the sole agency agreement entered into in this case, and involves a breach of contract on the part of the client. The respondent, on the other hand, argued that there is nothing in this agreement which precludes the client from using another agent. Mr Assersohn accepted that, on that basis, the word "sole" which appears in the agreement on a number of occasions, in the context of sole agency, adds nothing and can and should be ignored. The recorder decided this point in favour of the respondent.
If that issue is decided in favour of the appellant, the next question is whether the restriction on the use of another agent was breached. The recorder did not decide this point, as he held that there was no such restriction. The pleadings and the transcript show that it was not argued for the Defendant that, if there were such a restriction, it had not been broken.
The next question is what, if any, loss the Claimant had suffered, which depends on the assessment of what would have happened but for the Defendant's breach of contract. The recorder said nothing on this subject.
Then we come to the issues of more general interest. The Estate Agents Act 1979, section 18, requires an agent to give prospective clients information about (among other things) the remuneration and other payments which may come to be payable by the client to the agent. Pursuant to that section regulations have been made which supplement that obligation to give information: the Estate Agents (Provision of Information) Regulations 1991, SI 1991/859. Section 18 certainly applied to the Claimant in its dealings with the Defendant. There is an issue as to the application of the regulations, and whether the obligation in the regulations was satisfied or not.
If the agent did fail to comply with section 18 or the regulations, the contract is not enforceable except on application to the court, which has discretions in the matter laid down by section 18(6). If the case gets that far, as the recorder considered that it did, issues arise as to the recorder's exercise of the discretion whether or not to allow the contract to be enforced, and if so on what terms.
The facts
I can set out the main material facts quite briefly. I do not at this stage go into the level of detail that would be relevant to the assessment of the Claimant's loss, if any, nor into all the facts that might be relevant to the court's discretion under section 18(6).
Mr Morris used to work for another estate agency in Kensington. He had met Mr Digby while he worked there. He set up the Claimant in May 2007 in Mayfair. When he met Mr Digby, the latter was already thinking about selling his property 151 Brompton Road London SW5. Once Mr Morris had set up the Claimant he approached Mr Digby and invited him to give him the opportunity to sell the property for him, representing, no doubt, that he knew of several people who might be interested as purchasers. Mr Digby agreed, and signed the agreement which I have set out above on 1 August 2007. By the end of that day Mr Morris had sent Mr Digby details of three possible buyers, offering between £2.6M and £2.85M, the latter being the asking price. All three had been to see the property that day. Mr Morris also prepared a sales memorandum recording an agreement to sell for £2.85M to Henco Holding Ltd.
On 2 August Mr Digby met the eventual purchaser, Mr Murray. Exactly how they met is not entirely clear. What is clear is that Mr Murray offered to buy the property for £2.95M, and that at some point that day Mr Digby brought Marsh & Parsons in,...
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