Scheggia v Gradwell

THE MASTER OF THE ROLLS (read by LORD JUSTICE HARMAN): On the 9th October, 1961, Mr Mario Seheggia instructed Mr Gradwell (who traded as Mason's Business Transfer Agents) to find a purchaser for his business. It was a business of a restaurant providing snacks and meals. It was carried on at 5, Halleswelle Parade, Finchley Road, N.W.1, which was owned by Mr M. Snapper and Mr N. Snapper. Mr Seheggia had a lease of the premises for seven years from the 25th March, 1960. So it had five and a half years to run. The rent was £300 a year: and there was a covenant by the tenant "not to assign underlet or in any manner part with the possession of the demised premises or any part thereof for the whole or any part of the term hereby granted without the previous licence in writing of the lessors first obtained but so that such consent shall not be unreasonably withheld to an assignment or underletting of the whole of the demised premises to a respectable and responsible person".

When Mr Seheggia instructed Mr Gradwell to find a purchaser, he signed a printed form (in which Mr Gradwell or his employees filled in the particulars of the business) which contained this agreement about commission:

"AGREEMENT

1. I/we hereby appoint Mason's Business Transfer Agents (hereinafter called 'the Agents') as sole agents for the period of three months from the date hereof for the sale of the business and property particulars of which are shown above and overleaf. I/we instruct the agents to sell the said business and property for the total purchase price shown overleaf or such lesser price as I/we may hereafter specify. I/we agree not to determine the said agency or revoke the said instructions during the said period and in the event of my/our determining the said agency or revoking the said instructions within the said period I/we agree to pay to the agents the sum of £50 or - of the total purchase price shown overleaf for advertising and out-of-pocket expenses.

2. I/we have read and agreed the information shown move and overleaf and warrant it to be accurate in all respects.

3. I/we warrant that I/we own the said business and property.

4. For the purpose of this agreement 'total purchase price' means the purchase price of the said business and property plus (if applicable) the purchase price of any stock, fixtures, fittings or equipment.

5. In consideration of the agents agreeing to act as sole agents as aforesaid I/we agree to pay the agents a commission of £150 or commission at the rate of 71/2 per cent, on the total purchase price of the said business and property (whichever is the greater) upon the occurrence of any of the following events:

(a) If within the said period of three months any person introduced by the agents enters into a legally binding contract to purchase the said, business and property at the total purchase price shown overleaf or such other price as I/we have specified; or

(b) If at any time any person introduced by the agents purchases the said business and property; or

(c) If within the said period of three months I/we sell or enter into a legally binding agreement to sell the said business or property to any person, whether such sale or agreement be effected by another agent or by me/us independently of an agent.

6. I/we agree that any deposit payable by any prospective purchaser of the said business and property within the said period of three months shall be paid to the agents to be hold by them as stakeholders.

Signature(s) (agd) M. Scheggia

Date 9th October, 1961".

On the 30th October, 1961, Mr Gradwell found a person who was willing, and indeed anxious, to sign a contract of purchase of the business. He was Mr Yik Ping Chung. He agreed topurchase the leasehold interest and goodwill and fittings and so forth for the sum of £2,300: and paid a deposit of £230 to the agent, Mr Gradwell. The parties did not go to solicitors. The agent, Mr Gradwell, produced a photographic standard form of agreement into which he typed the names of the parties and so forth. And the parties signed it in his presence and he witnessed their signatures. Completion was to be in eight weeks. The agreement contained these clauses: "(6) The vendor will upon the payment of the balance of the said purchase money execute a proper assignment of the lease of the said property for the unexpired residue of the terms granted by the lease such assignment to be prepared and completed at the expense of the purchaser and the purchaser will submit suitable and acceptable references for the landlord's approval". "(11) The National Conditions of Sale (17th Edition) including Clause 13 thereof shall be deemed to be incorporated herein so far as the same are applicable to a sale by private treaty and are not varied by or inconsistent with the express terms of this Agreement".

The National Conditions of Sale contain these conditions: "(10)(5) The sale is subject to the reversioner's licence being obtained, where necessary. The fee for such licence shall be paid by the vendor, but, if the licence cannot be obtained, the vendor may rescind the contract on the same terms as if the purchaser had persisted in an objection to the title which the vendor was unable to removel'. The effect of rescission in those circumstances was that the vendor was to return the deposit (see Conditions 8(6) and 8(7)).

Mr Chung gave three references from fellow compatriots and one from a bank. The landlords were quite willing to accept the three from his compatriots to show his respectability, but they were "not quite satisfied with the bank reference to show his responsibility. They kept the matter open, however, and if Mr Chung had provided a satisfactory reference as to his financialresponsibility, or had provided a guarantor, they would have been willing to give their consent. Mr Chung did not provide either of these. Instead, on the 15th January, 1962, he withdrew from the purchase.

Naturally a question then arose between Mr Chung's solicitor and Mr Scheggia's solicitor about the deposit: and, in view of the legal difficulties involved, they came to a compromise about it. The £230 deposit was to be divided equally, £115 to Mr Scheggia and £115 to Mr Chung: but in addition Mr Chung had to pay £42 costs to Mr Scheggia. So the net result was that £157 went to Mr Scheggia (£115 plus £42 costs) and £73 to Mr Chung (£115 less£42).

But then Mr Gradwell, the agent, claimed that he was entitled to commission from Mr Scheggia of 7½ per cent, on £2,300, that is, £172. 10s. 0d. So he kept the £157: and claimed £15. 10s.0d. more from Mr Scheggia to make up his commission of £172. 10s. 0d. And the Judge has hold that the agent is entitled to this.

It was a very unfortunate state of affairs for tar Scheggia because he eventually sold the premises through other agents and only got £l,550 for them. The contract which Mr Gradwell obtained for him (£2,300) has, therefore, not only turned out to be no use to Mr Scheggia but he does not even get any solace from the deposit – he has to hand over the whole £157 to the agents and pay the agents an additional £15. 10s.0d.

I must say that I cannot agree with this. I accept that it all depends on the true interpretation of the contract for commission, but I think it plain that when commission is made payable if "any person introduced by the agents enters into a legally binding contract to purchase the said business and property" that roust mean any person who is ready, willing and able to purchase the property. Such is clearly implicit, for what good is it for the agent to introduce a man "who is willing to sign a binding contract but who is not able to purchase?Suppose the agent introduces a man of straw who signs the contract. Is the agent entitled to commission? Suppose the agent introduces a thoroughly disreputable character who signs the contract but whom the landlord refuses to accept. Is the agent entitled to commission? Plainly not.

The way I look at it is this. If an agent introduces a person who carries the purchase through to completion, he clearly gets his commission. That is the ordinary understanding of mankind in these matters. If the agent stipulates for commission on a lesser event, e.g. a "binding contract" to purchase it is implicit that the right to commission only arises if the person introduced is ready, willing and able to purchase: and he must be ready, willing and able to purchase, not only at the time when he signs the contract, but also at the time for completion. This must have been the understanding of both sider it protects the agent in case the vendor himself is at fault and himself withdraws from the contract. It ensures that the agent is then entitled to commission. It protects the vendor in case the purchaser is at fault and is unable or unwilling to complete. The services of the agent are in that case fruitless, and he should not be entitled to commission on a fruitless introduction: for you must remember always that the commission is put at a high rate for the very reason that it is payable on the fruits of the sale. The views that I have expressed are supported by the cases in this Court of James v. Smith, 1931, 2 King's Bench, p. 317, and Peter Long v. Burns, 1956, 1 Weekly law Reports, pp. 413, 1083. I agree that they are...