Restitution – Unjust enrichment – Introduction fee – Respondent claiming fee for introducing purchaser for property owned by company – Company refusing payment – High Court dismissing appeal against rejection of proof of debt in company’s liquidation – Court of Appeal allowing respondent’s appeal – Appellants appealing – Whether company obliged to pay reasonable remuneration for services – Appeal allowed (by a majority)
The fourth respondent company owned a property known as Nash House, Northolt, London which it purchased in 2006 for £3.75m plus VAT. An oral agreement was made under which the fourth respondent agreed to pay the first respondent £1.2m if the property was sold for £6.5m to a purchaser introduced by the first respondent. In 2013, the first respondent introduced a potential purchaser at a price of £6.5m. The fourth respondent subsequently sold the property to the purchaser for the reduced sum of £6m plus VAT.
It was accepted that the price reduction was reached in good faith. Following completion, the fourth respondent refused to pay the first respondent the £1.2m claimed. It offered to pay him £400,000 as a goodwill gesture, which he refused.
The fourth respondent subsequently went into liquidation. The sole director of the fourth respondent, acting as convenor of the deemed consent procedure, at a creditors’ meeting, rejected the first respondent’s proof of debt in the sum of £1.2m, valued his claim for voting purposes in the liquidation at £1 and appointed liquidators of the fourth respondent.
The High Court dismissed the first respondent’s appeal: [2018] EWHC 2426 (Ch). The Court of Appeal allowed his appeal against that decision and held that he was entitled to reasonable remuneration for his services: [2019] EWCA Civ 1999; [2019] PLSCS 222. The appellants, as personal representatives of the estate of the deceased sole director, appealed.
Held: The appeal was allowed by a majority (Lords Leggatt and Burrows dissenting).
(1) There were three potential routes to concluding that the fourth respondent was contractually bound to pay a fee to the first respondent: (i) it was an express term of the contract that he should be paid a fee in the events which happened; (ii) a term should be implied into the contract to give effect to the unexpressed intention of the parties; and (iii) there was a term implied by law as an incident of this kind of contract.
(2) The contract found by the judge was a straightforward, unilateral contract. The first respondent was not obliged to introduce a potential buyer to the fourth respondent in the sense that if he had decided not to disclose the name of the potential purchaser to the fourth respondent, he would not have been in breach of any contractual obligation. But if he did make the introduction and if the property was sold to the potential purchaser, the fourth respondent would be in breach of the express terms of the agreement if it failed to pay him £1.2m. To hold that the fourth respondent was contractually bound to pay the first respondent an unspecified sum if the property was sold for less than £6.5m contradicted the express terms of the contract.
(3) It could not be said that there was any particular fee to which the parties would clearly have agreed, or which was so obvious that it went without saying. Further, it was not necessary to imply such a term to give the agreement business efficacy: Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10; [2009] 1 WLR 1988 and Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] EGLR 8 applied.
Section 15 of the Supply of Goods and Services Act 1982 provided that where, under a “relevant contract” for the supply of a service, the consideration for the service was not determined by the contract, there was an implied term that the party contracting with the supplier would pay a reasonable charge. However, that section did not apply since the consideration for the introduction was determined by the contract. It was also doubtful whether that was a “relevant contract” within section 15. This was a unilateral contract under which the introduction brought the contract into existence.
(4) The law also implied a term as an incident of the particular kind of contract. In the present case the implication as to reasonable remuneration in the absence of agreement did not apply because there had been an agreement. The first respondent relied on a number of authorities in which the courts had implied an entitlement to commission as an incident of informal contracts commonly entered into between sellers of property and estate agents. However, the first respondent was not an estate agent who was entitled to claim commission and this was a one-off contract.
(5) The first respondent’s claim in unjust enrichment also failed. Where the basis of the consideration was expressly and unconditionally spelt out on the face of a valid and subsisting contract, there was no proper scope for inquiring into an alternative basis that was contrary to the express basis freely agreed between the parties: Dargamo Holdings Ltd v Avonwick Holdings Ltd [2021] EWCA Civ 1149; [2022] 1 All ER (Comm) 1244 considered.
An obligation on the fourth respondent to pay any commission to the first respondent when there had been no sale for £6.5m was at odds with what was agreed. Silence did not mean that the risk of someone buying the property at less than the target price had not been addressed; rather, the terms of the contract envisaged that that risk remained with the first respondent: see Risks on the contract/unjust enrichment borderline (2020) 136 LQR 349–354.
The enrichment consisting of the benefit to the fourth respondent of a sale to a purchaser introduced by the first respondent, for no reward, would not be unjust: It was an outcome provided for by the agreement. Unjust enrichment mended no-one’s bargain.
(per Lord Leggatt, dissenting) The terms of the oral agreement between the parties did not negative the first respondent’s right (pursuant to a term of the contract implied by law) to be paid a reasonable sum for the valuable service that he supplied in bringing about the sale.
(per Lord Burrows, dissenting) There was a term implied by law into the contract that the first respondent would be paid reasonable remuneration if he successfully introduced a purchaser. The express terms of the contract did not exclude that implied term.
Andrew Trigger KC and Robert Sterling (instructed by Phillips Law, of Basingstoke) appeared for the appellants; Brad Pomfret and Arnold Ayoo (instructed by Athena Solicitors LLP, of Manchester) appeared for the respondents.
Eileen O’Grady, barrister
Click here to read a transcript of Barton and others v Morris and others
