Estate agents’ commission — Claims for commission by two firms of estate agents alleged to be due from the vendor on the sale of the same property to the same purchaser — Decision of Forbes J upheld by Court of Appeal — The two actions for commission were heard together by Forbes J — The present appeal was brought by the firm (John D Wood) whose action was dismissed — An appeal by the vendor against the decision in favour of the other firm (Beauchamp Estates) was not pursued, but the latter’s interest in upholding the decision was recognised by an order making it a party to the present appeal — The facts revealed a confusing amount of activity over a period of some months and the Vice-Chancellor observed that the court’s decision was not likely to be of any general application — The issue was as to which of the two firms of estate agents had been the effective cause of the sale — The successful agents had made the first contact with the ultimate purchaser — Although this was not conclusive by itself, when it was combined with the firm’s subsequent achievement in persuading the purchaser to raise his figure to the amount acceptable to the vendor it justified the judge in deciding that Beauchamp Estates were the effective cause of the sale — The court discussed the meaning of ‘effective cause’ — They did not dismiss the entitlement to two commissions as an impossibility but held that it was not a sustainable proposition on the judge’s findings in the present case — Appeal dismissed
No cases are
referred to in this report.
This was an
appeal by John D Wood & Co from the decision of Forbes J (reported at
[1985] 2 EGLR 44; (1985) 275 EG 1278) dismissing the firm’s claim to commission
on the sale of a house at 19 Avenue Road, St John’s Wood, London NW8. Forbes J
had held in a separate action, heard at the same time, that Beauchamp Estates
were entitled to commission on the sale. The defendant vendor in both actions
was Prince Nasiru Dantata, of Nigeria. Prince Dantata did not pursue an appeal
against the decision in favour of Beauchamp Estates and, although a respondent
and cross-appellant in the present appeal, did not appear and was not
represented. Beauchamp Estates were added as a party by an order under RSC Ord
15, r 6(2)(b)(ii).
Richard Slowe
(instructed by Jaques & Lewis) appeared on behalf of the appellants, John D
Wood & Co; JGG Ungley (instructed by Dibb & Clegg, Ward, Beynon &
Co) appeared by order of the court as intervenor on behalf of Beauchamp
Estates; the respondent and cross-appellant, Prince Dantata, was not
represented and took no part in the appeal.
Giving the
first judgment at the invitation of the Vice-Chancellor, NOURSE LJ said: This
is a case about estate agents’ commission. The essential question is which of
two firms ‘introduced’ or ‘produced’ the purchaser. Alternatively, it is
suggested that they both did.
The
authorities established that in most, if not all, cases where two estate agents
claim commission for having introduced the same purchaser the court has to
decide which of them was the effective cause of the sale. It is unusual,
although not unknown, for two commissions to be payable. In every case the
court must look carefully at the terms of the agreements and the facts which
are before it. Here the eccentricities of the purchaser have produced a set of
facts which are unusual and perhaps unique. I do not think that our decision is
likely to be of any general application.
The case has
been overlaid with some procedural complications, to which I hope that the
following statement of the material facts will not give an undue prominence.
The vendor was
Prince Nasiru Dantata of Nigeria. He owned 19 Avenue Road, London NW8, which
the learned trial judge, the late Forbes J, described as a very large and
prestigious dwelling-house in St John’s Wood. In the early part of 1982 the
prince decided to put the property on the market through a number of firms of
estate agents. We were told that there were about 10 firms in all, although
whether all of them had instructions at all of the times which are material to
this case is not clear. We are concerned with only two of them, John D Wood
& Co and Beauchamp Estates Ltd.
On January 15
1982 John D Wood wrote to the prince confirming his instructions to place the
property on the market at an asking price of £1.2m, subject to contract. The
letter continued:
We should
like to confirm that if we are successful in introducing a purchaser with whom
a sale is completed you will be prepared to pay our fees, which are three per
cent of the total sale price . . . .
It was pointed
out that the fee attracted VAT at the standard rate. Those are the material
terms of the agreement between the prince and John D Wood.
On May 25 1982
Beauchamp Estates wrote to the prince, confirming his instructions to offer the
property at an initial asking price of £1m, subject to contract. The letter
continued:
Whilst
writing we would also confirm that in the event of our producing a successful
purchaser on the terms quoted or on such terms as may prove acceptable to you a
commission at the rate of two and a half per cent on the price realised plus
VAT will become payable to us.
Those are the
material terms of the agreement between the prince and Beauchamp Estates. All
sides have agreed that there is no material difference between the two
agreements.
The purchaser
of the property was Chief Ojura, also of Nigeria. Forbes J described the chief
as a somewhat flamboyant character who, on his not infrequent visits to London
from his home country, liked going round looking at prestigious houses. The
learned judge was satisfied that that was, in a sense, a kind of
window-shopping. The chief liked looking at houses, going round them and even
on occasion making bids, although it would be fair to say that there was always
some doubt whether any particular bid was a serious one. The chief used both
John D Wood and Beauchamp Estates as channels for inspecting and bidding for
the property. One of the more unusual features of the case is that at the time
neither firm had any knowledge of the other’s contemporaneous involvement with
the chief. It would seem that he deliberately pursued the two channels of
approach, keeping each in ignorance of the other.
The two firms’
involvement with the chief falls into two distinct periods: the first between
August 20 and September 23 1982, and the second between November 5 and 12 of
the same year.
The first
contact of the chief’s family with the property was when his son, who had
previously made it known that he was looking for a
Estates on August 20. On August 24 virtually the whole family, including the
chief and his wife, travelling in what the learned judge described as a
cavalcade of motor cars, were shown round the property by Mr Hersham, together
with other properties. Not then, but at some time later, the chief made an
appointment with Mr Hersham to see the property again on September 10.
The chief’s
first involvement with John D Wood in relation to the property was on September
9, when Mrs Patricia Greenstone of that firm was showing him various properties
in the area. Her evidence was that the chief said that he had not seen 19
Avenue Road and wanted to see it. Arrangements were there and then made for him
to do so. Mrs Greenstone inferred from the chief’s demeanour that he had not
previously seen the property. The learned judge, accepting Mr Hersham’s
evidence, found that he had. But he did not reject Mrs Greenstone’s evidence
and it would seem likely that the chief deceived her into thinking that he had
not been there before. Moreover, the judge found that the chief had not
forgotten all about the property on September 9 and that he retained a lively
interest in it. He certainly expressed interest to Mrs Greenstone, who during
the next few days had a number of telephone conversations with the prince’s
solicitors. On September 14 she wrote them a letter referring to a telephone
conversation of that date and confirming that Hercules Marine S A (‘Hercules’ —
a company of the chief’s) were very keen to purchase the property and could
proceed immediately to exchange of contracts and completion. By a telephone
call to the prince’s solicitors of the same date Mrs Greenstone, acting on the
chief’s instructions, offered £650,000 for the property. On September 15 the
prince’s solicitors wrote to Hercules’ solicitors confirming John D Wood’s
receipt of the offer of £650,000 but saying that they were unable to contact
the prince and stating that they had already sent out a draft contract to
another prospective purchaser.
During this
period of John D Wood’s involvement the chief does not seem to have been in
touch with Beauchamp Estates. His appointment with Mr Hersham on September 10
was not kept. He either cancelled it or did not turn up on the day. But on
September 19 (which was a Sunday) Mr Hersham did take some members of the
chief’s family to the property again. He thought that they included the chief
himself, but he could not be certain. Mrs Greenstone thought that the chief was
back in Lagos by September 19.
On September
21 Mrs Greenstone made a note on her file in the following terms:
Mr Dantata
rang regarding the Chief’s offer and wanted to know if payment could be made in
naira. Rang Mr Piper who said quite likely but would confirm with chief who was
in Lagos. Piper rang back to say yes. Dantata then wanted to know rate the
chief would pay.
Mr Piper was
the chief’s London adviser. Mrs Greenstone said in evidence that the prince
made that telephone call from the United States. She said that the inquiry as
to the rate which the chief would pay probably came not from the prince himself
but from his London solicitors. The answer to the inquiry was given in a letter
which Mrs Greenstone wrote to the solicitors on September 23. She stated that
Hercules had officially put in an offer of £700,000 or, alternatively, 845,000
naira, subject to contract. The sterling equivalent of the offer in naira was
about £750,000.
Those were the
material events in the first of the two periods. The chief did not return to
England until the beginning of November and nothing much seems to have happened
in the meantime. On November 2 Mrs Greenstone went away on holiday and the
conduct of the matter on John D Wood’s behalf fell to Mr Stephen Buston.
The matter
came to life again on November 5 when Mr Buston was informed over the telephone
by the prince’s solicitors that he would accept £850,000, subject to contract.
Thereafter Mr Buston made a number of telephone calls, including at least one to
the chief, who asked that his name should not be disclosed to the prince or his
solicitors. Mr Buston said in evidence that the reason for that was because the
chief was from Nigeria, as was the prince, and the chief did not wish any
conflict in that respect. He instructed Mr Buston to put forward an offer of
£750,000 and said that he would pay half in England and half in Nigeria, or
whatever the prince preferred. Mr Buston spoke several times to the prince’s
solicitors over the telephone on November 8 and 9. Someone in the solicitors’
firm made a note of one of the conversations on November 9 which recorded the
offer to pay in either currency. The note continued:
They are a
foreign company who are buying.
Notwithstanding
his instructions to John D Wood to put forward an offer of £750,000, the chief
then went back to Beauchamp Estates. On November 9 he telephoned Mr Hersham and
said that he wanted to see some properties, including 19 Avenue Road. An
appointment was made for November 11. Meanwhile, on November 10, Mr Buston
received a telephone call from the prince, who was in the United States. He
said that he would accept £850,000 or in the region of 1.5m naira, being the
equivalent of £750,000 at the black market rate. Mr Buston immediately spoke to
the chief, who said that he was not interested in dealing in naira. Mr Buston
advised the chief to go up to £800,000 or at least £775,000. The chief said
that he would think about it. On November 11, Mr Buston being out of the
office, the chief spoke to someone else and told him that he would go up to
£775,000 with an immediate exchange. That offer was telephoned through to the
prince’s solicitors, who rang back just before 1 pm and spoke to Mr Buston
himself. They said that £775,000 was not acceptable and that a compromise of
£800,000 would probably not be enough. Mr Buston said in evidence that he had a
feeling that it probably would have been. However, although he attempted to
speak again with the chief that afternoon, he never received any further
instructions. That was the end of John D Wood’s involvement in the matter.
At midday on
the same day, November 11, the chief kept his appointment with Mr Hersham.
Having inspected a number of properties, including 19 Avenue Road, the chief
asked Mr Hersham to make a bid for the latter of £750,000. Mr Hersham
immediately tried to contact the prince direct in the United States. Eventually
he spoke to him in the evening of November 11. The prince said that he would
sell the house lock, stock and barrel, to include all the contents, if Mr
Hersham could agree a deal at or above £800,000. After further telephone calls
to the chief and the prince, Mr Hersham knew that agreement had been reached at
£800,000. He met the chief at the property again on November 12, when he was accompanied
by every single member of his family, together with Mr Piper. On that day Mr
Hersham wrote a letter to Mr Piper confirming the prince’s acceptance of
Hercules’ offer of £800,000, subject to contract (and to include all carpets,
curtains, light fittings and contents as listed on an attached inventory).
In
cross-examination by counsel for the prince Mr Hersham said that he told the
prince that his applicant was a Nigerian, whose name was Chief Ojura. That was
when he put the offer of £750,000 to the prince, and it is to be assumed that
he said nothing different in their subsequent telephone conversations. Mr
Hersham said that he knew nothing of Hercules until November 11 or 12.
The remaining
facts can be shortly stated. On December 2 1982 the prince’s solicitors wrote
to John D Wood’s solicitors rejecting any suggestion that any fee was payable
to them. On December 14 1982 contracts for the sale of the property were
exchanged. In due course the purchase was completed. The prince, having been
made aware that both firms claimed commission, declined to pay either.
Ultimately, John D Wood and Beauchamp Estates each commenced separate actions
in the Queen’s Bench Division against the prince. There were various
interlocutory skirmishes which need not be recounted, except to say that the
prince’s attempt to interplead proved unsuccessful. Mareva relief was
also granted against him.
Eventually
both actions were called on together before Forbes J on June 26 1985. Even then
an argument was advanced on behalf of John D Wood to the effect that the
actions ought to be tried separately. However, the learned judge was of the
view that both justice and expediency required that he should hear them
together and he so ruled.
Each of the
three parties was represented by counsel. Evidence was given by Mrs Greenstone
and Mr Buston for John D Wood and by Mr Hersham and Mr Anthony Greer, the
caretaker at 19 Avenue Road, for Beauchamp Estates. Neither the prince nor the
chief gave evidence. There was a certain amount of documentary evidence, in
particular documents originating from the files of John D Wood and Beauchamp
Estates during the material period. At the conclusion of the hearing judgment
was reserved.
Forbes J gave
judgment on July 15 1985. At an early stage he said that it was clear that the
terms of the two agreements were in reality identical, so that both justice and
expediency required that both actions should be heard together. He observed
that the result might be that the prince had to pay commission to only one of the
two firms or to both of them. He recorded that the prince expressly disclaimed
any suggestion that he was not liable to pay either. He also recorded
that it was accepted by all three counsel that in order to succeed John D Wood
or Beauchamp Estates, as the case might be, had to show that they introduced
the ultimate purchaser and that such introduction was the effective cause of
the sale.
Having
referred to the law and stated the facts, the learned judge expressed the view
that it could be said that, ignoring the question of introduction, both firms
contributed by their work to the final outcome of a sale at £800,000. He said
that John D Wood were clearly instrumental in getting the chief to raise his
bid from £650,000 to £775,000. On the other hand, the final and accepted offer
of £800,000 was not only higher than that put forward by John D Wood but
included the contents. That was due to Beauchamp Estates. Both firms were
active in showing the chief and/or his family around the property at various
times.
At p 6B of the
transcript* the learned judge continued as follows:
I do not
consider, however, that the question here turns on whether either agent was
instrumental or assisted in the process which led finally to the sale. The
question is whether either of them has demonstrated that it was his
introduction which was the effective cause of the sale. Although the question
of who was first in the field is not conclusive, I do not consider that an
agent who effects a second introduction to the property (if that is not a
contradiction in terms) can succeed in demonstrating that such an introduction
was the effective cause of the sale, unless he can show that the interest
aroused in the purchaser by the first introduction has evaporated by the time
of the second.
* Editor’s
note: See [1985] 2 EGLR 44 at p 45M.
It was at this
stage that the learned judge said that he was not prepared to hold that the
chief had forgotten all about the property on September 9 and that he thought
that he retained a lively interest in it and recognised its connection with the
initial introduction by Beauchamp Estates. Mr Slowe, for John D Wood, has
sought to attack that finding, but I will say here and now that I am in no
doubt that there was evidence on which it could properly be made. The learned
judge concluded his judgment by saying that he was satisfied that the
introduction by Beauchamp Estates was the effective cause of the sale and that,
on the facts, there was no room for two effective causes. He therefore gave
judgment for Beauchamp Estates in their action and for the prince in John D
Wood’s action.
John D Wood
appealed against the decision in their action. The prince appealed against the
decision in Beauchamp Estates’ action, but that appeal was not pursued and has
been struck out. Accordingly, the only appeal which is before this court is
John D Wood’s. That appeared to present something of a problem when the appeal
was first opened, because the prince has disappeared and the funds secured in
this country by the Mareva relief which has been granted are not
sufficient to satisfy two judgments. It was therefore clear that Beauchamp
Estates had an interest in upholding the decision against John D Wood. The
problem was that they were not a party to John D Wood’s action. However, we
were able to resolve the problem by making an order for them to be added as a
party to this appeal under Ord 15, r 6(2)(b)(ii) of the RSC. In the result we
were much assisted by the argument of Mr Ungley on behalf of Beauchamp Estates.
In case this is not already clear, I should add that the prince has not been
represented, nor has he appeared, in this court.
The convenient
course is to start at what may be thought to be the wrong end of the case. During
the argument I was much attracted by the alternative submission made by Mr
Slowe to the effect that this was a case where, on its own unusual facts, two
commissions were payable. It seemed to me to be a well tenable view of the case
that, at any rate in its later stages, the prince had employed the two firms as
concurrent channels for bids made by the same purchaser with the result that it
did not lie in his mouth to deny that the purchaser was introduced by both
firms. On consideration, I have come to the conclusion that that view cannot be
sustained in the absence of a finding by the learned judge that the prince knew
that the bids were coming from the same source. Moreover, I think that he
would, on the evidence, have been bound to find that the prince did not have
that knowledge. It seems clear from Mr Hersham’s evidence that he told the
prince that the bid which he was putting forward came from the chief
personally. On the other side the evidence is not so clear. For example, Mrs
Greenstone’s file note of September 21 might suggest that her telephone call
from the prince had been about an offer made by the chief personally,
particularly in the light of the request for payment in naira. But then both
Mrs Greenstone’s letters of September 14 and 23 were written on behalf of
Hercules and not the chief personally. The short answer is, I think, that none
of this was investigated in Mrs Greenstone’s evidence. In my view this court
can proceed only on the footing that the prince thought that the bids which were
made through John D Wood were made on behalf of Hercules and that he did not
know that that was a company of the chief. That means that this cannot be a
case where two commissions are payable.
Mr Slowe’s
primary submission was that an estate agent’s ‘introduction’ can be effected
only by bringing the applicant and the vendor into personal acquaintance. That
proved to be not quite so startling as it might have appeared, because Mr Slowe
went on to say that what was necessary for that purpose was that the agent
should reveal the name of the applicant to the vendor. That, he said, was
something which was done for the first time when Mrs Greenstone wrote her
letter of September 14 to the prince’s solicitors. Mr Slowe sought to rely on
some fresh affidavit evidence of an independent estage agent which had been
received by this court under an order of the Registrar, but the only part of
that evidence which might have assisted him was clearly inadmissible for the
purposes of construing the two agreements. I will add that even that part could
not in any event have been in the least bit conclusive.
I reject Mr
Slowe’s primary submission on this simple ground. What we have to decide is
which of the two firms was the effective cause of the sale. That question
cannot be answered merely by deciding which was the first to reveal the name of
its applicant to the vendor. It must be answered on a view of the facts as a
whole.
As I have
said, the learned judge recorded an acceptance by all three counsel that in
order to succeed one or other of the two firms had to show that they introduced
the ultimate purchaser and that such introduction was the effective cause of
the purchase. That would seem to suggest that there are two questions to be
answered, and it would certainly explain the importance which the learned judge
attached to the chief’s retention of a lively interest in the property when he
went there again on September 9. In truth I think that there is but a single
question to be answered: which of the two firms introduced the chief to the
sale? Both language and authority
established that that question must be answered by answering this further
question: which of the two firms was the effective cause of the sale? Here I would gratefully adopt the following
statement of the law in Bowstead on Agency, 15th ed, at p 230, to which
the learned judge referred:
. . . the
fact that one agent introduces a person who ultimately purchases after a later
introduction by another agent will not necessarily entitle the first agent to
commission. In such a case the court must determine which of the two agents was
the effective cause of the transaction taking place.
The
difficulties in clarifying the mind on this question are, I think, caused by
the familiar meaning of the word ‘introduction’ as the bringing together of two
people who have not previously met. Thus it is natural, when looking at the
word in its present context, to attach significance to the first bringing
together of the property and the person who ultimately purchases it. But the
full phrase is ‘the introduction of a purchaser’ and I think that that can only
mean the introduction of the person who ultimately purchases, not to the
property, but to the purchase or, if you look at it from the vendor’s angle, to
the sale; in either case to the transaction which ultimately takes place. And
if you then apply the primary dictionary meaning of ‘introduction’, you find
that what you are looking for is the leading or bringing in of the purchaser to
that transaction. That makes it clear that first acquaintance is not paramount
and it explains why the test is expressed by reference to the effective cause
of the transaction.
Which of the
two firms was the effective cause of the sale to the chief? It will be evident that I do not attach any
conclusive weight to the initial part played by Beauchamp Estates. At the same
time it certainly cannot be ignored, because the lively interest which was thereby
generated in the chief must be taken to have survived, no doubt with fits and
starts, until the deal was clinched. On the other side, as the learned judge
said, John D Wood were clearly instrumental in getting the chief to raise his
bid from £650,000 to £775,000. But what they did not manage to do was to get
him up to the £800,000 to which they had advised he should go and which in the
end, as Mr Buston felt it would, hit the mark. That was the achievement of Mr
Hersham. It was he who got the chief to go to that figure with the contents
thrown in as well. On a view of the facts as a whole, I think that that
achievement combined with their initial role in the matter shows that Beauchamp
Estates and not John D Wood were the effective cause of the sale.
For these
reasons, I think that the decision of Mr Justice Forbes
SIR NICOLAS
BROWNE-WILKINSON V-C and NEILL LJ agreed and did not add anything.
The appeal
was dismissed. John D Wood & Co were ordered to pay the costs of Beauchamp
Estates from the time when they were joined as parties to the appeal. Mareva
injunctions granted to both firms of agents were discharged.
