Estate agents – Commission – Entitlement – Appellant firm instructed to market estate for sale in accordance with its marketing report and attached terms of business – Terms of business providing that report to prevail in event of inconsistency – Report proposing sale with benefit of planning permission for development – Estate ultimately sold without planning permission – Whether appellant entitled to commission pursuant to terms of business – Whether inconsistent with terms of report – Appeal allowed
The respondents appointed the appellant company to advise in connection with a proposed application to develop a 150-acre estate, currently laid out as a golf course, into a large mansion house and parkland with a view to selling it on. The first respondent, a director of the second respondent, entered into an agreement to buy back a cottage on the estate, which had previously been sold off, for £1.1m, so as to include it in the onward sale of the estate; the vendors were to transfer the cottage on completion to whomever the first respondent directed.6
The original plan was to market the estate once planning permission had been obtained. The appellant produced a marketing report on that basis, proposing a sale price in the region of £15m, and attached a copy of their terms of business to act as selling agents, which included a commission of 2% of the sale price. A space was left at the end of the report for the respondents to sign to instruct the appellants to proceed “in accordance with this report and the attached Terms of Business”.
The respondents did not sign but instead decided to sell the property as it stood, without planning permission. They also proposed to appoint another agent to act as joint selling agents with the appellant. The first respondent then signed a revised version of the report, in the same format as the previous version save that the terms of business had been amended to reduce the appellant’s commission to 1.75% and to reflect the appointment of another agent.
A sale of the estate, without planning permission for development, subsequently took place to a purchaser who had not been introduced by either the appellant or the other agent. The sale price was £6.88m for the entire estate, including the cottage.
The appellant claimed a commission of £120,400, plus VAT, on the sale pursuant to clause 2.2.1 of the terms of business. The respondents denied that any commission was payable. They relied on clause 18 of the terms of business, so far as they provided that the report would prevail in the event of any conflict between the two. They argued that no commission was payable because the basis of the sale was inconsistent with the terms of the report, which still provided for a sale with planning permission.
In the court below, the judge found in favour of the respondents and dismissed the claim for commission. He also determined that any liability for commission would have lain with the second respondent only. The appellant appealed.
Held: The appeal was allowed.
(1) In signing the report, the first respondent had confirmed his instructions to the appellant to proceed with the sale and marketing of the estate in accordance with the report and attached terms of business. The report and the terms of business fulfilled different functions, although both were part of the contract. The report was essentially a marketing strategy agreed by the vendor with a view to the sale of the property. The terms of business set out the circumstances in which the commission would become payable. In order to find a conflict between the report and the terms of business, it was necessary to read the marketing strategy outlined in the report as prescriptive and as governing the circumstances in which the commission would become payable. However, that was not its function.
The strategy set out in the report was no more than a recommendation. The choice of marketing strategy was ultimately a matter for the vendor and, if the vendor changed his instructions, the agent was required to comply. There was nothing in the language of the report that would justify reading it as an immutable contractual requirement, binding on both parties, that the estate be sold only after the grant of planning permission; still less that commission should only be payable in those circumstances.
The judge’s construction failed to recognise the different functions of the two parts of the agreement. The report itself, apart from specifying the amount of the commission, contained no provision at all which governed its payment. Clause 2.2.1(i) of the terms of business set out the circumstances in which the commission would be payable both in cases where the appellant introduced the purchaser and in cases where a purchaser emerged by a different route during the currency of the agency. For clause 18 to achieve the result which the judge held that it did, it was necessary to treat the marketing strategy set out in the report not only as dictating the circumstances in which commission would be payable, but also as qualifying, rather than excluding, the terms of clause 2.2.1. Otherwise, one would be left with a contract which contained no payment provisions at all. There was no justification for that construction of the agreement.
On the natural and ordinary meaning of the words used, there was no inconsistency between the terms of business and the relevant parts of the report and they took effect according to their terms. It followed that follows that the commission was payable in the events which happened.
(2) The parties liable to pay the commission were both the first and second respondents jointly and severally. The first respondent had signed the contract without qualification. The appellant knew that the instructions which he gave related to the estate as a whole, including the cottage, of which the first respondent was the sole contractual purchaser and therefore vendor. Apart from the cottage, the estate belonged to the second respondent and only that company could give instructions for its disposal. Various clauses in the terms of business treated the client as being the owner of the property to be sold. In the absence of any clear identification of the client in the contract, it was necessary to look at the entirety of the contract, and all relevant circumstances, in order to determine the liability for the commission. Where the first respondent had not expressly excluded any personal liability for the commission, and where the terms of business suggested that such liability was intended to attach to the vendors who had given the instructions, the proper interpretation was that the first respondent was personally liable along with the second respondent because they were the vendors of the two separate properties included in the sale.
Glenn Willetts (instructed by FBC Manby Bowdler LLP) appeared for the appellant; Simon Goldstone (instructed by Ross & Co) appeared for the respondent.
Sally Dobson, barrister
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