Is an agent, who contracts to receive an introduction fee if a property sells for a specified price, entitled to receive anything at all if he introduces a buyer who pays less for the property than the amount stipulated in the parties’ contract?
Barton v Gwyn-Jones [2019] EWCA Civ 1999; [2019] PLSCS 222 concerned a property known as Nash House in Northolt. The parties had agreed, orally, that the seller would pay the agent an introduction fee in the sum of £1.2m if he were to introduce a buyer who paid £6.5m for it. But Nash House stood on land that was potentially affected by HS2 and the buyer – who had been prepared to pay the full asking price – negotiated a reduction in the price to £6m to reflect the risk that the property might be compulsorily acquired from him.
The reduction in price put paid to the seller’s contractual liability for the introduction fee. But was the agent entitled to compensation for unjust enrichment? The judge at first instance found as a fact that the parties had made no agreement as to the allocation of risk if the sale price was less than £6.5m but dismissed the claim, citing the decision in Macdonald Dickens & Macklin (a firm) v Costello and others [2012] QB 244; [2011] EWCA Civ 930. In that case, the court ruled that the parties’ contractual arrangements should be upheld and that the parties’ mutual obligations should be limited to those set out in their agreement.
The Court of Appeal has overturned the first instance decision. It distinguished Costello on the ground that, in that case, builders who had contracted with a company were not allowed to make a claim in unjust enrichment against individual shareholder/directors since that would have by-passed the contract altogether and ignored the separate legal identity of the company, rendering the shareholder/directors guarantors of the company’s debt where no such guarantee existed. The circumstances in this case were entirely different.
Asplin LJ noted that this was not an “if, and only if” contract. In other words, the parties had not agreed that the agent would be remunerated only if he introduced a purchaser at a price of £6.5m. Had the parties wished to exclude any claim for remuneration other than in relation to a sale at £6.5m, they could, and should, have included an express term to that effect. And, in those circumstances, the principle in Costello would have applied because a claim in unjust enrichment would undermine the parties’ contractual freedom. But the parties’ agreement did not include any such term because the parties had not addressed the point.
Consequently (although Davis LJ preferred to analyse this as a quantum meruit case) there was nothing to preclude the agent from seeking remuneration on the basis of unjust enrichment. The seller had been enriched by the receipt of a benefit in the sense of the introduction of a willing purchaser for Nash House – and the service was rendered in circumstances in which the specific fee had not been agreed but in which the parties had not expected that the agent would go unpaid. Therefore, the agent was entitled to a fee assessed by reference to the value of the service that he had provided.
Allyson Colby, property law consultant
