Restitution – Unjust enrichment – Introduction fee – Appellant 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 – Appellant appealing – Whether contract for specified introduction fee for sale at particular price leaving room for payment if property sold for lesser sum to same purchaser – Whether appellant having claim in unjust enrichment – Appeal allowed in part
The fourth respondent company owned a property known as Nash House, in Northolt, London which it had purchased in 2006 for £3.75 million plus VAT. An oral agreement was made under which the fourth respondent agreed to pay the appellant £1.2 million if the property was sold for £6.5 million to a purchaser introduced by the appellant. In 2013, the appellant introduced a potential purchaser at a price of £6.5 million. The fourth respondent subsequently sold the property to the purchaser for the reduced sum of £6 million plus VAT.
It was accepted that the price reduction was reached in good faith. Following completion, the fourth respondent refused to pay the appellant the £1.2 million he claimed. Instead, it offered to pay him £400,000 as a goodwill gesture, which he refused.
The fourth respondent subsequently went into liquidation. The first respondent, who was its sole director, acting as convenor of the deemed consent procedure, at a creditors’ meeting, rejected the appellant’s proof of debt in the sum of £1.2 million, valued his claim for voting purposes in the liquidation at £1 and appointed the second and third respondents as liquidators of the fourth respondent.
The High Court dismissed the appellant’s appeal against that decision. The judge held that the appellant’s contractual claim failed because the property had been sold for £6 million rather than the stipulated figure of £6.5 million. Furthermore, the appellant could not succeed in a claim in unjust enrichment because such a claim was barred by the principle in Macdonald Dickens & Macklin (a firm) v Costello and others, [2011] 3 EGLR 87 namely, that the parties’ mutual obligations when they concluded a contract should be limited to those which they had defined and allocated in the course of negotiations, so as to give effect to the need for the court to uphold contractual arrangements: [2018] EWHC 2426 (Ch). The appellant appealed.
Held: The appeal was allowed in part
(1) In order to determine whether a claim for reasonable remuneration was excluded by the terms of the agreement, it was necessary, first, to construe those terms. In this case, the agreement was oral and its terms were determined by the judge as a question of fact. Taking into account the informality of the agreement, the question was what a reasonable person, with all the background knowledge reasonably available to the parties at the time of the agreement, would have understood the parties to have meant by the terms of the agreement as found by the judge.
(2) The appellant had relied on the Court of Appeal decision in Firth v Hylane Ltd [1959] EGD 212 in support of the argument that, in the absence of a clear and express agreement that he should receive nothing unless the property was sold for £6.5 million, the parties should not be held, by default, to have allocated the risk of a sale at a lesser sum to him, in that he should receive no payment at all. That decision was not binding on the court but the respondents’ arguments about the construction of the agreement required the court to ignore the judge’s finding that it would be bizarre to think that the appellant would knowingly have entered into a contract on such terms. There was nothing in the terms of the present agreement, objectively construed, which meant that the appellant should receive nothing unless the £6.5 million purchase price was achieved: Luxor (Eastbourne) Ltd v Cooper [1941] AC 188 and Berkeley Community Villages Ltd v Pullen [2007] 3 EGLR 101 considered.
(3) Although a claim in unjust enrichment should not be allowed to alter or undermine the express allocation of risk and obligations arising from a contract and the autonomy of the parties to configure their contractual relations, the circumstances of the present case were completely different to those in Costello. The judge found that it was not an “if, and only if” agreement and the parties had not given any thought to circumstances other than a sale at £6.5 million. The appellant took the risk that there would be no sale at all, in which case he would not be paid; and that the purchase price would be less than £6.5 million, in which case he would not be entitled to £1.2 million. However, there was nothing to preclude the appellant from seeking remuneration on the basis of unjust enrichment. Had they wished to exclude any claim for remuneration other than in relation to a sale at £6.5 million, the parties should have made clear that payment was to be received only if the specific event occurred. The express terms of the agreement did not exclude a claim in unjust enrichment, nor did the general principle in Costello require the court to dismiss a claim for remuneration: Costello distinguished.
(4) It was clear from Benedetti v Sawiris [2013] UKSC 50 that an award based on unjust enrichment concerned the recovery of the benefit unjustly gained rather than compensation for loss. The starting point was normally the objective market value of the services rendered, tested by the price which a reasonable person in the recipient’s position would have had to pay for them, taking into account conditions which increased or decreased their objective value to any reasonable person in that position. In the present case, it was pure speculation to determine the objective market value of the services on the basis of what the parties might have negotiated. The judge was entitled to base his conclusion upon the only reliable evidence as to the objective market value of the services available to him, namely, other agreements which the fourth respondent had reached with introducing agents in relation to the sale of the property. Therefore, the reasonable value of the services provided by the appellant should be as assessed by the judge, which equated to £435,000.
Brad Pomfret (instructed by Athena Solicitors LLP) appeared for the appellant; Robert Sterling (instructed by Nicholas Woolf & Co Solicitors) appeared for the first respondent; the second, third and fourth respondents did not appear and were not represented.
Eileen O’Grady, barrister
Click here to read a transcript of Barton v Gwyn-Jones and others
