Property development company — Sale of property — Estate agents instructed by company director — Company paying part of commission only — Whether director personally liable for payment of balance of commission — County court holding that company alone liable for commission — Court of Appeal reversing decision — Director had not disclosed existence of company at date of agreement with agents to sell property and so was personally liable — Judgment for agents
Angus House, Squires Mount, London NW3, was owned by a company, Constructura Palma 30 (UK) Ltd, of which H was a director. The company had bought the land and built the property to sell it as a property deal in the course of its business as a property developer. The appellants were estate agents who brought a claim against H for commission due to them from the defendant arising out of the sale of the property. There was no dispute that the appellants introduced the eventual purchaser of the property, M, to H and that they were entitled to commission from someone, since their introduction of M was the effective cause of the sale of the property. The agents sent an invoice for their commission first of all to H. He said that the invoice should have been directed to the company rather than to him personally. The agents then addressed an invoice to the company in the sum of £10,781.25 including VAT. The company paid £5,750 leaving £5,031.25 outstanding. The company did not pay the outstanding amount because the bank which had a charge over its assets went into receivership and the receiver refused to pay the balance. An issue arose whether H was personally liable for that commission or whether the liability was properly that of the company. The county court dismissed the agents’ claim concluding that H had disclosed that he was acting as agent for the company before the agreement as to commission was reached. Accordingly, it should be inferred from all the circumstances that the parties intended the commission to be paid by the company and not by H personally. The agents appealed.
Held The appeal was allowed and judgment entered for the agents for £5,031.25.
1. The agents had fulfilled their obligations under section 18 of the Estate Agents Act 1979 to inform H of the circumstances in which commission would become due and of their rate of commission. H never challenged those details and allowed the agents to show the property to the eventual purchasers. That was all they were required to do, ie to introduce the eventual purchasers to the property in circumstances in which that introduction was the effective cause of the sale. Their essential part in the matter was then concluded.
2. The commission rate of 2% specified by the agents in a letter of June 28 1990 was not challenged by H when the purchasers were introduced on the basis that that was the relevant rate. By his conduct in permitting the introduction to go ahead on that basis, H must be taken to have agreed it.
3. Accordingly, when the judge analysed the position in the light of the letter of June 28 1990 he should have found that a concluded bilateral agreement came into existence. When the agents introduced M to the property with the knowledge and approval of H that bilateral agreement included all the material terms including the rate of commission and was binding on the parties to it. Since at that date H had not disclosed the existence of the company to the agents he was personally liable under the agreement.
Lisa Giovannetti (instructed by Jim McKenzie & Co) appeared for the agents; Robert Lamb (instructed by Sookias & Sookias) appeared for H.
