Estate agents’ commission — Entitlement to commission for letting a property — Terms accepted were ‘We . . . offer a full-scale letting fee to your company should you introduce a tenant by whom you are unable to be retained, and with whom we have not been in previous communication and who subsequently completes a lease’ — The facts were that the plaintiff agents were the first to introduce the company which eventually completed the lease to the defendant lessors, but there was a period during which the company for various reasons ceased to be looking for a property — During this period contact between the plaintiffs and the company was interrupted — When the company’s interest in finding a property revived, an introduction to the property was made by a different firm of agents and through a different officer of the company — The judge found as a fact that the effective cause of the letting was the introduction by the second firm of agents — This finding, however, did not settle the question of the entitlement to commission — The effective cause in this case was irrelevant owing to the terms of the plaintiffs’ employment — The words ‘should you introduce a tenant who subsequently completes a lease’ were the very negation of causation — The terms contemplated that commission would be earned by the first agent who introduced somebody who subsequently completed the lease — The formula was evidently framed precisely to obviate arguments as to who was the effective cause of the transaction — Plaintiffs satisfied all the terms — They introduced a tenant by whom they were not retained, with whom the defendants had not been in previous communication, and who subsequently completed the lease — Judgment for plaintiffs
In this case
the plaintiffs, Brian Cooper & Co, estate agents, sued the defendants,
Fairview Estates (Investments) Ltd, for commission claimed to have been earned
by the introduction of a company, Metier Management Systems Ltd, as the lessees
of an office building, Fairview House, at Station Road, Hayes, Middlesex.
David Eady QC
and Stephen Suttle (instructed by H Davis & Co) appeared on behalf of the
plaintiffs; Miss Elizabeth Gloster (instructed by Lovell, White & King)
represented the defendants.
Giving
judgment, JUDGE TIBBER said: Once again, the court is being asked to construe a
contract by which somebody retains an agent to let a property for them. One
would have thought that the number of variations in this type of contract were
limited and had come to an end, but it is plainly not so and, although the
courts have since the early parts of this century busily spent time construing
such contracts, they continue so to do.
In this case
there are three agents involved. There is Mr Victor Spencer of Brian Cooper
& Co, who is the plaintiff. Without doubt, he was the first agent on the
scene. There was subsequently an agent called Phillips Roth & Co, and
somewhere, somewhat mysteriously, Druce & Co appear and disappear. I can
say from the outset that although I am a little mystified by the role which
Druce & Co played in the transaction which I have to consider, it is not a
matter which I think has any great relevance to the points on which I have to
make a decision.
It is Mr
Spencer of Brian Cooper & Co who is making a claim for commission in this
case, and the first thing I must do is to review the course of the negotiations
and the facts.
It all started
in April 1982. I say in parentheses, as in all these cases where one is
investigating a course of conduct between parties, people are asked to remember
the contents of telephone conversations three and four years ago. Life is very
difficult for them when they are asked to do that. They do their best to
remember, but the sort of people who are involved in this case are constantly,
as I understand it, on the telephone and it is difficult for them to remember
accurately what took place. It is so easy to transpose back into 1982 ideas and
notions which have in fact only arisen since then. They look back and say what
they must have done and what they did do. It becomes very difficult to fix
exactly what was said as long ago as that. There are documents, of course, and
they help.
In March 1982
Metier wished to acquire new premises. In the person of Mr Clark, they
approached Mr Spencer of Brian Cooper to ask for his assistance in finding
accommodation. Mr Clark — and I do not mean any disrespect to him — was a
fairly lowly figure in the Metier organisation. He was the publications
manager. He was not a director. He formed no part of what I have learned in
this company to call the ‘executive’, because it is an American company; it is
what I think we would call here the ‘board’. He had apparently been deputed to
do something about finding some accommodation and he approached Mr Spencer whom
he had known for a number of years.
On March 18
1982 Mr Spencer wrote to Mr Clark and sent him some information about available
buildings and there the matter rested for a very short time. On March 22 1982
the defendants came on the scene. They are, as I understand it, a company which
builds and then lets or sells property. I think they let residential as well as
industrial property, but we are only concerned here with industrial or
commercial property. The defendants were in the process of building, at Station
Road, Hayes, an office building, and they sent to some 300 agents in the West
and West End of London the circular letter which appears on p 4 of the agreed
bundle. They enclosed brochures and they set out in the letter the terms on
which they would pay commission to an agent who found a customer for them:
We . . .
offer a full-scale letting fee to your company should you introduce a tenant by
whom you are unable to be retained, and with whom we have not been in previous
communication and who subsequently completes a lease.
I shall have to
come back to that letter at a later stage.
Shortly after
receipt of that letter, Mr Spencer discussed the building at Hayes with Mr
McCulloch, who for the purposes of this case is Fairview; he is the senior development
surveyor there. On April 15 Mr Spencer wrote a letter to Mr McCulloch. He
referred to their ‘several telephone conversations’ and used the letter to
confirm ‘my introduction to you of Metier’. He said, as he had arranged
apparently with Mr Ross or Mr Clark of Metier:
The Company
hope to arrange for the building to be inspected . . . and I will . . . arrange
a suitably convenient time. In the meantime I look forward to receiving floor
plans that have been requested by the Company.
Then, again,
comes one of the contract terms:
. . . I am
not retained by Metier and in the event that the Company do complete a lease on
the building I would wish to take advantage of your offer of full-scale
commission.
On the same
day he wrote to Mr Ross of Metier, pushing, so to speak, the building and
setting out certain relevant facts about it, among others the rent asked, which
he puts at £10 per sq ft. In fact, I think £10.50 was being asked. He says that
the developers ‘are certainly prepared to negotiate’ and describes the basis on
which such negotiations could be done. Mr McCulloch says that at that stage the
developers certainly were not prepared to negotiate. They only became prepared
to negotiate rather later when it was apparent that the market was, as he put it,
‘thin’. But that is what Mr Spencer put in his letter, and I dare say he
thought that once he could get the parties talking something could be done.
The floor
plans were duly obtained and there was a meeting on April 23 at the site, the
building being at this stage incomplete. Present at that meeting were Mr
McCulloch, Mr Spencer, Mr Clark and Mr Ross. Be it noted again that neither
Clark nor Ross had any
right to say at this stage that at no stage did they report either the
existence of Fairview House or its suitability to any of the directors of the
company. It is put in this way, that there was never any high-level interest
shown by Metier in Fairview House until early in 1983. By ‘high-level
interest’, what I mean is that no director became involved or even knew about
it until that stage.
Contact with
Mr Clark and Mr Ross about Fairview House was maintained by Mr Spencer. He
obtained, for example, the rating information that they asked for.
By August 1982
or thereabouts — and I use a phrase which was used by the witness — hatches
were battened down at Metier. Metier is apparently a company which goes through
periodic cash-flow crises because of the nature of its product, which is
something to do with computers, the market for which is apparently volatile.
They were going through a period when it began to seem as though it was not
right for them to be interested in relocating themselves.
From about
June 1982 there were between two and four conversations between Mr Spencer and
Mr Ross concerning Fairview House. I am not sure who initiated them. I think
they were mainly initiated by Mr Spencer, who wanted Mr Ross to come to some
sort of view about Fairview House and pass it on to the directors.
On October 11
Mr Spencer wrote for the first time to Mr Hood. Mr Hood was in a rather
different position from Mr Clark and Mr Ross. He was the financial director of
Metier. Apparently, what had happened was that at some stage Mr Spencer had had
a conversation with Mr Ross, who had told him that Metier were still not suited
in their search for office accommodation and, realising — as of course he
would, being an experienced and astute estate agent — that Mr Ross and Mr Clark
were really too low down in the hierarchy to be dealt with satisfactorily, Mr
Spencer finally managed to get in touch with Mr Hood and wrote the letter which
is at p 40 of the bundle. That is not a letter which relates to Fairview House;
indeed, it is pushing an entirely different property. The letter shows his
contact with Metier and it shows that Mr Spencer realised, or thought he
realised, that Metier were still looking for properties and if he could not
satisfy them with Fairview House he would try to satisfy them with another
property.
There matters
rested until December 21 1982. What happened was this: on December 2 1982, or
just before, Mr McCulloch had telephoned Mr Spencer. He not only telephoned Mr
Spencer. He says he telephoned a number of other agents who had also shown an
interest in Fairview House. He telephoned those agents, as I understand it,
because they had shown an interest in Fairview House and because they had not
attended some sort of cocktail party that Fairview had given at the premises in
order to try to whip up some interest in them, because they were sticking: they
were not being let. I think that the building was very much nearer completion
at that stage, although it had not been completed. Mr Spencer had not been able
to get to that party, so Mr McCulloch telephoned him. The effect of the
conversation was ‘You might like to get back to Metier and see whether they are
still interested in this property.’
Further, he was offering now not scale commission, but double scale
commission.
And so on
December 2 Mr Spencer wrote to Mr McCulloch confirming that conversation. That
conversation is relied on by the plaintiff as showing that Fairview recognised that
he was the contact man so far as Metier were concerned. On the same day,
December 2, Mr Spencer wrote to Mr Hood enclosing the new brochure and pointing
out to Mr Hood that Fairview House had been inspected by Mr Ross and Mr Clark
‘earlier this summer during its construction’. In fact, it was April; it was
not really early summer. He pointed out that the building had now been
completed:
I have been
requested by the developers to enquire if it would be of interest as the terms
. . . have changed more favourably . . .
The new terms
are set out, and on the second page he says:
I know that
you and your co-directors have not seen the building and would genuinely
suggest that you carry out an inspection . . . I look forward to hearing from
you and in any event would be pleased to know what is actually happening with
your office moving, as it is many months since we have been in contact.
He says that
that ‘many months’ really refers to contact with Hood and not with the company,
because he had had some telephone conversations with either Mr Ross or Mr Clark
during the summer. I accept that to be the position.
Then Mr
Spencer received from Mr Hood the letter which seemed to shut the matter down
completely:
For a variety
of operational reasons, we are not now contemplating a relocation in the near
term, so in consequence we have no interest in any properties. As and when the
situation changes, you are assured we will contact you and in the meantime we
thank you for your interest in us.
After December
21 little or nothing was done so far as contact between Mr Spencer and Fairview
was concerned until in March 1983 Mr Spencer received another letter from
Fairview. Again, I think I am right in saying that it was a circular letter,
but this particular one was ‘personalised’ in the sense that it was sent to Mr
V Spencer and I think a number of similar letters were sent to other agents. Mr
Spencer had shown direct interest in Fairview House, and Fairview sent a new
brochure, pointed out that the offices were now ready for occupation and put in
this sentence:
I confirm
that, should your Company introduce a tenant by whom you are unable to be
retained and with whom we have not been in previous communication, then, should
your applicants enter into a lease, we are pleased to pay a double scale
letting commission.
There is
nothing really very new about that, although I shall have to consider that at a
later stage as well.
On receipt of
that letter, Mr Spencer rang Metier, and after what I think were two more
abortive attempts he finally succeeded in speaking to Mr Hood, he said, and his
account of the conversation was this:
I said that
Mr Clark suggested I should telephone.
When I spoke
of ‘abortive attempts’, I meant that Mr Spencer had telephoned Metier and had
been able to speak only to Mr Clark or Mr Ross; that was not satisfactory.
Mr Hood — or
Mr Clark, I am not sure which — said they were looking at a property in
Uxbridge, Harefield Place. We discussed it and I
Mr Spencer
said it was
not suitable for you. And he agreed. I then mentioned Fairview House, and he
said he had the building in mind but it was a question of location because
their present building was in Stonebridge Park and they did not want to move
far because of the problems of recruiting staff.
Mr Hood cannot
recall that conversation. He is not prepared to say it did not take place. What
he said, somewhat acidly, was that he cannot recall conversations which took
place on the telephone three years ago. What he does say is:
I would not
have said at that stage that I had the property in mind. In May 1983 I was not
conscious of Station Road as a property the company was interested in. It may
have been in my mind, as were other properties. I do not recall a conversation
with Mr Spencer. If he says he spoke, I cannot argue.
That is when
he made the remark about not recalling phone conversations three years ago.
But I cannot
think that in May 1983 I would have said we had any specific property in mind.
It is put that
if Mr Hood had said that, Mr Spencer, whom I have already categorised as an
experienced and astute estate agent, would have almost certainly followed up
that telephone conversation with a letter to Mr Hood. No such letter exists.
Nevertheless, I think the conversation did take place. I think Fairview House
was probably mentioned. I do not accept that Mr Hood said he had Fairview House
in mind, because I do not think from his account of the matter that he could
possibly have done so. There had been no report by Mr Ross and Mr Clark to Mr
Hood. There apparently was some system of filing: references were made to a
property file. But then some things went into a proper file, some things went
into a different file, which was apparently the waste-paper basket. He may have
heard the name, but he certainly did not have it in mind, in my view, as a
property that Metier might well end up taking.
That
conversation seems to be the end of Mr Spencer’s contact with Metier. He says
that he had several conversations with Mr McCulloch of Fairview during that
summer, in the course of which he said that Metier were still not suited and he
was convinced they would end up in Fairview House, as he always had been. He
says that he had recognised from the beginning that that was the place that was
ideally suited to them and, though they might not know it, he did, as an
experienced estate agent who knew what they were looking for and knew what
Fairview House was. That, after all, is his occupation — matching up people to
what they need.
Mr McCulloch
does not accept that these conversations took place and what Mr Spencer says
is:
Well, I did
not actually ring him about Fairview House. What happened was that we were
discussing rent reviews of some of Fairview’s properties which were coming up
in that area, and he asked me my view about rents in the area.
House and Metier not being suited, what was happening, or something of that
sort.
I think again
those conversations probably did take place: I am not sure how many. I am
equally sure that the mention of Fairview House was almost casual. It had to be
really. What could Mr McCulloch do? He
was not the person to push, as Mr Spencer well knew. The conversations were primarily
directed to something else; that is to say, the question of rent reviews or
matters of that sort. Mr Spencer says Fairview House was mentioned, that Metier
were not suited and so on. I think such conversations probably took place. I do
not suppose they made much impact on Mr McCulloch because, after all, Mr
Spencer was not reporting anything that was of any interest to Mr McCulloch. He
was not reporting interest being shown by Metier; he was merely saying that
they were not yet suited.
Metier’s financial
position improved and their interest in finding some new property revived in
the spring of 1983; this time, however, in the person of Mr Gunn. Mr Gunn was
the finance and administration manager of Metier. He said that at that stage he
had never heard of Fairview House and did not in fact hear of Fairview House
until he was introduced to it by Mr Roth, whom he retained in May 1983 to help
the company find a suitable property.
That amazes Mr
Spencer, but I accept that it is so. This company, Metier, seems to be very
compartmentalised. The matter had never got beyond Mr Ross and Mr Clark in the
earlier stages of the negotiation except in that conversation with Mr Hood to
which I have already referred. As I have said, I do not think that Mr Hood had
really heard of Fairview in the sense of considering it as a property to which
the company might eventually move. I accept that Mr Gunn had not heard of
Fairview House until he was introduced to it by Mr Roth.
In August 1983
a Mr Lodge comes on to the scene. I am not sure what his position is
technically, but he is known as ‘the Boss’. He is the head, I think, of the
American side of Metier. On August 8 he sent to Mr Gunn, with copies to other
people, a memorandum which was received on August 12:
Thank you for
forwarding to me the background information on the search for new London
accommodation. In order that you are able to get as quickly as possible to the
point where you submit a proposal, I would suggest the following.
1. . . .
review Dick’s memorandum of the 6th of April 1982 . . .
That was a
memorandum prepared early on in Metier’s search when certain criteria had been
suggested as to what Metier were looking for.
2. Review
in detail what their requirements will be for other than staff accommodation .
. .
3. Review
on what basis you should calculate space requirements . . .
and so on
I suggest
that you summarise that into a set of requirements which can be provided to our
agents, requesting that they submit as rapidly as possible a list of all
available properties which fit or nearly fit our specifications . . . As it
will be mid August by the time you receive this letter, and it is my
understanding our lease on Metier House expires at the end of December, you
should treat the search for alternative accommodation as urgent
and I expect
you to do this, that and the other by the end of August. The requirements are
all set out. It is a rocket from the American side saying ‘Get on with finding
other accommodation.’ As a result of
that, and as a result of what Mr Roth had told them, Metier, on September 7,
went to inspect the premises. They went in the person of Mr Gunn. They went and
met Mr McCulloch and they also met Mr Roth and Allan Grossman of Druce’s, all
on site. Apparently at some stage during the course of that site meeting Mr
McCulloch said to Mr Gunn ‘Oh, you are Metier?
Your company has inspected this site before.’ ‘Has it?’
said Mr Gunn, ‘I did not know.’
He was not terribly surprised because he knew they had been looking for
properties for some time. It certainly did not register with him as a surprise,
nor did it register with him as something that he had known.
Very shortly
after that inspection and after the letter of September 15 from Phillips Roth
to Mr Gunn, there was an executive management meeting of Metier in Houston,
Texas, where the London accommodation was discussed.
Mr Spencer was
away on holiday and when he returned he had a telephone conversation with Mr
McCulloch and was told that Fairview House had been let. I should say that that
conversation took place because Mr McCulloch had phoned him for the purpose of
informing him that a deal had been done on Fairview House. Mr Spencer’s
reaction was that he was delighted and would be sending his account for
commission. Mr McCulloch said that he had accepted another agent’s
introduction. It was agreed they would both check their files and get back to
each other, which they did. But they did not resolve the question, and that is
why we are here today.
Some time in
October 1983 Metier signed a lease on Fairview House, and it is said that it is
of some significance that Mr McCulloch told the court that he phoned Mr Spencer
as a matter of courtesy to let him know the deal was finalised and that he
phoned no other agent, although Fairview House had been very widely advertised.
He clearly recognised that Mr Spencer certainly had been involved over Fairview
House.
On those facts
I have to ask the question: what was the effective cause of the letting? Not because at this stage I have come to the
conclusion that effective cause is a material question in the course of this
contract, but because it is convenient to deal with that question while the
facts are before me. If effective cause of the letting is a relevant
consideration in this case, I have come to the conclusion that that effective
cause was not Mr Spencer but was probably Mr Roth.
Mr Spencer, so
far as Metier were concerned, had virtually dropped out of the picture after
December 1982. There was a fresh approach and activity by Mr Gunn through Mr Roth
from May 1983. Mr Gunn had never heard of the approach of Metier to this
building earlier on. True it is that Metier are a corporate entity, and as a
corporate entity I suppose Metier were aware of Mr Spencer’s introduction, but
as a corporate entity I am equally satisfied that Metier had forgotten all
about it and that Mr Spencer’s introduction did not operate on their mind in
coming to sign a lease. Apart from some conversation to which I have already
referred with Mr Mr McCulloch in summer of 1983 to say that Metier were not
suited, there was no involvement by Mr Spencer since the conversation with Mr
Hood after the March re-advertisement. The inspection by Mr Gunn of the
completed building was an inspection on the instigation of Mr Roth and the documentary
and oral evidence support Mr Roth’s detailed negotiations as to the terms. I do
not think I need to go into that.
I do not think
either that there is any need to try to define the term ‘effective cause’.
There is a footnote in Bowstead on Agency where the American
Restatement definition is printed*, but I do not think it is a great deal
of help. It is a circular definition in my view. I think the words themselves
are clear. In the light of my finding that really Mr Spencer had dropped out of
the picture by the time Mr Roth came on the scene, I do not think it can be
said he was the effective cause of the sale.
*Bowstead
on Agency, 15th ed., p229, footnote 24: Restatement, Second, Agency
(American Law Institute) 1958.
The question I
have to decide is this: is the ‘effective cause’ term relevant to this
contract? The contract which has to be
construed is set out at p 4 of the bundle:
We confirm
that we are pleased to offer to offer a full scale letting fee . . .
It is not, in
my view, the contract at p 55 of the bundle, which is in rather different
terms. The contract at p 4 was the original contract. Double commission had
been agreed between Mr Spencer and Mr McCulloch before we get to March 2 1983,
when the second contract came into existence; it had been agreed some time in
December 1982. P 55 is a document, so to speak, unilaterally sent by Mr
McCulloch to Mr Spencer. It was not the result of any agreement. Mr Spencer had
already done work on the basis of p 4 of March 22 1982, and it was not open to
Fairview, in these circumstances, unilaterally to impose new terms. They could
only be agreed between the parties, as the double commission term had been agreed.
In those circumstances, in my view, the question ‘Was Metier your applicant?’,
which is the phrase used in the later document of March 2 1983, simply does not
arise.
On the
authorities, especially the well-known Luxor case [Luxor (Eastbourne)
Ltd v Cooper [1941] AC 108], the position appears to be that if the
terms of the contract are clear, you cannot introduce such implied terms as
‘the effective cause’. I have been referred to many authorities where the test
of effective cause has been imported. I hope I shall not be thought
discourteous if I do not review them in the course of this judgment. I think
the effect of them is set out in Bowstead on Agency, 15th ed, at p227,
at the beginning of Article 59:
Subject to
any special terms in the contract of agency, where the remuneration of an agent
is a commission on a transaction to be brought about, he is not entitled to
such commission unless his services were the effective cause of the transaction
being brought about.
The words at
the beginning of the paragraph — ‘subject to any special terms in the contract
of agency’ — seem to me to mean no more than ‘subject to the terms of the
contract’. That is what the authorities appear to bear out. Generally, the
authorities which were cited to me relate to cases where the person who
ultimately purchases has been introduced by the agent, and the question is: was
the purchase consequent upon the introduction of that person or was it merely
subsequent to it? If that is the question
to be asked, what it becomes is: what is the effective cause?
In the
contract which I have to construe, the word ‘subsequently’ has been expressly
used: ‘should you introduce a tenant who subsequently completes a lease . . .’.
The plaintiff’s case is that that is really the negation of causation; in other
words, what this contract is saying expressly or by necessary implication from
the use of the word ‘subsequently’ is: we are not interested here in effective
cause; we are interested in the first agent to come along who introduces
somebody who subsequently completes a lease.
Mr John M
Phillips [senior partner, Henry Butcher & Co] was called by the defendants
as an expert. He gave some significant evidence about that, although I think
one always has to treat the evidence of an expert cautiously when what he is
doing is construing a document and that is the very matter which the court has
to do. He described this formulation as being popular and he said that the
reason that it is popular is that it makes it clear that the person entitled to
the commission is the one who first introduces the party who finally concludes
the lease. He said ‘It makes for certainty.’
I, too, think it does.
It looks as
though that formulation has been introduced precisely to get rid of arguments
about who was the effective cause of the lease. It seems to me that Mr Spencer
has satisfied the requirements of the contract. He has introduced a tenant by
whom he was unable to be retained (and we know that that means no more than
that he was not retained) ‘with whom we have not been in previous
communication’ — and Fairview had not been in previous communication with
Metier at the time of the introduction by Mr Spencer. Metier subsequently
completed a lease.
Nothing, in my
view, could be clearer. I see no necessity, either in terms of business
efficacy or otherwise, to import an obligation that Mr Spencer, in order to be
entitled to his commission, must be the effective cause of the signing of the
lease. As I have already said, I do not think he was, but he satisfies the requirements
of the contract as set out in the letter of March 22 1982 and there must be
judgment for him accordingly.
