Estate agents — Commission claim — Sale of hotel — ‘Sole selling agreement’ — Claim rejected by vendors — The subject property was a high-standard country house type of hotel, set in 45 acres of land at Stanstead Abbots in Hertfordshire, including a nine-hole golf course — The commission claim was based in the alternative on two different clauses in the instructions — The first was a provision that if ‘during the period of our sole selling agreement’ the vendor were to deal with a person not introduced by the plaintiffs or by any other agents, the plaintiffs were to be entitled to the same commission as if they had carried out the introduction — The second clause provided for commission if the plaintiffs introduced directly or indirectly a person who agreed (whether or not subject to contract) to purchase the property at the specified price or such other price as the vendor was willing to accept — There was some confusing and conflicting evidence, but the judge found that these clauses did form the basis of the agency agreement between the parties and he rejected objections that the wording was uncertain or ambiguous or that the provisions were onerous and unusual and had not been fairly and reasonably brought to the attention of the vendors
in the course of his judgment distinguishes between three types of agency: (a)
the ‘conventional agent’, who must be the effective cause of a sale to be
entitled to commission and may be one of several agents instructed by the
vendor, (b) the sole agent, who has the sole right to sell but not to the
exclusion of the vendor himself, and (c) the agent who has the sole selling
right and will be entitled to commission not only if the purchaser is
introduced by another agent but also if the vendor himself sells during the
term of the agency — The last type is called a ‘sole selling agreement’,
although referred to once (with a risk of confusion) as a ‘sole selling agency
agreement’ — This last type is said to be commonly used in the sale of hotels
and was used in the present case
the subject property was sold as the result of the introduction by a commercial
property consultant who was
by the vendors to sell the property — Judge White held that in consequence of
this sale the plaintiffs were entitled to commission under their ‘sole selling
agreement’ clause, rejecting a submission that the plaintiffs’ instructions had
been withdrawn before the sale — It did not therefore matter that the
plaintiffs failed under the alternative (introduction) clause, on the ground
that the person interested did not ‘agree to purchase’ the hotel — Judgment for
plaintiffs
The following
cases are referred to in this report.
Interfoto
Picture Library Ltd v Stiletto Visual Programmes
Ltd [1988] 1 All ER 348
Jaques v Lloyd D George & Partners [1968] 1 WLR 625; [1968] 2
All ER 187; [1968] EGD 186; (1968) 205 EG 1207, CA
Parker v South Eastern Railway Co (1877) 2 CPD 416
Thornton
v Shoe Lane Parking Ltd [1971] 2 QB 163;
[1971] 2 WLR 585; [1971] 1 All ER 686; [1971] 1 Lloyd’s Rep 289, CA
In this case
the plaintiff estate agents, Brodie Marshall & Co (Hotel Division) Ltd, who
specialised in business concerning the hotel and catering trades, claimed
against the defendants, Stuart Arthur Sharer and his wife, Wendy Sharer,
commission in respect of the sale of the Briggins House Hotel, Stanstead
Abbots, Hertfordshire. The hotel was sold, but not through the instrumentality
of the plaintiffs, to Norfolk Capital for £2.9m.
Gordon Bennett
(instructed by Amhurst Brown & Colombotti) appeared on behalf of the
plaintiffs; Charles Flint (instructed by M S Marks & Co), represented the
defendants.
Giving
judgment, JUDGE WHITE said: This is a claim by estate agents specialising in
the hotel and catering trades for commission upon the sale of a country house
hotel by the defendants in October 1984. Although not instrumental in the
introduction of the purchasers, they rely on the terms of their standard ‘sole
selling agreement’, upon which they say they were instructed by the first
defendant to act as agents for him and his wife (the second defendant) to sell
their property and business a year before.
Under the
terms of that agreement they seek a commission upon the sale. Alternatively,
they claim commission, again under the terms of that agreement, for the
introduction of a would-be purchaser in November 1983 who, they claim, agreed,
subject to contract, to purchase the property and business at a price which was
acceptable to the defendants. That sale, in the circumstances I shall outline,
was never completed, but the plaintiffs argue that they were, nevertheless,
entitled to commission for the introduction. If they succeed on the first
ground of the claim they would, they say, be entitled to 1.75% of the sale
price, which was £2.9m, plus interest. The sum due upon the alternative ground
would require an inquiry, as the would-be purchasers agreed to pay £2.4m, plus
an additional amount to be calculated upon the net disposable profits of the
hotel in the two-year period that followed the sale. The commission rate would,
the plaintiffs claim, be calculated at half that which would have been due had
the sale been completed, namely 1.25% of the total sum.
The first
defendant denies that any commission is payable. Although he did instruct the
plaintiffs to act as his agents in October 1983 for the sale of the hotel, he
did so on a very limited basis and not upon the terms of their standard sole
selling agreement as they claim. His liability for commission was only to
arise, he says, upon the completion of a sale to a purchaser introduced by
them. The eventual purchaser was not introduced by them, and in any event he
does not accept that by October 1984 they were still acting as his agents. His
instructions to them had been withdrawn, he says, or had lapsed in April or May
1984 when the proposed sale to the would-be purchasers who had been introduced
by the plaintiffs fell through. It fell through because the would-be purchasers
withdrew after five months of fruitless negotiation. In these circumstances, if
he was bound by the plaintiffs’ sole selling agency agreement, which he
strenuously denies, no commission was payable under its express terms.
Further, the
defendants argue that the sole selling agreement which the plaintiffs seek to
rely upon was in law unenforceable, either because it was void for uncertainty
or because the plaintiffs did not take sufficient steps to bring the crucial
terms which are unusual and oppressive in nature to the attention of the first
defendant at the time the contract was entered into.
This in
outline is the framework of the issues, both of fact and law, within which
evidence has, over five days, been led upon the events leading up to the
proceedings and the relationship of the two central characters, Mr Nairn, the
chairman and managing director of the plaintiffs, and the first defendant, Mr
Sharer. I shall throughout the judgment refer to him simply as Mr Sharer.
I begin by
observing that the relationship between the two men clearly had a personal as
well as a business dimension, which, quite apart from the matters with which I
am concerned, led to tension between them. Exactly what that was, or its
relevance to the business relationship, within which there were some features
which left the court with an uneasy feeling that they had not been fully
explained, is uncertain or unclear. Both parties presented their cases with a
curtain drawn over the reason for any of the personal tensions referred to by
the defendant, Mr Sharer. The court proceeds on the evidence that it has.
The property
at the centre of the case is a high-standard country house hotel set in 45
acres of land at Stanstead Abbots in Hertfordshire. The main building was a
Georgian house and in the grounds there is now a nine-hole golf course. When
purchased by Mr Sharer in 1980 it was empty, but he sought and obtained planning
permission for its present use. He then converted the property for hotel
accommodation and opened the business, employing a general manager to run it,
in March 1982. The freehold was purchased with the financial assistance of a
sleeping partner, and the hotel business run by a company, Briggins House Hotel
Ltd, of which he and his wife were the sole directors. It is common ground that
in the next two years a successfully run four-star country house hotel was
brought into being.
It was Mr
Sharer’s first venture into the hotel trade. He had previously been in the
cleaning cloth business, following which he had developed two factories. In
about 1977 he began to look to the hotel or leisure business for a development
project, and at this point first had contact with Mr Nairn, who was then
working for Christie & Co, to whom I shall refer as Christies, who were
estate agents specialising in this field. Contact was by telephone, merely
indicating his interest in possible properties that might come on to the market.
Later that year Mr Nairn bought a stake in the plaintiffs, but the loose
contact with Mr Sharer was maintained with occasional particulars being sent to
him and discussed by telephone.
Both Christies
and the plaintiffs specialised in the hotel, catering and leisure trade. It is
a very specialised field of estate agency work, particularly in the hotel
trade, with only a handful of agents operating countrywide. Not only does the
understanding and valuation of hotel businesses and property require particular
expertise but very often sales need to be handled under conditions of
confidentiality to protect a running business from being undermined by a
general knowledge, particularly in the staff, of the uncertainties inherent in
the situation. Mr Nairn has explained that in this field an agent may become
very much more involved in a transaction than an ordinary property agent. At
one stage he described himself as being more of a broker than an estate agent.
Payment for
services for the sale of a property are usually by way of commission based on a
percentage of the sale price, and in general terms there are three basic types
of agency:
(a) the conventional agent, who must be the
effective cause of a sale to be entitled to commission and may be one of
several agents instructed by the vendor;
(b) the sole agent, who insists on the sole right
to sell but not to the exclusion of the vendor; and
(c) the sole selling agent, who has the sole
selling right and will be entitled to commission not only if the purchaser is
introduced by another agent but also if the vendor himself sells during the
term of the agency. I will look at the particular legal implications of these
types of agency in due course. For the moment I merely note by way of
background that, on the evidence which I accept, sole selling agreements are,
because of the specialised nature and problems of selling hotel businesses,
commonly, although not invariably, sought by agents in this field. It was
certainly the policy of the plaintiffs, with very few exceptions, to seek such
terms when accepting instructions to act, as it was of another firm, Robert
Barry, a specialised agency referred to during the hearings. It was not,
however, the practice of Humberts, who deal with hotels in their leisure
division.
Mr Nairn and
Mr Sharer, after loose occasional contact from 1977 onwards, first met in 1980
after the purchase of the Briggins House property. Mr Sharer sought Mr Nairn’s
professional advice upon the
obtained. His position was analysed in Mr Nairn’s letter of November 25 1980.
The options included not only running a hotel business at the property but
immediately marketing it again, either with the benefit of planning permission
for office or for hotel use. In either case he quoted a commission fee ‘payable
in the event of sale’. There would have been no running business to protect and
this would have been a sale as a conventional agent.
In the event
Mr Sharer decided to start his own hotel business, running it through Briggins
House Hotel Ltd, and the hotel opened in March 1982.
During the
next two years Mr Nairn’s professional relationship with Mr Sharer continued.
He gave advice as to the effect of the planned improvements upon the value of
the property and he forwarded particulars of other properties which might be
suitable for a similar future project. By 1984 the hunt for a follow-on
property appeared to be intensifying, and to this end, in May of that year, Mr
Nairn placed a half-page advertisement in the Country Life magazine.
Further, by then Mr Sharer had begun negotiating with the Harlow Council with a
view to obtaining a lease of a site opposite Harlow Station with planning
permission for a conference centre and hotel. Again, Mr Nairn was asked to
advise on this possible project.
I accept his
evidence that in those two years he made at least six visits to the hotel, and
although it was not on the market Mr Nairn sensed from the discussions that Mr
Sharer, whom he understood to be a developer rather than an hotelier, would
soon be selling and moving on to something afresh.
I accept that
there was some general talk between the two men in this period as to ways of
selling the hotel, with Mr Sharer stressing the importance of confidentiality
if this could be achieved. Further, Mr Nairn anticipated, because of his
continuing professional involvement with Mr Sharer, that if the hotel were to
be sold he would be asked to act as agent. Up to mid-1984, however, no firm
decision or plan had been made.
The decision
to sell followed the opportunity Mr Sharer had during that year to purchase in
his wife’s name the sleeping partner’s share. Mr Nairn was first asked for a
valuation prior to a bank loan, but the resulting financial interest and repayment
burden precipitated a decision to sell. The decision was taken by Mr Sharer
either just before or during a long telephone conversation with Mr Nairn in the
evening of October 22 1984.
Neither party
now has a clear recollection of how the telephone call came about, but it is
plain that Mr Sharer wanted to discuss the sale of the hotel with Mr Nairn, and
in the course of the discussion gave him instructions to act as his agent to
sell the property by approaching on the basis of strict confidentiality a few
selected possible buyers at offers at around £2.5m plus stock at valuation.
There is a
dispute as to what was said or agreed about the terms upon which Mr Nairn was
to act and the commission he was to receive, to which I will return later. What
is not in dispute is that Mr Sharer’s instructions to sell were given orally on
this occasion.
The following
day Mr Nairn wrote to confirm his instructions. On the back of the letter were
standard printed terms and conditions of business for a sole selling agreement,
including a scale fee of 3% of the price. Again I will look at the terms in
more detail at a later stage of this judgment. For the moment I merely note
that in para 2 of the letter Mr Nairn made specific reference to the terms and
conditions overleaf:
You will see
that the scale C overleaf is the lowest scale at three per cent, and, in
variance with our normal terms and conditions, I would agree that if the owners
of
and he gave
the names of three possible purchasers
the
Mandeville Hotel or your Nigerian friend (name to be supplied when you can
remember who he is), Peter Isles of Norfolk Capital and Mr Peter Harris of the
Carnarvon at Ealing, should become the purchasers, that our fees would be
one-half the scale set out on the terms and conditions overleaf.
Those three
potential purchasers had already made approaches to Mr Sharer, and he had
insisted in that telephone conversation that if a sale did take place to one of
them the plaintiffs should have only half their fee. The eventual sale was to
Norfolk Capital (I will refer to them throughout as ‘Norfolk’) and the
plaintiffs do restrict their claim to half the fee which they claim would
otherwise have become due.
The scale of
fees set out in Mr Nairn’s letter of October 23 was subsequently varied. On receiving
the letter several days later, Mr Sharer telephoned Mr Nairn complaining of the
scale level, and it was agreed that, instead of the blanket 3%, the fee should
be 2% if the price was under £2.5m, 3% if it was between £2.5m and £2.6m, and
4% above £2.6m. The call was noted by Mr Nairn as having taken place on October
29 and he confirmed the new scale by letter the following day. He wrote: ‘The
fee scale we have agreed upon in accordance with our terms and conditions is to
be revised,’ and he then sets out the new scale.
There is an
important dispute of fact as to whether on this occasion Mr Sharer also, as he
claims, rejected the plaintiffs’ terms and conditions, insisting that he
retained the right to instruct other agents and that commission would be
payable only on a sale. That there was such a discussion is disputed by Mr
Nairn and I will return to this issue in due course.
There was a
further agreed variation of the scale in a discussion just under a fortnight
later, and the effect is recorded by Mr Nairn in his letter of November 13
1984. He wrote:
I take your
point regarding the scale of fees and if I say I will now finally set out what
has been finally agreed, you will no doubt let me know if it is not what you
understand to be the case. Our fee scale is to be as follows: up to
£2,499,999.99: 2 1/2 per cent of the total consideration. From £2.5 million to
£2,599,999: three per cent: from £2.6 million to £2,999,999: 3 1/2 per cent,
and the
commission was to be 5% if the price was over £3m.
The object
that Mr Sharer had in mind in insisting upon a graduated scale of this kind was
to build in an incentive to the plaintiffs to get the highest price that they
could.
By November 13
1984 the terms upon which the plaintiffs had been engaged by Mr Sharer were
therefore finally agreed. A central issue in the case is: what, apart from the
scale fees, were the agreed terms and conditions?
I pause here
to note that unknown to Mr Nairn, Mr Sharer was, at about the same time,
separately instructing Christies to act for him as agents to sell — again upon
the basis that only a few selected potential customers should be approached to
protect confidentiality. Four days after he had instructed Mr Nairn, Mr Sharer
had a telephone conversation with Mr Caile of Christies as a result of which
that firm was given authority to discreetly market the hotel. In his letter
confirming the instruction Mr Caile wrote: ‘However, I will emphasise to
respective buyers that the business is not on the market and that it is only
because of the possibility of another centre, are you at all considering a sale
at this time.’ From this I infer that Mr
Sharer did not disclose to Christies that Mr Nairn had been separately
instructed.
The letter
continued: ‘Should we be instrumental in introducing a purchaser who duly
completes a transaction then, as agreed, we shall look to you for our fee in
accordance with the scale detailed below.’
This was up to £2.5m, 2%, up to £3m, 2.5%, and over £3m, 3% — a similar
but not identical scale to that which he had agreed the day before with Mr
Nairn. No standard forms of contract were introduced by Christies into this
arrangement.
Acting upon
their instructions, Christies informed a Mr Hazelrigg of Kingsmead Hotels, a
potential purchaser, of the hotel by letter dated November 2 1984. It so
happened that Mr Nairn also made an approach to him by telephone on November 5
and was of course told that he already knew of the property, but with a price
tag of nearer £3m than the £2.6m Mr Nairn was at the time quoting.
According to
Mr Nairn, after hearing that Christies had got hold of the property he
telephoned Mr Sharer, reminding him that he had sole rights and warning him
that he might find himself paying two sets of fees, and expressing concern over
the risk to confidentiality. ‘I distinctly recalled,’ Mr Nairn said, ‘him
saying that he would get in touch with Christies as they should not be offering
it.’ Mr Sharer went on to explain that
he had seen Mr Caile prior to instructing Mr Nairn who had said that he would
be willing to sell it at £3m, but Mr Nairn was the sole agent, and it was just
a matter of ‘clearing it up’.
If this
conversation did take place it clearly was very crucial, being the clearest
indication of Mr Sharer’s acceptance of the plaintiffs’ exclusive agency
agreement.
Mr Sharer
denies that this conversation ever took place. He does, however, recall being
told in November by Mr Caile that he had had a row with Mr Nairn, who had
complained of Christies sending the particulars to Mr Hazelrigg, who he claimed
was his (Mr Nairn’s) client. Mr Sharer’s recollection is that when told of this
he simply commented that the two agents would have to ‘sort it out between
themselves’. He certainly did not speak to Mr Nairn about it or accept that the
plaintiffs were sole selling agents for the hotel.
I again leave
this important issue of fact until later. Whatever the
shortly after the protracted negotiations with purchasers introduced by Mr
Nairn finally came to an end, Mr Sharer had a telephone conversation with a Mr
Cameron, who by then had replaced Mr Caile.
The introduction
of a potential purchaser by Mr Nairn followed immediately after Mr Sharer had
authorised him to approach potential purchasers. On October 18 1984 agents
acting for a father and son, Ralph and Daniel Levy, with a ‘roll-over tax
situation’ wrote to the plaintiffs as part of their search for a suitable hotel
with vacant possession in London or the Home Counties. There was urgency in
their situation as for tax purposes the purchase of any hotel had to be agreed
before mid-December.
The Levys were
introduced to Mr Sharer by October 30 1984. They visited the premises on
November 2 and a written offer quickly followed on November 7 1984. In the
urgency of their situation, with no time to have a full accountant’s report,
the basis of the offer was not a finite sum but an initial consideration of
£2.4m plus an additional variable sum based on a projection of profitability
for the next two years assessed on the figures available.
I pause to
note that the hotel had traded for only two years, that audited accounts for
the year ending April 1984 were not yet available, and that full trading had
yet to come on stream. The works of improvement and enlargement had still to be
completed or put in hand. This was the background to the offer that was made.
There followed
two meetings, one at Mr Nairn’s office on November 16 and one at the hotel on
November 20. Agreement was reached on the footing of the formula suggested by
the Levys. There was to be an escalator and a de-escalator provision. Mr Sharer
was to be retained for the two years in which the provisions were to operate on
a managerial basis at a wage of £25,000 a year, and the purchasers agreed to
provide the new trading company which was to be set up to run the business with
£500,000 capital to enable Mr Sharer to apply for the necessary planning
consents for the extensions which he had had in contemplation, and which could
be expected to enhance the hotel’s profitability, plus an additional £500,000
for further capital expenditure in the period.
At the two
meetings detailed terms were hammered out and agreed as set out in Mr Nairn’s
letter to Mr Sharer’s solicitors of November 21 1984, copies of which were sent
to Mr Levy’s solicitors. Mr Nairn also drew up a memorandum of sale, although
not specifically instructed to do so. Mr Sharer’s solicitors acknowledged Mr
Nairn’s letter and the memorandum, and having seen their client with his
accountant raised no objection or query. It was agreed that the Levys’
solicitors, Slaughter & May, should draft the agreement.
It is clear
that the parties had at this point agreed in general terms, subject to
contract, to the sale to the Levys of the hotel and the crucial terms upon
which the formal contract was to be drawn. By the law of this country the
parties had not yet legally bound themselves, but both recognised that a ‘deal
had been struck’. Mr Nairn has described how at the conclusion of the meeting
on November 20 1984 ‘there was a tremendous feeling that a deal had been
struck’. Mr Daniel Levy added: ‘In our view, in our accountant’s view and in
our solicitor’s view (who would not have been instructed if there had not been
an agreement) there was unquestionably a deal struck.’
The effect of
that ‘deal’, which, as I shall now indicate, never was embodied in a formal
contract, is (in the context of the provisions of the plaintiffs’ standard
terms) a subject of challenge by the defendants.
In coming to
the deal no mention was made by Mr Sharer of his interest in the Harlow site.
His interest still was only of a possible opportunity to obtain a lease and
planning permission for another hotel development, but it was relevant not only
because if it came to fruition it could cause complications with the usual
restraint of trade covenant that would be embodied within the contract of sale,
but also because in the eyes of the council the link of a potential developer
with the Briggins House Hotel which was close by could have been a factor which
would affect their ultimate decision whether or not to grant a lease, and in
any event the potential at Harlow could be of interest to the new purchasers of
the Briggins House Hotel. The business of one could complement the business of
the other.
The Harlow
project was disclosed to and discussed with the Levys at a further meeting with
Mr Sharer, the date of which is not clear but was probably December 10. At that
meeting a change of the consideration which had been previously agreed was also
broached, as well as Mr Sharer’s continuing involvement over the next two years
as a manager of the business. I have no doubt that it was Mr Sharer who sought
to make the variations from the original agreement, whether or not this was as
a result of tax counsel’s advice (he had seen tax counsel on December 5) or
simply because he had changed his mind — got cold feet about staying on and
wanted an outright sum rather than run the risks inherent in the escalator
provisions.
In the result
negotiations were reopened, and the original deal was varied. The Levys, who
were anxious to conclude a deal, now agreed to pay £2.6m for the hotel (a
halfway figure between £2.4m and £2.89m which they thought it was possible for
Mr Sharer to have obtained upon the escalator). Mr Sharer’s continuing
management involvement was dropped and his interest, if it materialised, in the
Harlow site was to be purchased by them for £200,000.
Slaughter
& May were reinstructed and with speed produced a draft agreement on the
new basis on December 12 1984. There was by then great urgency on the Levy
side: contracts were to be signed by December 17, which would have just met
their tax deadline.
Their
solicitors, however, advised that the Harlow deal should be separately catered
for, and the draft contract contained no reference to it. It was referred to in
their covering letter. In that letter the Levys’ solicitors suggested that it
should be discussed later.
Further, to
protect their clients against the uncertainties of the accounting position they
reintroduced the de-escalation clause — linked to a net disposable profit
figure of £200,000. Mr Levy junior has explained that on Mr Sharer’s figures
that should have caused no problem for him, but it certainly had not been part
of the new arrangement.
As a result Mr
Sharer’s solicitors immediately reacted by telex, complaining that the new
draft did not reflect the agreement terms both as to Harlow and as to the
escalator. Further negotiations on principle were, they suggested, required,
and a new basis for agreement put forward — namely a total consideration of
£3.2m which was to include £400,000 to be set aside in a joint account as
capital for the improvements at the hotel, reflecting what had been agreed in
principle from the beginning on this point. A de-escalator clause would be
agreed to only if it were balanced by a similar escalator clause using the same
trigger figure. At this point agreement slipped away from the parties.
Negotiations
for the sale of Briggins House and the Harlow lease nevertheless continued, but
was no longer under the pressure of time on the Levys’ side, as their tax
deadline had now passed. It is clear that positions on both sides began to
shift. At the beginning of January 1985, following a long conference with Mr
Nairn, Mr Sharer put forward new proposals. In summary £2.7m was to be paid for
the hotel plus stock at valuation. The purchasers would pay an additional
£100,000 if and when planning consent was obtained for the additional
accommodation at the hotel. This made £2.8m for the hotel alone: if the Harlow
interest were required this would cost an additional £200,000, £3m in all.
The Levys’
agent reported to his clients at this stage that having spent a long time
negotiating with Mr Nairn he was reasonably confident that these were the
minimum terms upon which the vendor was prepared to treat. In a letter to Mr
Nairn the agent asked for a ‘solemn undertaking that he would treat on that
basis’. This reflected a feeling on the Levys’ side that Mr Sharer had, as it
were, shifted the goal posts.
New draft
contracts were then prepared, this time by Mr Sharer’s solicitors, with March 1
as the proposed completion date. Solicitors’ correspondence on the draft
followed, but on January 28 1985 Mr Sharer’s solicitors telexed that he wished
to retain the two lodge gates. This was the first time that this had been
mentioned and was rejected out of hand by the Levys. It was not pursued
further, but to the purchasers again it appeared to be an attempt to change the
firm basis upon which they had, in this new phase of the negotiations, been
prepared to treat.
Apart from
this hiccup, it appeared nevertheless that the negotiations were going well. On
January 21 Mr Sharer suggested to Mr Nairn that if the Levy deal went through
his fee should, instead of being calculated on the scale agreed the previous
October, be £50,000 on completion, plus the lease of one of two identified
flats in a country manor which he owned or, if they were not available because
they had been previously sold to other parties, a further £50,000 payable as to
half on the sale of the flat and as to the remainder on the acquisition by Mr
Sharer of another property through Mr Nairn or at the end of 18 months,
whichever was the sooner. Mr Nairn agreed in principle to the variation and the
timing and details were referred to
came of the proposed arrangement, as the Levy sale did not go through, and
neither the plaintiffs nor the defendant seeks to rely upon it outside the
particular circumstances that were envisaged in the discussion. The basic issue
in the case remains as to the terms upon which Mr Nairn was originally
instructed.
In the middle
of February there was a further turn in the negotiations, this time at the
instigation of the Levys. Wanting more time, they sought an option arrangement,
giving them an option to complete on notice in April: this would have extended
the deadline from the beginning of March to the middle of April. The
consideration was to be £20,000. It was agreed to by Mr Sharer, who again
sought Mr Nairn’s advice on the position. He was plainly becoming disturbed
about the level of fees that were mounting, and the resultant risk if the deal
did not eventually go through. An option gave him some protection, but no less
than three new draft contracts were then prepared, on February 27 and 29 and
March 1.
In the
meantime inventories were being taken, and further accounting information
relating to the trading situation of the hotel business was being pressed for
by the Levys. Matters dragged on through March, and by the end of the month Mr
Sharer was getting impatient. On April 4 his solicitors telexed to say that he
did not wish to proceed further.
He has said,
and I accept, this was to bring matters to a head. It did just this, but
unhappily led to further offers and counteroffers.
In response,
the Levys offered to proceed immediately, in spite of not having had some of
the accounting information that they had earlier requested, at £250,000 below
the price previously agreed, the drop obviously being seen as a protection in
the absence of the figures that they otherwise were insisting on seeing. There
was a further exchange. Mr Nairn discussed in this period the trading figures
with Mr Mendoza, the Levys’ agent, and shortly afterwards the Levys indicated a
willingness to proceed at the original price, so that by April 30 it appeared
that the parties were ad idem and ready to complete. There was, however,
one final condition that the Levys sought to make at the restored price, namely
that the accounting information which had been requested earlier should be made
available before exchange, not, they assured, for the purpose of seeking a
renegotiation but to give them an opportunity to discuss and comment on any
points that arose.
Mr Sharer was
not prepared to accept such a condition without a protection against the costs
involved, as well as the overall cost for which he was on risk if the Levys
backed out. He was seeking a 10% deposit while the information was given, with
compensation for delay and expenditure if the Levys pulled out equivalent to 1%
of the price. Following this telex sent on May 2 there was a further
conversation between Mr Sharer and Mr Daniel Levy at which the transaction was
called off.
There is a
dispute as to which of the two parties withdrew. I will return to this later.
But the fact is that on May 9 the papers were returned by solicitors. The
conversation would have taken place shortly before. Mr Sharer’s recollection is
that it took place on May 3, but there is no record to support this. But if
correct, he by that time was aware that Norfolk were about to make an offer at
£3m.
There is a
further dispute as to whether Mr Sharer informed Mr Nairn at this time of the
breakdown of the negotiations. There is no correspondence or record of any
communication between them after March — a time when the negotiations, although
hanging fire, were still alive — although Mr Nairn was, as I have indicated,
discussing with the Levys’ agent the hotel trading figures in April. It is Mr
Nairn’s evidence that he was never told that the Levy transaction had come to
an end. He knew of difficulties, particularly in connection with the new
building works, which would have taken time to resolve, and he said he was not
unduly concerned, although he was given no indication of how it was progressing
between May and September 1985. During this period he asked Mr Sharer several
times about the hotel and in reply Mr Sharer gave a general assurance that
everything was all right, but there were still works to be done. At no time did
he say the Levy deal had been called off. Mr Sharer’s recollection is that
after he received planning permission for the new extension — this was on April
24 — he phoned Mr Nairn asking him to withdraw the property from the market,
saying he was going to start the building works. This was at the end of April
or beginning of May. He further told him that the Levy deal was dead and told
Mr Nairn not to introduce further customers. He would, he said, wait until the
building works were complete and would then be looking for £3.5m, at which he
recalls Mr Nairn commenting that he was ‘ahead of the field as usual’.
That such a
discussion ever took place is strenuously denied by Mr Nairn.
In his
affidavit, sworn on July 16 1986, Mr Sharer deposed that he told Mr Nairn in
this telephone call that until the building works were complete he would not
market or sell the hotel. If this was said, it was at the time plainly untrue,
as he was then quite separately about to treat, or in the process of treating,
with Norfolk, the eventual buyers of his hotel.
In mid-March,
Mr Sharer was told by a commercial property consultant whom he contacted in his
search for another property that this company could be interested in Briggins
House Hotel. As a result, an appointment for Mr Isles of that company to visit
was made in the last week of April. After that visit, which took place on April
29, an offer in writing dated May 1 was made at a price of £3m, which Mr Sharer
accepted subject to contract by letter on May 7.
The Levy
transactions had come to an end either just before or just after his letter of
acceptance was written. Certainly at the time that they did come to an end Mr
Sharer would have been aware of the possibility of a pending offer.
Norfolk’s
follow-up investigations continued throughout the summer. During this period
Christies had re-established contact with Mr Sharer, and on May 8, after a
lapse of over six months, were instructed by him to ‘discreetly market’ the
hotel on the terms that had been agreed on the previous October, seeking offers
in excess of £3m.
Mr Sharer
informed them that he had an interested party — indeed the day before he had,
‘subject to contract’, accepted Norfolk’s offer. The Prudential and Thistle
Hotels were later introduced by Christies. Both showed some interest during the
summer but nothing came of either introduction.
In early
October Norfolk completed at £2.9m.
Mr Nairn
learnt for the first time of the Norfolk purchase when reading the Financial
Times in a traffic jam on the M1. He telephoned his secretary from the car
and an invoice for his fee under what he contended was a continuing binding
agreement with Mr Sharer was sent. This was rejected, and the writ followed in
December of that year.
This in
outline was the long and at times tortuous sequence of events leading to these
proceedings.
I now turn to
the issues of fact and of law which lie along the trail and which were left for
the time being to the side.
(1) Upon what terms were the plaintiffs engaged
by the defendant to act as agent for the sale of the Briggins House Hotel?
This issue
raises questions both of fact and of law.
(i) The facts
I deal first
with the facts. Before dealing with this particular area of factual dispute I
make the following general observations about the two principal witnesses, Mr
Nairn and Mr Sharer. Neither was entirely satisfactory in the witness box. The
detailed recollections of both, I have no doubt, have genuinely suffered with
the passage of time.
Mr Nairn was
frustratingly vague at times, giving sketchy recollections of events or
meetings of which detail might have assisted in piecing the evidence together.
He did impress, however, as a frank and straightforward witness. I am sure that
where there was vagueness it was because of a genuine lack of recall and not
simply a device to obscure an unhelpful truth.
Mr Sharer, on
the other hand, at times gave the impression of allowing hindsight to distort
or to fill gaps in his recollection. Further, the complaints that he was at the
very least disingenuous in his affidavits when dealing with the negotiations
with Norfolk from April 1985 onwards, and with the related discovery, were
patently justified. Further, his explanations of these matters were unhappily
marked by an obvious lack of candour.
I am satisfied
that his evidence was not always reliable. Of the two witnesses, where there
was a straight conflict I find the evidence of Mr Nairn the more reliable.
Nevertheless, each recollection has to be set and tested against the
surrounding facts and documents of the time.
At the heart
of the factual issues as to the terms upon which the plaintiffs were engaged by
the defendant are two telephone conversations — one on October 22 1984 and one
which took place shortly after Mr Sharer had received Mr Nairn’s letter of
October 23 1984. The two men differ as to what was said on each occasion. I
accept that the call on October 22 followed discussions that had taken place
during 1984, in which ways of marketing the hotel had been touched upon in
general terms. In the context of the need for secrecy Mr Nairn had explained
that, if instructed, he would expect the hotel to be placed exclusively in his
hands. Mr Sharer would have been aware that Mr Nairn would proceed on the basis
that he was to be the only agent instructed, but the words ‘sole selling agent’
were not used and no detailed discussion as to the terms would have taken
place.
In the course
of the telephone call on October 22 I accept Mr Nairn’s evidence that (1) he
indicated that his fees would be 3%; (2) he made it plain that he would be
accepting instructions on the basis that he was to be the only agent; and (3)
because of the need for secrecy he was only to approach the six potential
purchasers. It was at that point that Mr Sharer indicated that he had already
had approaches from three potential purchasers and a variation of the 3% fee
was agreed in respect of them. I reject Mr Sharer’s evidence that figures were
not mentioned.
I am not
satisfied that there was any further meaningful discussion about other
conditions upon which the plaintiffs would be prepared to act. In particular,
Mr Nairn did not attempt to give details of the terms governing liability or
fees if Mr Sharer instructed another agent, or sold without the intervention of
an agent, or at what point fees would become payable. Further, he did not use
the words ‘sole selling agent’. It would nevertheless have been in general
terms clear that, if instructed, Mr Nairn was to have the exclusive rights to
sell. This was implied in his explanation of how secrecy was to be protected.
Further, I accept that it is probable, as Mr Nairn recalls, that it was left
that night that he would be confirming in the usual way — that is by letter —
in the morning. Mr Nairn clearly would have relied upon the confirmatory letter
to spell out the detailed terms upon which he would be prepared to act. In the
conversation the fee was the focus of attention.
The letter he
wrote the following day did draw attention in the second paragraph to the
plaintiffs’ terms and conditions printed overleaf. It has been argued that the
reference was only to the fee scale and that the paragraph is ambiguous as to
whether the plaintiffs are relying upon the main body of the terms and
conditions.
In my
judgment, it was implicit in the second paragraph of the letter, from the
heading of the reverse side which read ‘Brodie Marshall Hotels — terms and
conditions of business’, and from the wording of the scale C (3%) provision
that these were the terms upon which the plaintiffs were prepared to act for
the defendant.
On receiving
the letter — it was delayed a few days because it was wrongly addressed — Mr
Sharer has described how he dealt with it:
I started to
read it, but being the type of businessman I am, I looked to the fee. I didn’t
give much notice to the other parts — I read parts of it but my focus was on
the fee . . . I can’t recall reading any of it except focusing my eye on the
fee. I obviously read ‘sole selling agreement’ but did not read any terms and
conditions on the back.
Although he
was, as I have found, told what the plaintiffs’ fee was on October 22 1984, he
telephoned Mr Nairn expressing ‘despondency’ at the commission rate. It is
common ground that Mr Nairn then agreed to a graduated scale. What is in
dispute is whether Mr Sharer also rejected the plaintiffs’ terms and
conditions. His recollection was: ‘I basically said I didn’t know what he was
trying to prove to me . . .. We had not discussed or agreed upon any terms or
conditions or fees’, and later: ‘I said I am not interested in any of your
terms. I am only interested in your fee if you are successful in selling. I
said I did not want to enter into any form of sole selling agreement. I made it
plain I reserved the right to instruct other agents.’
Mr Nairn
denies this formed part of the conversation, and I have no hesitation in
accepting his evidence upon this. He made a note at the time which recorded the
change of fee scale but made no mention in that note of a rejection of the
standard terms. I do not for a moment think he would neither have made a note
of such a crucial matter nor reacted either by seeking to redefine his terms or
sending a follow-up letter on the point. I reject Mr Sharer’s evidence: I am
sure this is an example of time and hindsight distorting a recollection.
What is plain
is that Mr Sharer was well aware, on receipt of Mr Nairn’s letter of October
23, that the plaintiffs were proposing to act for him upon a ‘sole selling
agency basis’, the terms of which were set out on the back of the letter for
him to read. It is not entirely clear just how far he did read those terms — he
clearly looked at the heading and the provision setting out the scale fee at 3%
at the bottom of the page. I think the truth simply is that he glanced at them
but did not bother to read them carefully.
Accepting Mr
Nairn’s evidence that there was no dissent upon the terms from him when the new
fee was negotiated, those terms impliedly became part of the contractual
arrangement between the parties.
The position
was confirmed by letter, by Mr Nairn, on October 30, in which he wrote, ‘The
fee scale we have agreed upon in accordance with our terms and conditions is to
be revised’, and he set out the new scale.
That scale was
again revised following a further call from Mr Sharer, and that revision, as I
have indicated, is set out in Mr Nairn’s letter of November 13 1984. I reject
the submission that I should interpret the words ‘I will now finally set out
what has been agreed’ as embodying all the other terms and conditions; in other
words they were not being embodied. The letter plainly referred solely to the
variation of the fee scale.
Linked to the
initial basic issues of fact is the dispute as to a telephone call Mr Nairn
said he made to Mr Sharer on learning that Christies appeared to be marketing
the hotel at the same time. According to his recollection Mr Sharer accepted
they should not be acting for him, gave an explanation and said he would talk
to them. As a result I am asked to infer Christies’ activities did cease. Mr
Sharer denies this conversation. He says Christies told him of a row with Mr
Nairn and he simply replied that they should sort it out between themselves. It
is a curious dispute of fact which is not easy to resolve, as both witnesses
here gave very vivid detailed accounts of the calls, and there are no helpful
independent pointers to the truth. Nevertheless, I again accept Mr Nairn’s
recollection in preference to that of Mr Sharer.
I was asked to
infer that the very fact that Mr Sharer instructed Christies at the same time
that he was instructing Mr Nairn was inconsistent with his having accepted a
‘sole selling agency agreement’ with the plaintiffs, or of being aware of its
terms. I have not overlooked the point, but I conclude that the truth very
simply was that on instructing Christies Mr Sharer either overlooked or
disregarded his obligations to Mr Nairn.
Those
obligations were defined by the plaintiffs’ written terms and conditions of
business as set out on the reverse of the letter of October 23 1984 and I now
turn to the issues of law that arise upon them.
(ii) Issues of law
The defendant
argues that if the conditions did form the basis of the agency agreement he is
not legally bound by those terms that the plaintiffs seek to rely upon. Either
they were void for uncertainty or, being unusual and onerous for this class of
agreement, the plaintiffs did not take sufficient care to bring them to his
notice at the time of the contract.
The claim in
so far as it seeks a commission upon the Norfolk sale in October 1985 relies
particularly upon clause 8:
If during the
period of our sole selling agreement the owner or the person directly
instructing us, deals with a person not introduced by us or by any other agents
we shall also be entitled to the same commission in the same circumstances as
if we had introduced such a person.
The
alternative claim is founded upon clause 1, and that reads:
The owner
will pay our commission if we introduce directly or indirectly a person who
agrees (whether or not subject to contract) to purchase the property at the
price specified overleaf or such other price as the owner is willing to accept.
However, no commission will be payable in respect of a proposed sale which is
not completed on account of the purchaser withdrawing from the transaction.
Clause 7
provides that the agreement continues until terminated by either party giving
not less than 21 days’ notice in writing, to expire not earlier than three
months from the letter.
At any time
the vendor is, nevertheless, entitled to withdraw the property from the market
on payment of a fee of £100 or the plaintiffs’ out-of-pocket expenses,
whichever is the greater (clause 10). The fee, which is stated to be a reduced
fee (as compared with the plaintiffs’ fees for straightforward agencies or sole
agency agreements) is 3%: in the case of a proposed sale which is not completed
half of that rate is payable, provided that the purchaser has not withdrawn
from the transaction (clause 6). The commission becomes payable on completion
of the sale. If completion does not take place within one calendar month of
exchange of contracts the commission becomes due on exchange of contracts or,
in the case of a proposed sale which is not completed, the commission becomes
payable (if the purchaser has not withdrawn from the transaction) when the transaction
terminates (clause 3).
It is the
defendant’s submission that the terms relevant to either head of claim
(commission due upon the Norfolk sale or the Levy introduction) are not
sufficiently clear to found the contractual rights which the plaintiffs seek to
enforce. They are, it is argued, onerous and unusual, and to bind the defendant
require not only unambiguous language but also that the effect be fairly and
reasonably brought to his attention — brought home to him to ensure that he has
agreed to them. It is claimed that the terms were not fairly brought to his
attention. In this context I have been referred to three authorities, Jaques
v Lloyd D George & Partners Ltd [1968] 1 WLR 625, Thornton v
Shoe Lane Parking Ltd [1971] 2 QB 163, and Interfoto Picture Library Ltd
v Stiletto Visual Programmes Ltd [1988] 1 All ER 348. I refer
briefly to passages from judgments in each of these authorities which provide
the basis of the arguments which have been put upon the terms of this
agreement.
In Jaques v
Lloyd D George & Partners Ltd Lord Denning MR at p 630 said:
The
principles which in my opinion are applicable are these: when an estate agent
is employed to find a purchaser for a business or a house, the ordinary
understanding of mankind is that the commission is payable out of the purchase
price when the matter is concluded. If the agent seeks to depart from that
ordinary and well understood term, then he must make it perfectly plain to his
client. He must bring it home to him such as to make sure he agrees to it. When
his representative produces a printed form and puts it before the client to
sign, he should explain its effect to him, making it clear that it goes beyond
the usual understanding in these matters. In the absence of such explanation, a
client is entitled to assume that the form contains nothing unreasonable or
oppressive. If he does not read it and the form is found afterwards to contain
a term which is wholly unreasonable and totally uncertain, as this is, then the
estate agent cannot enforce it against the innocent vendor.
Megaw LJ in Thornton
v Shoe Lane Parking Ltd at p 172 said:
. . . it may
not be necessary for a defendant to prove more than that the intention to
attach some conditions has been fairly brought to the notice of the
other party. But at least, where the particular condition relied on involves a
sort of restriction that is not shown to be usual in that class of contract, a
defendant must show that his intention to attach an unusual condition of
that particular nature was fairly brought to the notice of the other party.
How much is required as being, in the words of Mellish LJ in Parker v
South Eastern Railway Co (1877) 2 CPD 416, 424, ‘reasonably sufficient to
give the plaintiff notice of the condition’ depends on the nature of the
restrictive condition.
Finally Dillon
LJ in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd at
p 352, after a review of the authorities that followed Parker v South
Eastern Railway, said:
It is in my
judgment a logical development of the common law into modern conditions that it
should be held . . . that, if one condition in a set of printed conditions is
particularly onerous or unusual, the party seeking to enforce it must show that
that particular condition was fairly brought to the attention of the other
party.
There are,
therefore, three questions that have to be asked:
1 Are the terms relied upon clear and
unambiguous?
2 If they are, are they particularly onerous or
unusual?
and:
3 If they are, were they brought fairly to the
attention of the defendant?
I take clause
8 first. It is argued that clause 8 has an ambiguity or alternatively, if it is
clear, it would not, in its literal sense, entitle the plaintiffs to commission
on the Norfolk sale.
The focus of
the argument is the wording ‘deals with a person not introduced by us or by any
other agents’. The problem arises from the facts of the case. Norfolk was
introduced by an agent, a Mr Meyers, although he was not an agent who had been
instructed to sell the property by the defendants. For this purpose he was not
the defendants’ agent. Mr Meyers, a commercial property consultant, had been
asked by Mr Sharer to look for a property that could be developed in a way
similar to the Briggins House Hotel in February 1985. He also happened to have
been retained by Norfolk to search for suitable hotels for that group. On
visiting the property for the purpose of Mr Sharer’s business, in the course of
conversation Mr Meyers asked if he could make an appointment for his clients
(Norfolk) to view, and the first defendant agreed. This led to the ultimate
sale.
There was, it
is argued, an introduction here by an agent, be it not the defendants’, and
therefore the transaction was not covered by the words of clause 8. Neither
does it appear to be within the relevant clause which makes provision for
commission to be paid upon a sale to a purchaser introduced by ‘agents
appointed by the [defendant] to sell his property’. It is argued that although
this appears to be a ‘loophole’ in the drafting, the construction should be contra
proferentem, the wording is ambiguous and the right to commission on the
facts of this case is not established.
I reject this
argument. If clause 8 is read in isolation there is some force in it, but in my
judgment when read as it should be, together with clause 7, the meaning is
clear — namely that ‘other agents’ refers simply to other agents appointed by
the vendor to sell the property in question. The words ‘other agents’ clearly
have the same meaning in clause 8 as in the penultimate sentence of clause 7:
‘If this is contravened and a person is introduced by other agents’, referring
to agents instructed to sell the property as described in the first half of
that sentence. That meaning is plainly carried on into the following clause and
the two should be read together.
In my judgment
clause 8 is sufficiently clear and unambiguous to be relied upon in the sense
that the plaintiffs claim.
Further, I
find on the evidence that ‘sole selling agency agreements’, of which clauses 7
and 8 would form natural and usual terms, are, in that part of the estate
agency business concerned with the sale of hotels as running concerns,
commonly, although not invariably, used. Practice varies, but agreements of this
kind are by no means unusual in this class of transaction for the reasons I
have already outlined.
This type of
agency is, of course, more onerous for the vendor than straightforward or sole
agencies, as he may become liable for commission even if he sells on his own,
but this is not an unreasonable compensation, provided it is kept to a limited
period, for the agent who, to protect secrecy, is restricted from going all out
to make a sale.
Of course a
sole selling agreement is one of the three basic types of agency agreement and
it is clearly necessary for the agent when entering into the contract to bring
the nature of the agreement he is insisting upon fairly to the attention of the
vendor.
I am satisfied
that this did happen in this case. The nature of the agency was brought fairly
to the vendor’s notice. Mr Nairn’s letter of October 23 followed discussions in
which the way he would handle a sale to protect confidentiality, including his
having the exclusive rights to sell, was made clear to Mr Sharer. The letter
directed his attention to the terms and conditions on the reverse side where
they were clearly and fairly set out in very legible print. Anybody turning the
page could not avoid seeing that these were the terms of a ‘sole selling
agreement’.
When considering
what steps an agent should take, all the circumstances of the particular case
have to be considered, and I here bear in mind not only the discussions which
preceded the letter but that Mr Sharer had time to consider the terms — this,
for example, is a long way from the facts of Interfoto Ltd v Stiletto
Ltd, both as to the circumstances and as to the unreasonableness of the
relevant terms. Further, the terms were worded in a straightforward manner.
Indeed, in
reality it is not the defendant’s case that he was misled at the point of
contract or was in some way lulled into a false sense of security about the
terms: his case is that he did see that these terms were the terms of a sole
selling agency but, in the telephone call that followed, expressly refused to
be bound by them, insisting on the retention of his right to employ other
agents. As I have indicated, I do not accept his evidence about that
conversation.
For these
reasons I am satisfied that the defendants were bound by the terms of clause 8.
I now turn to
clause 1. Again it is argued that this clause is uncertain, and in any event
was unusual as well as onerous, requiring particular attention to be drawn to
it.
The wording
which it is said is ambiguous is:
if we
introduce . . . a person who agrees (whether or not subject to contract) to
purchase the property at the price specified overleaf or such other price as
the owner is willing to accept [the commission becomes payable].
What, it is
asked, is meant by the word ‘agrees’?
There may be various stages of agreement, in outline, in principle, in
detail: at which point, if an agreement is to be subject to contract, does the
agent become entitled to his commission?
This is a
particularly English problem, set as it is upon the background of ‘offers
subject to contract’ which the drafting of the clause has sought to provide
for. In my judgment the meaning nevertheless is clear. The wording implies
that, apart from the need to reduce the terms into a formal contract, the
parties had reached full agreement. If it were not for the formality of a
written agreement the
accept defendant’s counsel’s wording of the appropriate test: namely, ‘a
complete and certain agreement which would be legally binding but for the
‘subject to contract’ condition’. Clearly, in the reduction of the terms into a
formal contract details may still require negotiation, but these essentially
would be of form and not of substance: or using a phrase employed by witnesses
in the course of the case, simply dotting the i’s and crossing the t’s. A
central question in this case is whether such an agreement was ever in fact
reached, and I return to this issue a little later.
A provision of
this kind is, nevertheless, unusual. Commission is usually payable upon the
completion of a sale, and I refer again to Jaques v Lloyd D George
& Partners Ltd. I accept that if clause 1 is to be relied upon the
plaintiffs do have to show that they brought it fairly to the defendant’s
attention. I pause to note, however, that although more onerous than a ‘payment
on completion’ provision it is not more onerous than a term requiring payment
upon the introduction of a person who is ready, willing and able to purchase.
There must be a full agreement and there is in another clause protection for
the vendor if the purchaser withdraws in the last phase of the transaction.
Be that as it
may, the attention of the vendor must be fairly drawn to the term, having
regard to its particular nature.
Was attention
therefore fairly drawn to it? It was not
specifically signposted in the terms and conditions, but in all the
circumstances I conclude on the facts of this case that reasonable steps were
taken. The condition is clearly and fairly set out at the beginning of the
terms. Mr Sharer had time to consider the terms at his home and I again refer
to the general background I have already outlined. I am satisfied that this
clause also was binding.
My attention
has also been drawn to the term (not less than three months) and the
requirement of three weeks’ notice in writing to terminate the agreement, my
attention being drawn in connection with both clause 8 and clause 1. On the
evidence I am satisfied that that term was not unusual or excessive for this
class of agreement and that the provision for three weeks’ notice in writing
was reasonable. It was, in any event, always open to the vendor to withdraw the
property from the market without notice on payment of the agent’s out-of-pocket
expenses.
I now turn to
the next main issue. Do the plaintiffs prove that under the terms of their
agency agreement they are entitled to commission either for the introduction of
the Levys or upon the sale to Norfolk?
I begin with
the Levys transaction. The plaintiffs have not satisfied me that they are
entitled to commission under this head of claim. They have not shown that the
Levys ‘agreed to purchase’ the hotel within the meaning of clause 1.
Their case
essentially is that there was such an agreement reached by October 30 upon the
price the Levys had first offered, which was accepted by the defendant. The
parties were then ready to reduce the agreement into a formal contract.
The difficulty
that the plaintiffs face is that, although in the negotiations that took place
between the Levys and the defendant this point was indeed reached at that
stage, the negotiations were thereafter almost immediately reopened so that the
initial intention of the parties was never taken further.
In my judgment
the negotiations which took place between October and the following May have to
be seen as one continuing transaction or set of negotiations, and it would be
wholly artificial to view them, as I am asked to, as two transactions, one of
which ended in early December 1984 and the other in early May 1985. I accept
that the initiative to reopen the negotiations came from Mr Sharer, but
reopened they were and both parties from then on put a series of new offers and
counter offers. In the end they were unable to agree. That is the reality and
on this ground alone I reject this head of claim.
I would also,
however, hold that if the deal reached on October 30 1984 was viewed in
isolation it was not so complete as to be an agreement within the meaning of
clause 1. This was a complex transaction involving not only the sale of the
property but the business as well as the employment of the defendant for a
two-year period, and the promise of capital for works which it was hoped would
be carried out during that time once planning permission was obtained. Although
the main principles had been agreed, there were still matters outstanding, such
as the precise terms upon which the defendant was to stay on, how the capital
which was to be provided for the works was to be handled, and the extent of the
warranties — as well as other smaller points left open. These were not merely
matters of detail, they were substantial issues, not just questions of form.
Although there was the euphoric atmosphere at the time that a ‘deal had been
struck’, important terms still remained outstanding. The agreement was not
complete.
The plaintiffs
do not, therefore, succeed under clause 1. Had there been such an agreement I
indicate that I would not have held that either in December or May the Levys
withdrew from the transaction within the meaning of that phrase in the terms
and conditions. On both occasions the negotiations were either reopened or
called off by mutual consent.
Finally I
return to the Norfolk sale.
There is on
this part of the claim a further issue of fact to be resolved upon which turns
the question: was the agreement between the parties terminated before that sale
took place?
As I have
noted, there is a dispute on the evidence between the two main witnesses as to
whether Mr Sharer called off or suspended the agreement by telephone in late
April or early May 1985. It is not suggested that written notice was given, but
that Mr Nairn accepted a withdrawal of instructions — mutual consent, it is
argued, was to be implied. Alternatively the property was simply withdrawn from
the market by Mr Sharer.
I have no
hesitation in accepting Mr Nairn’s denial that there was any such telephone
call. It is clear that in April — probably late April — he was still concerned
with the transaction. There is, as I have noted, an undated note by him of a
discussion with the Levys’ agent about trading figures, and I note that in any
event Mr Sharer himself could not have known until, at the earliest, May 3 that
the transaction was off. I think it is inconceivable that if Mr Nairn had been
told it was off by Mr Sharer or that it had been taken off the market, he would
not have recorded this or reacted in some clear way to the new situation.
I was troubled
during the hearing by Mr Nairn’s apparent failure between May and September to
press inquiries as to what was the state of the transaction, but I accept that
in the brief discussions during this period with Mr Sharer he was given
assurances that matters were progressing, be it slowly, and that the time
factor was not in this context significant.
If Mr Sharer’s
affidavit sworn in July 1985 was to be believed, he told Mr Nairn in that
conversation that he had taken the hotel off the market. As can now be seen
following the history of discovery in this matter, upon which I have already
commented, that would have been patently untrue and could only have been said
at the time to mislead the plaintiffs. I think the truth is that no such
telephone conversation took place but that the defendant did in the later brief
meetings keep the true position from Mr Nairn. I am quite sure that when
sitting in his car in a traffic jam in early October 1985 he, reading the Financial
Times, for the first time became aware of the situation and that the sale
to Norfolk took him completely by surprise. I do not for a moment think he
would have sent his invoice unless he genuinely thought the agreement was still
effective. I repeat, he gave the impression of being straightforward in his
evidence and I accept that his response at that point was genuine for the very
simple reason that the defendant had never given him notice or led him to
believe that the Levy transaction was not still in hand.
The agreement
was, therefore, I find still binding on the defendants and commission became
payable to the plaintiffs on the sale to Norfolk. Norfolk was one of the three
nominated potential purchasers in respect of whom commission was to be paid at
50% of the agreed scale and the calculation will be made accordingly. There
will therefore be judgment for the plaintiffs in the sum of £58,865.63, plus
the contractual interest from the date of completion.
Subject to
the award to them of the costs of an interlocutory application, the defendants
were ordered to pay five-sixths of the plaintiffs’ costs.
