Estate agents — Commission — Two agents — Whether introduction by first agent was effective cause of purchase
By a letter
dated July 29 1988 the plaintiff firm of estate agents accepted the defendant’s
instructions to find a purchaser for Forest Hill House Nursing Home, Dorset
(which had the benefit of planning permission for bungalow), and stating that
the commission would be 2%; there was a further letter in the same terms on
August 2 1988, save that the commission was stated as 1 1/2%. A number of potential
purchasers were introduced by the plaintiffs, including a Mr Russell Wilson,
but he made no offer and no sale resulted. In June 1989 the defendant
instructed a second firm of estates agents, Goadsby & Harding, as sole
agents at a commission of 2%. On June 22 1989 the officials of the local
planning authority indicated that they would support a plan to increase the
floor area through an extension. This information was given to Mr Russell
Wilson by Goadsby & Harding and on July 31 1989 he completed the purchase
of the property. Both agents claimed commission and the defendant paid Goadsby
& Harding. Judge Bates QC in Bournemouth County Court gave judgment to the
plaintiff for £16,000 plus interest. The defendant appealed, contending that
the plaintiff’s introduction of Mr Wilson was not the effective cause of the
sale.
that his introduction in any case was the effective cause of the purchase. If,
however, he shows that he was the first to introduce the purchaser, and that a
purchase followed, and if no other facts are established, then it may well be
that the judge will infer that the plaintiff was the effective cause. The
evidential burden in such a case then passes to the defendant. The first
introduction by the plaintiff was the effective cause of nothing. It produced
no offer from Mr Wilson. The second introduction did not depend on the first
and it was the second introduction which was the cause of the purchase.
The following
cases are referred to in this report.
Chesterfield
& Co Ltd v Zahid [1989] 2 EGLR 24;
[1989] 29 EG 75
Wood
(John D) & Co v Dantata [1987] 2 EGLR
23; (1987) 283 EG 314, CA
This was an
appeal by the defendant, David Hedges, from the decision of Judge Bates QC, in
Bournemouth County Court, where he gave judgment to the plaintiff, Chasen Ryder
& Co, for commission on the sale of the defendant’s property.
Michael Norman
(instructed by Aldridge & Brownlee, of Bournemouth) appeared for the
appellant; Roger Shawcross (instructed by Morris Scott & Co, of
Christchurch) appeared for the respondent.
Giving the
first judgment at the invitation of Sir Donald Nicholls V-C, STAUGHTON LJ
said: In July 1988 Mr Hedges, the defendant, was the owner of Forest Hill
House, a large building in Dorset, which was used as a residential nursing
home. Mr Hedges wanted to sell it. He instructed the plaintiff, Chasen Ryder
& Co, which I gather is the trading name of Mr Rhone, an estate agent
specialising in that type of property. He wrote a letter on July 29 to Mr
Hedges in these terms:
FOREST HILL
HOUSE NURSING HOME
Thank you for
your instructions to find a purchaser for your property: Forest Hill House
Nursing Home, Rushall Lane, Corfe Mullen, Wimborne, Dorset, BH21 3RT
Our
commission will be 2% of the sale price plus VAT at prevailing rate.
We enclose a
copy of our sales details Ref: N333 and a copy of this letter with a stamped
addressed envelope. Would you kindly sign the copy and return to confirm our
sales details are correct.
The sales
details enclosed with that letter said that the price was £750,000, and the
land included 2.79 acres. It was said that there was planning permission for a
bungalow in the grounds, which would enable the number of residents in the home
to be increased from 20 to 29.
There was a
further letter on August 2 in substantially the same terms as that of July 29,
except that the commission was now to be 1 1/2% plus VAT. Mr Rhone introduced a
number of possible buyers. Almost straightaway there was a Mr Ronald Lay and
his brother. They agreed to buy, subject to contract, for the asking price of
£750,000. Mr Hedges thought that he must be selling too cheaply, so he took the
property off the market for a time and then put it back on different terms. The
asking price was now £925,000 and the amount of land offered, 15 acres.
By November
1988 Mr Rhone had sent particulars to Mr Russell Wilson as a possible purchaser
and he arranged for Mr Wilson to visit the house. Mr Wilson did that on
November 22, but he made no offer and expressed no interest. There is evidence
that instead in April 1989 he made an offer for another property.
In January
1989, meanwhile, another person had agreed to buy for £835,000, subject to
contract, but that sale also fell through. The same happened with a Mr Hewitt
between February and April 1989, at a price of £875,000. It happened again with
a Mr Wilkes, at a price of £895,000, in May and June 1989. Meanwhile, on June
17 or thereabouts, Mr Hedges instructed another firm of estate agents, Goadsby
& Harding. He told them to market the property with 15 acres at a price to
be advised. They were to be sole agents and receive a commission of 2%. In
their letter of confirmation, they said that commission was to be payable ‘in
the event of our being instrumental in the introduction of a person, ready,
able and willing who proceeds to an exchange of contracts to purchase at a
price acceptable to you’. The planning permission situation was much the same
as it had been in the previous year.
But then, on
June 22 1989, there was a meeting between Mr Hedges’ architect and officials of
the local planning authority. It would seem that at that meeting the officials
were prepared to lend their support to a plan to increase the floor area of the
building through an extension by an amount of 50%. This would have enabled the
number of residents to be increased either to 31 or 34. Of course, the
officials of the local authority do not have power to grant planning
permission. The authority and their councillors have that power. But these
officials were prepared to recommend it, and Mr Hedges’ architect regarded the
outcome of that meeting as very satisfactory. Mrs Quinn of Goadsby &
Harding had met, or at any
be interested in buying a nursing home. She telephoned him. The evidence of
that telephone conversation is to be found in what Mrs Quinn says in her
examination-in-chief:
I spoke to Mr
Wilson. He was in the market to buy a nursing home/rest home. I came across him
in 1986. He had a rest home in Bournemouth known as Balhome Grange. He sold
Balhome Grange in 1988.
I spoke to Mr
Wilson on the telephone. I felt Forest Hill House suited his requirements —
development possibilities — that is what prompted me to telephone him. We made
an appointment for Mr Wilson to view the property. I handled the transaction.
Mrs Quinn does
not there say expressly what she said on the telephone, but one must bear in
mind that she did not know that Mr Rhone had already introduced Mr Wilson to
this property some seven months earlier; so no doubt she told him a bit about
it, possibly that she felt it suited his requirements and that it had
development possibilities.
That must have
been on or about June 23, because on that day Mrs Quinn made an appointment for
Mr Wilson to view the house. Of course he had seen it seven months earlier, but
he went to view it again. Presumably, or perhaps it is inference, he was told
of the outcome of the planning meeting on the previous day. What Mr Hedges says
in evidence is:
He was
shaking with excitement. He wanted to see the plans and the letter from the
architect. He was excited about the development possibilities. He made an offer
there and then. £935,000 offer.
That, of
course, was subject to contract, but this time the property was actually sold.
Completion took place on July 31. Both agents claimed commission. Goadsby &
Harding were paid by Mr Hedges, although it is said that that was only after
they had issued proceedings. Mr Rhone, the plaintiff in this action, was not
paid, so he started this action, which was tried in Bournemouth County Court
before Judge Bates QC. On February 14 1992 judgment was given for Mr Rhone for
some £16,000 plus interest. So Mr Hedges would have to pay twice. But he now
appeals.
There is not a
great deal of dispute about the law applicable to this situation. It is to be
found in two cases. The first is a decision of this court in John D Wood
& Co v Dantata [1987] 2 EGLR 23*. In that case, too, there were
two rival estate agents seeking commission. Of course they might, on the facts,
both be entitled to it. But that does not seem to have arisen in that case. In
his judgment, Nourse LJ quoted a passage from the judgment of Forbes J in the
court below, which I also quote.
*Editor’s
note: Also reported at (1987) 283 EG 314.
I do not
consider, however, that the question here turns on whether either agent was
instrumental or assisted in the process which led finally to the sale. The
question is whether either of them has demonstrated that it was his
introduction which was the effective cause of the sale. Although the question
of who was first in the field is not conclusive, I do not consider that an
agent who effects a second introduction to the property (if that is not a
contradiction in terms) can succeed in demonstrating that such an introduction
was the effective cause of the sale, unless he can show that the interest
aroused in the purchase by the first introduction has evaporated by the time of
the second.
Nourse LJ, at
p25, said:
As I have
said, the learned judge recorded an acceptance by all three counsel that in
order to succeed one or other of the two firms had to show that they introduced
the ultimate purchaser and that such introduction was the effective cause of
the purchase. That would seem to suggest that there are two questions to be
answered, and it would certainly explain the importance which the learned judge
attached to the chief’s retention of a lively interest in the property when he
went there again on September 9. In truth I think that there is but a single
question to be answered: which of the two firms introduced the chief to the
sale? Both language and authority
established that that question must be answered by answering this further
question: which of the two firms was the effective cause of the sale? Here I would gratefully adopt the following
statement of the law in Bowstead on Agency . . . to which the learned
judge referred:
‘. . . the
fact that one agent introduces a person who ultimately purchases after a later
introduction by another agent will not necessarily entitle the first agent to
commission. In such a case the court must determine which of the two agents was
the effective cause of the transaction taking place.’
Then Nourse LJ
went on to say that, so far as introduction was concerned, what mattered was
the introduction of the purchaser to the purchase, not to the property. So
there is no dispute here that what we have to consider is: has it been shown
that Mr Rhone’s introduction was the effective cause of the sale? The second case was Chesterfield & Co
Ltd v Zahid [1989] 2 EGLR 24† , a decision of Garland J. The judge
there again quoted the passage of Forbes J at first instance in John D Wood v
Dantata and said at p25 that Nourse LJ had adopted that passage in that
case. He said the same again at p26.
† Editor’s
note: Also reported at [1989] 29 EG 75, [1989] 2 EGLR 24.
I do not think
it right to say that Nourse LJ adopted that passage from Forbes J. He merely
cited it. Nor do I think that the law is as Forbes J stated it, if indeed he
was intending to state a rule of law. The burden is on the plaintiff to show
that his introduction in any case was the effective cause of the purchase. If,
however, he shows that he was the first to introduce the purchaser, and that a
purchase followed, and if no other facts are established, then it may well be
that the judge will infer that the plaintiff was the effective cause. It can
therefore be said that the evidential burden in such a case passes to the
defendant, whether the other agent or the vendor, to prove more facts which
displace that inference. But, even in such a case, I do not think that the
further facts which the defendant then has to prove must be such as to show
that interest aroused by the first introduction has evaporated, that is to say,
entirely disappeared. It will be a matter for consideration in each case as to
how far the defendant has to go before he has displaced an inference which
might arise from the mere fact of the introduction followed by the purchase.
The judge in
the present case did say that there was an evidential burden on the defendant.
He did not spell that out, although he went on to say that the defendant must
show that the interest had evaporated. As I have said, if the judge meant that
the fact of the first introduction followed by the fact of the purchase placed
some evidential burden on the defendant, I would not have disagreed with that.
But I would not have gone so far as to say that the defendant then had to show
that Mr Wilson’s interest had evaporated before the second introduction.
Looking at the
matter afresh, it seems to me, on the evidence, that the first introduction in
this case, by Mr Rhone, in the event was the effective cause of nothing. It
produced no offer from Mr Wilson. It produced no interest from Mr Wilson. So
far as we know, Mr Wilson disappeared for a period of seven months. What is
more, during that period he was making an offer for some other property.
The second
introduction by Mrs Quinn did not in any way depend upon the first. She was not
aware that Mr Wilson had been shown the property as a result of the first
introduction. It is true that Mr Wilson may have carried in his head information
that he had obtained through the first introduction and his first view of the
house. But on this second occasion there was a different bargain on offer. Mr
Shawcross says not very different: instead of the prospect of 29 residential
places, either 31 or 35. There is then the fact that, according to Mr Hedges,
Mr Wilson was shaking with excitement and was very interested in the
possibilities of development on this second occasion. What brought that about,
one asks, if it was not the second introduction? He was not shaking with excitement, so far as
we know, at any time before that.
Mr Hedges’
credibility is criticised by the judge, but he did not reject everything that
he said. Neither side called Mr Wilson as a witness, although he was available.
So we have to make do with the evidence that we do have. That evidence shows
that, following the second introduction, there was immediate interest and
almost immediately a purchase. It does not always follow that, as the latin tag
has it, because one thing occurs after another thing it is therefore caused by
the other thing. But, to my mind, by far the most probable inference on the
facts of this case is that the introduction by Mrs Quinn was the effective
cause of the purchase and that the earlier introduction by Mr Rhone was not.
I would
therefore allow this appeal, set aside the judgment in favour of Mr Rhone and
dismiss the claim.
SIR DONALD
NICHOLLS V-C agreed and did not add anything.
Appeal
allowed with costs.
