Estate agent — Commission — Sale negotiated partly for cash and partly in part-exchange — Whether estate agent earned commission on total value of house sold
On the
instructions of the defendant, the plaintiff firm of estate agents negotiated a
sale of a house at 7 Water Lane, Chelveston, Northamptonshire, to purchasers
under a transaction by which the purchasers paid the defendant £53,000 in cash
and the defendant received in part-exchange another house at 10 Milner Road,
Finedon. The plaintiffs contended that this house was valued in the transaction
at £56,000, making a total price of £109,000. By written agency agreement
between the two parties, a commission of 3% plus VAT on ‘the purchase price on
completion of the sale to a purchaser introduced by Connell however this is
brought about’ was agreed. In proceedings in Northampton County Court by the
plaintiffs claiming £3,760.50 commission, being 3% plus VAT of £109,000, Judge
Crane held that the purchase price in the commission agreement was only the £53,000
cash element and awarded the plaintiff 3% plus VAT of that sum, namely the
judgment figure of £1,828.50. The plaintiffs appealed, contending that on a
true construction of the agreement the purchase price embraced both the cash
and the part-exchange element.
house was sold partly for cash and partly in part-exchange for a further
property was a sale within the meaning of the commission agreement. The
purchase price for that sale included both the cash sum of £53,000 and the
value of the exchange house of £56,000. Accordingly, the plaintiffs were
entitled to commission on the total sum of £109,000. Section 18 of the Estate
Agents Act 1979 was complied with in that the commission agreement set out the
circumstances upon which the commission became payable and the manner in which
it was to be calculated.
The following
cases are referred to in this report.
Davey v Paine Bros (Motor) Ltd [1954] NZLR 1122
Johnston
Fear & Kingham & Offset Printing Co Proprietary Ltd v Commonwealth [1943] 67 CLR 314
Littlewoods
Mail Order Stores Ltd v Inland Revenue
Commissioners [1963] AC 135; [1962] 2 WLR 1228; [1962] 2 All ER 279, HL
Westminster
Property Group plc, Re [1984] 1 WLR 1117; [1985] 1
WLR 676; [1985] 2 All ER 426, CA
This is an
appeal from the decision of Judge Crane in Northampton County Court who, on
March 6 1992, gave judgment for the plaintiffs, Connell Estate Agents, in the
sum of £1,828.50 against the defendant, Mr J Begej.
Andrew Davies
(instructed by Bowerman & Partners, of Bicester) appeared for the
appellants; Jeremy Pendlebury (instructed by Batcheldors, of Kempston)
represented the respondent.
Giving
judgment, HIRST LJ said: This is an appeal by the plaintiffs, Connell
Estate Agents, against the order of Judge Crane made on March 6 1992 in
Northampton County Court whereby it was ordered that there be judgment for the
plaintiffs against the defendant, Mr J Begej, in the sum of £1,828.50 plus
interest and costs. The appeal is brought by leave of another county court
judge on terms that the appellants will pay both sides’ costs whatever the
outcome of the appeal. There is also a respondent’s notice, for which we gave
leave to serve out of time.
The plaintiffs
are a firm of estate agents, as their name denotes. The defendant, who is a
builder, was their client for the sale of a house at 7 Water Lane, Chelveston,
Northamptonshire (‘Water Lane’). The sale was negotiated to purchasers
introduced by the plaintiffs, namely a Mr Hill acting on his own behalf and on
behalf of a Miss Wickens. However, the transaction was not an outright cash
sale but one partly for cash and partly in part-exchange, under which the
respondent was paid £53,000 cash by Mr Hill and Miss Wickens and received in
part-exchange another house, which then belonged to Mr Hill and Miss Wickens,
namely 10 Milner Road, Finedon (‘Milner Road’). The appellants say that this
house was valued in the transaction at £56,000, making a total price of
£109,000.
The written
agency agreement between the two parties stipulated a commission fee of 3% plus
VAT on ‘the purchase price on completion of the sale to a purchaser introduced
by Connell however this is brought about’.
The appellants
claimed in the action £3,760.50 commission, ie 3% plus VAT of £109,000 which,
as I have already said, they assert was the aggregate purchase price combining
together the cash element of £53,000 and the part-exchange value of £56,000.
The respondent contended that they were not entitled either to commission, on
the footing that there was no agreement between the parties relative to such a
transaction, or, alternatively, that commission should be at most £1,828.50, ie
3% plus VAT of the £53,000 cash element. The learned judge at the trial held in
the appellants’ favour that the agency agreement was applicable to the whole
transaction on the footing that it was a sale. But he then proceeded to hold in
the respondent’s favour that the purchase price referred to in the agreement
was only the £53,000 cash element and awarded the appellants 3% plus VAT of
that sum, namely the judgment figure of £1,828.50.
The appellants
now appeal, contending that on a true construction of the agreement, in the
light of all the circumstances, the purchase price embraced both the cash and
the part-exchange element, ie £109,000. The respondent, by his cross-notice,
challenges the judge’s findings in the appellants’ favour and contends that the
written agency agreement did not apply to the transaction in the circumstances
which eventually occurred and that the transaction was not a sale. The
cross-notice also raises a point under the Estate Agents Act 1979, which I need
not mention again until the end of this judgment. In seeking leave to serve the
respondent’s notice out of time, Mr Pendlebury made it clear that he did not
seek to disturb the judge’s award of £1,828.50 and it was on this basis that
leave to serve out of time was granted.
The case thus
turns on three main points, which are either points of law or points of mixed
fact and law.
(1) Did the agency agreement apply to this
transaction?
(2) If ‘yes’ to (1), was the transaction a sale?
(3) If ‘yes’ to (1) and (2), what was the
purchase price?
The basic
facts can be traced conveniently through the documents. Following oral
instructions, the appellants wrote to the respondent by letter dated October 18
thanking him for his instructions to sell Water Lane and confirmed the original
asking price of £119,950. They said:
We are
pleased to advise you that details have been prepared and are being circulated
to current applicants. Enclosed for your approval is a copy of these details
and should they be in any way at variance with your instructions, we should be
grateful if you would kindly inform us immediately.
Pausing there,
the particulars of sale which had been prepared were in the normal form,
showing a photograph of the property and detailed particulars of the size and
characteristics of each room and the garden etc. The letter proceeded as
follows:
We are taking
this opportunity to confirm that upon our finding an applicant who wishes to
complete the purchase of your property either direct, through advertising or
from a ‘For Sale’ board, if erected, then we shall be entitled to 3% of the
sale price plus VAT being the normal charges.
Shortly
thereafter, on November 14 1989, there was an agreement signed by both parties,
which clearly constitutes an agreement in writing. It is headed ‘Connell Agency
Agreement’. The property is identified as Water Lane. The agreement states that
the respondent agrees to appoint the appellants as agents for the sale of the
property and continues:
I understand
that Connell will be entitled to a commission fee amounting to 3 percent plus
VAT of the purchase price on completion of the sale to a purchaser introduced
by Connell, however this is brought about.
Various
potential buyers appeared on the scene and were shown around, but no firm offer
had been obtained by April 1990 at which juncture, as is common ground, the
asking price was reduced to £109,500. Also at about this time Mr Hill and Miss
Wickens appeared on the scene and shortly thereafter the idea of a
part-exchange transaction was first ventilated.
The appellants
inspected Milner Road on May 25 1990, provided particulars and valued the house
at £55,000 to £56,000. That figure was corroborated precisely by a valuation
made by Prudential, which is referred to by the learned judge in his judgment.
There then followed a very important exchange of correspondence, to which I
shall refer hereafter as the June correspondence. It starts with a letter dated
June 2 from the defendant to the plaintiffs and in that letter, so far as
relevant, he states as follows:
During October
1989, I discussed with you the sale of, and instructed you to act as selling
agent for the above property; in a conventional transaction where a property is
bought/sold for a monetary consideration, in fact a transaction of the type
that I had transacted with your company on numerous occasions in recent years.
Subsequently
I was contacted by one of your negotiators, and asked if I would also consider
an alternative type of transaction, whereby the property would be sold for a
monetary consideration and another property in part exchange. I answered that
in principle I would be interested in such an alternative transaction subject
to agreeing terms/conditions and legal and financial considerations.
He then
described the approach by Mr Hill and continues as follows:
Such
information was also presented to Mr Hill, [advice as to the legal and
commercial points to be considered] and formed the basis of subsequent
negotiations, the outcome of which was that Mr Hill, subject to contract,
agreed to purchase my property at Chelveston, for a monetary consideration of
£53,000 and the part exchange of his property at 10 Milner Road, Finedon. This
information was passed on to you on Saturday 26th May. At this stage there was
still no agreement as to your commission for this type of alternative
transaction, as such I had reserved for you a commission of 3% of the monetary
consideration.
This letter,
as I say, was dated June 2 and it almost certainly crossed a letter of June 4
1990 from the appellants to the respondent which states at follows:
Following our
recent conversation in respect of your property, we are writing to confirm your
acceptance of the offer of £109,000 subject to contract made by Mr D M Hill and
Miss S Wickens.
We have
requested a preliminary deposit from the purchasers and will of course let you
know when this is to hand.
They give the
name of the solicitors and there is then a very important paragraph:
Whilst
writing we enclose a copy of our sales particulars used in effecting the sale
to Mr D M Hill and Miss S Wickens, and we would be grateful to be advised of
any significant inaccuracies.
Enclosed with
that letter is a document which, in my judgment, is of critical importance in
the case. It is headed ‘Confirmation of Sale’. It then gives the address of the
property as Water Lane and states:
Price:
£109,000.00
Tenure:
Freehold
Vendor: Mr
Begej
Vendor’s
Solicitors . . .
Purchaser: Mr
D M Hill & Miss S Wickens.
Purchaser’s
Solicitors . . . Mortgage arrangements . . .
Possession
date: As soon as possible
There are
remarks at the bottom, which are also of importance:
Vendor to
receive ownership of 10 Milner Road, Finedon plus balance of £53,000.00.
It will be
noted that both the letter and the confirmation of sale explicitly specify the
price of Water Lane as £109,000 and the latter document spells out in detail
the make-up of that figure, namely ownership of 10 Milner Road plus balance
(emphasis supplied) of £53,000; clearly, on any normal construction, this
signifies that £53,000 is the balance of the £56,000 attributable to Milner
Road, making a total of £109,000. A copy of the confirmation of sale was also
sent to Mr Hill and Miss Wickens, or their solicitors.
There was no
reply to this letter, nor was there any query of the figures specified for the
price, or their make-up, either from the respondent or from Mr Hill and Miss
Wickens at any subsequent stage.
Ten days
later, by a letter dated June 15, the appellants answered the letter, which I
have already quoted from the respondent dated June 2, setting out the history
of the transaction in terms which I do not need to read, apart from para 5:
5. At all
stages in the prospective negotiations between ourselves, Mr Hill and your good
self, it was obviously very difficult to assess a true purchase price of 7
Water Lane, Chelveston, because this depended upon the assessed value of 10
Milner Road, Finedon, and the difference between the two.
In my various
conversations with you I have pointed out that in effect we would have to
assess a total purchase price as this was the figure which our commission would
be charged against. To this end, if an assessed value of £56,000.00 is made on
10 Milner Road, and the monetary consideration of £53,000.00 added to this,
then the total overall value is £109,000.00.
They then
requote the agency agreement and the letter of October 18, and make it clear
that they will be charging 3% plus VAT on the total sum of £109,000.
The paragraph
which I have quoted conveys the same information as that contained in the
confirmation of sale. No answer was received from the respondent to that
letter.
Matters then
proceeded, and the sale was completed without any further comment from any
relevant party as to the price or the elements of which it was made up.
However, on September 14 1990 the respondent’s solicitors tendered the sum of
£1,828.50 in full and final settlement of the appellants’ invoice, which had
been for the larger sum based on commission on £109,000. That cheque was
returned by the appellants.
The action
began in Northampton County Court in December 1990 and the trial took place on
March 5 and 6 1991. The witnesses were
Northamptonshire with which we are concerned, who did a great deal of the work,
including visiting Milner Road) and the respondent.
The relevant
parts of their evidence can be traced through the judgment of the learned judge
given on March 6 1991.
Having read
the agency agreement and referred to the confirmatory letter, the learned judge
stated as follows:
The defendant
[that is the respondent in the Court of Appeal] says that there was an oral
agreement that the plaintiffs were to seek only a purchaser for cash, that is,
a purchaser who would pay by some means a money price. Mr Hodgson denies any
such agreement. I find that the written agreement represented the contract and
that there was no attempt to modify it orally. The simple truth is that neither
man envisaged at that time anything other than a purchaser for cash in the
sense I have referred to.
He then said:
The evidence
of the two witnesses about some subsequent events differs. Where it differs I
prefer in general the defendant’s evidence. He was able to give a much more
detailed account of certain crucial events than was Mr Hodgson.
That
conclusion is not challenged by the appellants. The learned judge then went on
with the history as follows:
Some interest
was shown in the property, but no purchasers emerged at an acceptable price. It
is not disputed that in April the defendant indicated to Mrs Johnson [who was
working for the appellants] that he would reduce the asking price to £109,500.
In May the subject of ‘part-exchange’ was raised.
He then
referred to the arrival on the scene of Mr Hill and Miss Wickens and recorded
that on May 25 Mr Hodgson visited Milner Road, assessed its suitability as a
house to be taken in part-exchange, and assessed its value as £55,000 to
£56,000. He then went on to discuss the negotiations and said:
It was
probably very shortly after [in the second half of May] because Mr Hodgson made
out on the 25th May a ‘sales progress’ sheet recording a price of £109,000,
with the comments ‘vendor to receive ownership of 10 Milner Road, Finedon +
balance of £53,000’.
This sales
progress sheet was an internal manuscript document which never left the
appellants’ offices until discovery in the action. However, it was later typed
up and formed verbatim the confirmation of sale which was, as I have already
observed, forwarded both to the respondent and to Mr Hill and Miss Wickens.
The learned
judge proceeded to resolve a conflict of evidence between the two witnesses as
to whether there was in May an express agreement that commission should be
calculated on the figure of £109,000. On that issue he preferred the
respondent’s evidence and that finding is not challenged by the appellants. If
there had been such an oral agreement at that stage, the appellants would have
had an open and shut case before the judge and we would not be here today.
The learned
judge then went through the June correspondence, but mentioned only in passing
and without comment the confirmation of sale. He then focused on two questions
and said:
. . . two
questions arise. First, in the words of the agreement, did ‘completion of the
sale to a purchaser’ take place? Second,
if it did, what was the ‘purchase price’?
He then made findings
of fact which are important and which, for reasons that I will give later, I do
not find entirely reconcilable:
I have found
that I do not accept that £109,000 was ever agreed as a total value between the
defendant and Mr Hodgson. There is no evidence that £109,000 was ever agreed as
a total purchase price between the defendant and Mr Hill. The only direct
evidence of the agreement about the properties is from the defendant. I find
that £53,000 was probably arrived at because the parties subtracted £56,000
from £109,000, but they did not choose to express their final agreement in
terms of a total purchase price.
The learned
judge then answered his first question as follows:
I have not
been referred to any authorities, although at my suggestion I looked with
counsel at sections 2 and 6 of the Sale of Goods Act 1979 and the notes to
section 2 at p110 of Halsbury’s Laws, 4th ed. It seems to me, on general
principles, that a transaction in which two properties were exchanged and in
which money played no part or a minimal part would not be a sale. However, the
fact that the consideration does not consist solely of money does not prevent
the transaction being a sale.
In my
judgment, in the context of the commission agreement, the agreement between the
defendant and Mr Hill was a sale. The money element of £53,000 played a
sufficiently large part for that to be the correct conclusion.
That is the
first of the important findings of mixed fact and law and it is that finding in
the appellant’s favour which is challenged by the respondent in his
cross-notice.
The learned
judge then proceeded to answer his second question:
£109,000 was
very nearly the last asking price of 7 Water Lane. It was the value put on it
by Mr Hodgson. It is on any view close to the value implied by Mr Hodgson’s
valuation of 10 Milner Road at £55,000 to £56,000 and the Prudential’s
valuation of 10 Milner Road at £55,000. However, the commission agreement
speaks of a ‘purchase price’. The essence of a price is a sum of money.
Part of the consideration here was a property. I do not regard the estimated
value of a property in such circumstances as a price or part of a price. It
would be different if a price of £109,000 had been agreed, with an option to
substitute the property for part. There is the analogy of buying a car, when an
agreed value is put on a car traded in against an agreed purchase price.
I conclude
that there was no ‘purchase price’ of £109,000. However, I regard the sum of
£53,000 as properly described as a ‘purchase price’, although it was not the
sole consideration. [emphasis supplied]
The sentence
to which I have added emphasis is the judge’s ratio in law for his answer to
his second question. It is criticised by Mr Davies as being unsound in law and
he also challenges the learned judge’s evaluation of the evidence as to the
purchase price, particularly in the light of the terms of the confirmation of
sale.
The learned
judge finally deals with some points under the Estate Agents Act 1979, to which
I need not refer, save to say they were resolved in the appellants’ favour.
I must first
consider the two questions raised in the cross-notice of appeal, namely did the
agency agreement apply to the transaction and was the transaction a sale? In my judgment, these two questions go
together since, if the transaction is not a sale, plainly the agency agreement
cannot apply because there would have been no ‘completion of a sale to a
purchaser introduced by Connell’. But, if the transaction is a sale, then on
the construction of the words that I have just read it plainly does apply. The
judge’s conclusion was that a part-exchange transaction such as was concluded
here, with a substantial money element (those are his words), does constitute a
sale.
Mr Pendlebury
submits that this conclusion is wrong. First, he argues that the agreement must
be construed in its matrix, and that originally both parties clearly
contemplated that the sale would be for cash and therefore that must have been
what they intended.
Let me say at
once that, in my judgment, this is not a viable argument, since on elementary
principles the intention of the parties must be derived objectively from the
terms of the agreement itself, and not from extraneous evidence as to their
subjective intention at an earlier stage. I therefore reject that submission,
which is not in reality seeking to establish a matrix, but rather seeking to
interpret the agreement impermissibly by reference to extraneous evidence.
Mr Pendlebury
then submits that in everyday language ‘sale’ connotes a sale for cash. In
support of that argument he relies on two authorities. The first is the case of
Re Westminster Property Group plc, a decision of the Court of Appeal reported
at [1985] 1 WLR 676. The facts related to an agreement for the purchase of a
company by means of an exchange of shares with no money passing; in other
words, it was an outright exchange transaction. In giving the judgment of the
court (Ackner, Slade and Purchas LJJ), Slade LJ stated as follows at p683:
Neither the
Act of 1948 nor the Act of 1981 contains any definition of the words ‘sale’ or
‘sold’. Both Mr Potts, on behalf of Milbury, and Mr Oliver, who on behalf of Mr
Withers supported his argument in this context and added some further points of
his own, accepted that in ordinary legislative
words such as ‘sold’ denote an exchange of property for cash and not for any
other form of property.
The other case
is the case of Littlewoods Mail Order Stores Ltd v Inland Revenue
Commissioners [1963] AC 135. This was a case relating to liability for
stamp duty in relation to a deed of exchange of properties, again without any
cash consideration; ie another outright exchange of two properties or groups of
properties. Lord Simonds in his speech said at p151:
If stamp duty
is to be assessed on the instrument as a ‘conveyance or transfer on sale’ an
extended meaning must be given to the words ‘on sale’. For neither in form nor
in substance is the exchange a sale according to ordinary legal terminology.
I fully accept
that an outright exchange of properties, without any cash element, with which
both of those cases was concerned, cannot properly be categorised as a sale and
indeed is usually categorised in the text books as a barter transaction. But I
do not think either of these authorities is in point when considering the
part-exchange transaction with which the court is here concerned. Neither of
them were focusing on part-exchange and they are therefore distinguishable on
that ground.
Mr Pendlebury
also cited section 2 of the Sale of Goods Act 1979, which provides as follows:
A contract of
sale of goods is a contract by which the seller transfers or agrees to transfer
the property in goods to the buyer for a money consideration, called the price.
That must be
read in the context of section 1 of that Act, which says that the Act applies
to contracts of sale of goods; in other words it is defining the ambit of the
Act. That shows, to put it no higher, that it is debatable whether the Sale of
Goods Act applies to a part-exchange transaction, though it is not necessary to
decide that in the present case. This does not mean a part-exchange transaction
cannot be treated for other purposes, and especially in relation to the
construction of a document of the present kind, as a sale. Indeed, contrary to
Mr Pendlebury’s argument, I would have thought that in the 1990s a
part-exchange transaction would be regarded in everyday language as a sale,
seeing that secondhand cars, washing machines and other items of domestic
equipment are traded-in daily in part-exchange transactions for purchases of
new vehicles or equipment.
The leading
text books are unanimous that a transaction of this kind can constitute a sale.
In Professor Atiyah’s Sale of Goods 8th ed 1990 at pp8-9 the learned
author states as follows:
The proper
characterisation of a contract depends in the last resort on the intention of
the parties, so it may well be that, if the parties envisaged a transaction as
a sale and used terminology appropriate to a sale, the contract would be held
to be a sale even if the substantial consideration is supplied in goods rather
than money. In the motor trade, for example, if the transaction is treated by
the parties as a sale, it seems improbable that the courts would treat it as
anything else, even if the dealer’s allowance for the traded-in car does not
fall far short of the price of the new car.
There are similar
statements in other leading textbooks, which I do not need to quote, viz:
Benjamins Sale of Goods 4th ed, para 1-039 and 2-043, and Chitty on
Contracts 26th ed vol 1 p1138 para 4691. Both Professor Attiyah and Benjamin
cite in support of their proposition the decision of North J in the New Zealand
case of Davey v Paine Bros (Motor) Ltd [1954] NZLR 1122 at p1129.
I consider
that to be the correct approach and I have therefore concluded that the judge’s
finding in answer to the first two questions was correct, subject only to the
qualification that I do not think it necessary that the cash element should be
large or substantial, as the judge seemed to indicate, provided it is more than
merely nominal.
I now turn to
the final question, which is the subject-matter of the appellants’ appeal: what
was the price?
The first
issue is, was the judge right, as Mr Pendlebury submits he was, in his
conclusion in principle that ‘the essence of a price is a sum of money’? Mr Davies submits that the learned judge was
wrong and that, if the consideration consists partly of cash and partly of
part-exchanged property, there is no justification for segregating the latter
from the former and reaching the artificial result that only the cash element
constitutes the price. He relies in support of this contention on an Australian
case, Johnston Fear & Kingham & Offset Printing Co Proprietary Ltd v
Commonwealth [1943] 67 CLR 314, which was concerned with the validity of
a regulation for the acquisition of land compulsorily in wartime. In the course
of his judgment Starke J, when dealing with the manner in which the
Commonwealth fixed the price of items to be compulsorily purchased, said at
p327 as follows:
Price is the
sum of money or its equivalent at which a thing is valued . . .
Although the
facts are far removed from the present case, I think that quotation is
pertinent, showing, as it does, that the price in the learned judge’s view was
money or money’s worth. This, Mr Davies contends, is also consistent with the
definition in section 205 of the Law of Property Act 1925 of the word
‘purchaser’, which is to be found in subsection (xxi) of section 205 as
follows:
‘Purchaser’
means a purchaser in good faith for valuable consideration and includes a
lessee, mortgagee or other person who for valuable consideration acquires an
interest in property except that in Part I of this Act and elsewhere where so
expressly provided ‘purchaser’ only means a person who acquires an interest in
or charge on property for money or money’s worth . . .
The rest of
this definition is not relevant to the present case.
Mr Pendlebury
supports the judge’s conclusions and raised the same arguments mutatis
mutandis to those that he advanced in relation to the construction of the
word ‘sale’, which are, in my judgment, equally unsound in this context, since
in part-exchange it is wholly artificial to divide the consideration and
segregate the cash element from the part-exchange element.
I think Mr
Davies is right when he says that ‘for valuable consideration’, in subsection
(xxi), is an even wider test than money or money’s worth, and, in my judgment,
the test of money or money’s worth lends support to the dictum of Starke J in
the High Court of Australia, with which I agree.
I have
therefore come to the conclusion that the learned judge erred in his conclusion
that the essence of price is a sum of money, which was reached without the
benefit of the full citation which we have been given.
I now turn to
the application of the words in the agency agreement to the actual
circumstances which occurred. Mr Davies attacks the learned judge’s conclusions
on the ground that they are contradictory and appear to attach no, or at least
insufficient, weight to the confirmation of sale. This, he says, shows clearly
that the price of Water Lane was indeed £109,000, made up in part of Milner
Road with a balance of £53,000, the word ‘balance’ clearly showing that Milner
Road was brought in at £56,000.
Mr Pendlebury
supports the learned judge’s reasoning and submits that the cash element of
£53,000 only was agreed. There was, he contends, no agreement on the other
essential elements, namely the value of Milner Road and the total price for
Water Lane. He also attaches great weight to the judge’s conclusion, reiterated
more than once, that there was no final agreement as to the amount of the total
purchase price.
In resolving
this issue the starting point must be the documents, which the court is in as
good a position as the learned judge to interpret. In my judgment, Mr Davies’
construction of these documents is the correct one. The confirmation of sale
states explicitly that the price of Water Lane is £109,000, made up of two
elements, 10 Milner Road and the balance of £53,000. The use of the word
‘balance’ clearly indicates that an actual value of £56,000 was fixed for
Milner Road and not merely an estimated value, as the learned judge described
it. The confirmation of sale was sent both to the respondent, and to Mr Hill
and Miss Wickens, and there was no response from either quarter, let alone any
contradiction. The transaction went through on this basis, thus, in my
judgment,
sale. Although, as I have already noted, the learned judge referred in passing
to that document when reciting the history, I do not think, with respect, that
he fully appreciated its significance, especially seeing that it accorded with,
and indeed confirmed, his express finding that £53,000 was probably arrived at because
the parties subtracted £56,000 from £109,000. That document, coupled with that
finding of fact as to the mode of calculation, seems to me conclusive as
demonstrating that the total price of Water Lane was in fact agreed at £109,000
made up of the value of £56,000 for Milner Road and the balance of £53,000
cash. Consequently, I do not think that the learned judge’s conclusion that no
total purchase price was agreed can stand.
I should add
for completeness that I am unable to accept Mr Pendlebury’s argument that 10
Milner Road cannot constitute part of the price on the ground that, if Mr Hill
and Miss Wickens had refused to transfer Milner Road, the respondent’s only
remedy would have been a claim for specific performance. In my judgment, in
such a contingency the respondent would have been entitled to sue for the
balance of the agreed purchase price of £109,000, viz £56,000.
It follows
that under the agency agreement the purchase price, upon which the 3%
commission plus VAT is to be calculated, is £109,000, made up of the two
elements which I have already described.
This
conclusion is fully in accordance with the practical reality of this
transaction, since the total consideration included both elements and, in my
judgment, it would be thoroughly artificial to ignore the value of Milner Road,
which formed more than 50% thereof. This view is well illustrated by Professor
Atiyah’s example, if one postulates a part-exchange transaction for a new motor
car, as follows:
List price of
new car in dealer’s showroom £10,000; Trade-in value of old car £9,000; Cash
balance paid £1,000.
It would under
that illustration be artificial to treat the price as £1,000 and not £10,000.
This
conclusion is also in accordance with commercial good sense, since it was the
respondent’s and not the appellants’ choice whether to accept part-exchange.
That choice in no way reduced the amount of work done by the appellants;
indeed, to some extent it increased it, since they had to view, compile
particulars of and value Milner Road.
I do not
accept Mr Pendlebury’s argument that this would result in the appellants being
paid twice over for Milner Road, since there was no agreement that the
appellants would be instructed to sell Milner Road (even assuming that the
respondent decided to do so without improvement or attention), the respondent
being free either to instruct other agents or to put it in the hands of several
agents. In any event, even if the appellants had been immediately instructed to
find a buyer for 10 Milner Road and had succeeded in doing so, there would have
been a separate extra item of work justifying further commission.
Finally, I
must refer briefly to Mr Pendlebury’s submission that the requirements of
section 18 (2)(a) and (b) of the Estate Agents Act 1979 was
infringed, viz:
18(1) Subject to subsection (2) below, before any
person (in this section referred to as ‘the client’) enters into a contract
with another (in this section referred to as ‘the agent’) under which the agent
will engage in estate agency work on behalf of the client, the agent shall give
the client —
(a) the information specified in subsection (2)
below; (b) . . .
(2) The following is the information to be given
under subsection (1)(a) above —
(a) particulars of the circumstances in which the
client will become liable to pay remuneration to the agent for carrying out
estate agency work;
(b) particulars of the amount of the agent’s
remuneration for carrying out estate agency work or, if that amount is not
ascertainable at the time the information is given, particulars of the manner
in which the remuneration will be calculated; . . .
In my
judgment, subsection (2)(a) is complied with, since in the agency agreement the
circumstances are specified as being the completion of sale of the property
which, for the reasons already given, included on its proper construction
part-exchange. Subsection (2)(b) is complied with, because the manner in which
remuneration will be calculated is specified in the same document as 3% of the
purchase price plus VAT. It goes without saying that the actual purchase price
could not be specified at that stage, since that depended on whether the
appellants were successful in effecting a sale and, if so, what price they
managed to obtain. It follows, in my judgment, that there was no breach of
section 18.
For all these
reasons I would allow this appeal and enter judgment for £3,760.50 plus
interest in favour of the appellants.
BUTLER-SLOSS
LJ agreed and did not add anything.
Appeal
allowed with costs.
