Purchase of property – Buyer’s agent – Contract – Defendant claiming property purchased by private agreement – Claimant seeking commission on sale under agency contract – Whether claimant being effective cause of sale – Whether effective cause principle applying – Claim allowed
The claimant was a buyer’s agent, which had been engaged by the defendant to assist him in purchasing a house. Following a meeting with the claimant’s representative (F), the defendant paid the required registration fee of £500 and signed a copy of the claimant’s terms and conditions. Clause 3 of the contract provided that, in addition to the registration fee, the claimant would charge a fee of either 1.5% of the purchase price or 15% of the negotiated saving between the asking price and the price actually paid for any property that the claimant had introduced on which contracts were exchanged during the continuance or within one year after the date of termination or expiry of the agreement.
F prepared a list of properties that were likely to be of interest to the defendant, including the property that the latter eventually purchased, in January 2006, for £2.3m. On the basis of that introduction, the claimant sought payment of £40,537 including VAT by way of commission in accordance with clause 3. However, the defendant claimed that the property had been purchased by private negotiation with the vendors in which the claimant had taken no part so that it had not been the effective cause of the sale and was not entitled to a fee.
The claimant brought proceedings in the county court to recover the sum claimed.
Held: The claim was allowed.
The court’s role was to construe the express terms of the contract to which the effective cause doctrine was subject. In the absence of factors pointing in clear terms to the contrary, it would be appropriate to imply into an agency contract a requirement that the agent should be the effective cause of the sale. The correct approach was to look at the language against the relevant factual background and decide whether, in that context, the language that the parties had used required the implication of the relevant term: Brian Cooper & Co v Fairview Estates (Investments) Ltd [1987] 1 EGLR 18; (1987) 282 EG 1131 and Favermead Ltd v FPD Savills Ltd [2005] EWHC 626; [2005] PLSCS 48 considered.
A vendor of a property that might instruct more than one agent was unlikely to have agreed to a contract which involved more than one agent obtaining commission. The effective cause doctrine would usually prevent such a result. The normal contract between a vendor and selling agent involved no obligation on the agent to take positive steps to carry out any specific work that also militated towards the effective cause implied term before the agent could receive payment: Raja v Rollerby Ltd [1997] PLSCS 143 considered.
However, the effective clause doctrine was less likely to apply and the implication less likely to be necessary in contracts outside the norm because either a conventional seller/agent contract was not in place or the specific wording as to when payment was due rendered such a term unnecessary.
On the facts of the present case, a term as to effective cause could not be implied. Not only was it inconsistent with clause 3 but the claimant was a buyer’s agent and the buyer would be charged a fee in any event, namely the £500 registration. The contract contemplated that no other buyer’s agents would be required to do work for the seller. Thus, the rationale for an effective cause implication was missing.
Hugh Sims (instructed by Michelmores, of Exeter) appeared for the claimant; Philip Flower (instructed by Caplans, of Harrow) appeared for the defendant.
Eileen O’Grady, barrister
