Commission — Whether commission agreement existed — Whether commission-earning event occurred
The plaintiff
claimed that by an oral agreement made between himself and a Mr Carr, the
treasurer of the defendant company, the defendants agreed to pay the plaintiff
a commission if he found a purchaser for the defendants’ premises at Milton
Keynes for about £30m, that commission being on the ‘normal basis’ which the
plaintiff thought would be 1% of the sale consideration plus 10% of the rent
following a lease-back. The plaintiff, who claimed £250,000 plus VAT, contended
that he introduced a Mr Halabi as a prospective purchaser. The plaintiff gave
evidence that the oral agreement was made at a lunch between himself and Mr
Carr. The defendants denied any such oral agreement and further contended that
in any event Mr Halabi was never ready, willing and able to purchase, because
for financial reasons the sale did not take place.
a to the existence of an agreement was not accepted. Contrary to the invariable
practice in this field of professional activity, the agreement, if there was
one, was never confirmed in writing by the plaintiff. Even if there had been an
agreement, Mr Halabi was never able to finance the purchase price and therefore
was never ‘able’ to purchase. The commission-earning event therefore never
occurred.
No cases are
referred to in this report.
This was a
claim for an agent’s commission by the plaintiff, Roy Anthony Farrant, against
the defendant, Unisys Europe-Africa Ltd.
Anthony
Connerty (instructed by Radcliffe & Co) appeared for the plaintiff; Martin
Hutchings (instructed by Norton Rose) represented the defendants.
Giving
judgment MR PATRICK BENNETT QC said: The defendants in this action are
an international company, hence their eponymous name. In the early part of 1990
they experienced a cash-flow problem. They decided to sell part of the property
that they owned and then to lease it back. The property consisted of a double
site at Milton Keynes. One was a purpose-built residential training centre for
Unisys (as I shall call them) and a combined office and warehouse building, the
logistic centre.
The
plaintiff’s claim is based on an oral contract, which he alleges was made between
himself and the treasurer of the defendant company, Mr Carr.
The plaintiff
carries on business as a surveyor, valuer, property consultant and project
manager. He alleges that Mr Carr entered into an oral agreement initially, but
was also made partly in writing that he should act as the defendants’ agent in
the sale and lease-back of the property to which I have referred. He alleges
that he produced a purchaser ready, willing and able to purchase the property
and he was therefore entitled to the agreed remuneration for the performance of
his contract, this being 1% of the purchase price. He also could have, but did
not claim, 10% of the rent passing on the lease-back. As a result of that, he
claims he is entitled to the sum of £287,500 by way of damages for failing to
pay the commission due, that sum being composed of £250,000 plus VAT. He also
claims interest thereon.
The
defendants’ answer is two-fold. They say first of all that no such agreement
was entered into. Second, even if it was the person whom the plaintiff
introduced as a prospective purchaser, Mr Halabi, was not a person who was
ready, willing and able to purchase and by reason of that fact, the proposed
purchase which had been negotiated with Mr Halabi did not reach fruition and
the sale did not take place. Therefore, even had there been an agreement with
the plaintiff, he had not produced a purchaser who was ready, willing and able
to purchase.
The evidence I
received consisted of witness statements verified by those giving evidence, the
pleadings and interrogatories, the oral evidence of the witnesses and a large
bundle of documents. I will, for that reason, not go into great detail as to
the evidence I heard and read.
The evidence
of Mr Farrant was to the effect that he had known Mr Tom Goddard (a director of
a company called Metro Advertising Group) and he had advised Mr Goddard on
various property matters and he, Mr Goddard, approached Mr Farrant in
connection with a portfolio of properties. According to Mr Farrant, he had also
approached Mr Carr in order that Mr Carr would assist in the acquisition of the
property. There was a meeting with them and thereafter a meeting was arranged
between Mr Carr and Mr Farrant over lunch at the Chiv Wine Bar in Wigmore
Street on February 28 1990. At that meeting Mr Farrant said that they discussed
the sale and lease-back of Unisys’ premises at Milton Keynes and that Mr Carr
asked him if he could introduce a purchaser for a £30m sale and lease-back
transaction.
Mr Farrant
said that he could; he knew a number of institutions and private investors who
might be prepared to consider the proposition. Mr Carr told him in strict
confidence that he was talking about Unisys’ own training and logistic centre
at Milton Keynes and, said Mr Farrant in his statement which he verified on
oath.
I asked in
the broadest terms about payment of fees. Mr Carr told me that if I found a
purchaser then I would be paid fees on the normal basis.
There was no
investigation of what ‘normal basis’ meant, but Mr Farrant said he always understood
that meant that he would be paid 1% of the purchase price, plus 10% of the rent
passing.
Mr Farrant
thereafter used his best endeavours to obtain a purchaser, and there are a
number of letters which can be found in the bundle and they are all set out in
the reamended statement of claim showing how the matter went.
Eventually in
May or early June Mr Farrant was approached by Finnemore & Jones, who were
surveyors. They asked whether they could approach a client of theirs whom they
knew might be interested and Mr Farrant agreed. As a result Mr Simone Halabi
came onto the scene. He was a gentleman who operated through various companies,
one of which was called Statemile Ltd.
As a result of
that Mr Farrant said he was instrumental in bringing a meeting at Unisys’
offices on June 20 between Mr Carr and Mr Jones and Mr Finnemore on behalf of
Mr Halabi. There was an inspection of the site by Jones & Finnemore (which
Mr Carr was neither present at nor knew about), and then a proposal was put
forward to Mr Carr in a letter from Derek Jones. Prior to the meeting (which Mr
Farrant said originally was on November 8 1990, but having found from the
telephone records of Mr Carr that was not a possible day), he said he was
telephoned by Mr Carr on his mobile car telephone.
He informed me
he was on his way to the meeting and wished to clarify the position with regard
to my firm’s fees.
During the
course of that telephone conversation with Mr Carr I stated my firm’s fee would
be 1% of the contract price plus 10% of the rent passing. He was not surprised
because those terms represented what is regarded as the normal terms and I had
already been told at the meeting at Chiv Wine Bar that I would be paid the
normal fee.
However, in
the course of that telephone conversation I said to Mr Carr that I was prepared
to accept 1% of the contract price and that I would waive any fee based on the
rental. I made this concession as I told Mr Carr, because of the size of the
transaction. Mr Carr said that my concession seemed to be very fair and he and
I agreed during the course of that telephone conversation that the fee payable
would be 1% of the contract price.
Mr Carr gave
evidence in the form of a written statement signed and orally. He said that he
had met Mr Farrant socially once or twice through Mr Goddard and he accepts
that he had lunch on December 16 with Mr Farrant but does not specifically
recall the lunch.
However, he
does recall the meeting on February 28 1990 in Chiv’s Wine Bar. He says,
contrary to what Mr Farrant said, that he had not solicited the meeting, but
went along to listen to proposals that the plaintiff might have. ‘Mr Farrant
indicated he might have somebody interested in purchasing the Milton Keynes
property’. However, according to Mr Carr, most of the meeting was spent
discussing non-business subjects, although Mr Carr indicated that if Mr Farrant
came up with a purchaser he might be interested if the purchaser’s terms were
acceptable. There was, according to Mr Carr, no question of discussing the
terms of Mr Farrant’s engagement. He (Mr Carr) was unaware that the seller
ordinarily pays commission to an estate agent and he thought at the time that a
single commission would be paid by the buyer. This is the first time he had
ever been involved in selling commercial properties, but he accepted that he
had left the door open for subsequent negotiations in relation to a formal
arrangement between Unisys and Mr Farrant. He says he does not recollect
mentioning a figure of £300m for the purchase of the property and he had no
previous course of dealing with the plaintiff before this. He certainly kept in
contact following February 28 and he accepts also that he did telephone Mr
Farrant on his car telephone but he said the purpose of that call only was to
get more details about Mr Halabi and his background and there was no question
of any discussion with Mr Farrant as to fees to be paid to him. At no time did
he ever agree to pay commission either to Derek Jones or to Mr Farrant and he
himself never thought that he had entered into any contract with him. There is,
therefore, a clear conflict between those two witnesses on this vital aspect of
the case.
I did not find
Mr Farrant a witness on whose recollection I could place reliance where his
evidence conflicted with that of Mr Carr.
view is confirmed by a number of matters which have corroborated that view,
some of which I recount. I would have expected a professional man like Mr
Farrant to conduct his affairs in a professional manner, that is to make
written records as to fees agreed and the like. This was, according to the
evidence of Mr Derek Jones FRICS and of Mr Andrew MacLeod FRICS, an expert
called by the plaintiff, the invariable practice in this field of professional
activity. Indeed, it is something which one would, from one’s ordinary
experience of life, expect. No record was kept by Mr Farrant of this agreement
or the terms of the remuneration. This was a deliberate choice on his part
which I find puzzling. He sought to justify it on the basis that this was a
confidential matter; he did not feel it right to put anything in writing. I do
not think that excuse will wash. It did not inhibit him from writing numerous
letters to Mr Carr marked with ‘Strictly Private’, ‘Addressee Only’,
‘Confidential’ and the like and I cannot myself understand why, once these
terms had been agreed, he had not written a letter to Mr Carr not necessarily
disclosing the whole nature of the transaction but saying: ‘Further to our
conversation, I record our agreement as to my remuneration’. Not a word of
that.
Mr Farrant’s
evidence, to my mind, was not wholly convincing when he started to talk about
the dates when he had this mobile telephone conversation with Mr Carr. The
defendants disclosed telephone records which showed that his original date was
wrong. He then said to me that the call was made on November 19, and when I
happened to observe that the telephone record showed only a 2 unit call on that
date he then said: ‘Well, it must have been the 20th November’. Of course, the
record shows that a call of 24 units was made. To my mind it was a somewhat
procrustean exercise. He displayed, to my mind, a remarkably poor memory. His
attention was drawn to a letter he wrote, on February 28 to Mr Carr:
Dear Jim,
The surveyors
you require are Messrs Goddard & Smith and there is one man there that
makes the decisions in respect of RX. If you telephone me tomorrow I will give
you the balance of information.
Thank you
very much for joining me today.
He could not
remember what that was about. At p206 is a letter which Mr Farrant wrote
claiming payment of his fees.
It contains in
the last paragraph:
I will send
you my invoice within the next seven days.
That invoice
has not surfaced, nor has a copy of it. Mr Farrant told me in evidence that he
would not have any difficulty overnight in getting a copy. He was unduly
optimistic. It is an important document in one sense because if an invoice was
raised including VAT this would mean that the VAT was payable whether or not
the invoice was paid. However, as I say, we have not seen that invoice.
Though the
Estate Agents Act 1979, which required at the time oral explanation of the
estate agents’ terms and conditions, had not been translated by that stage into
a requirement for returns to be reduced in writing, I again find it a little
surprising that Mr Farrant did not avail himself of that clearly recommended
practice. Without going through the further and better particulars and
interrogatories I can make the comment, I think, that they do not entirely fit
in with his evidence. He referred to his remuneration being based on a scale of
charges. That scale of charges was no longer in operation at the time the
alleged agreement was entered into, those being the scale of charges of the
Royal Institution of Chartered Surveyors, which was not in effect at the time.
However, the
view I have formed of the evidence of Mr Farrant was wholly confirmed by the
view I have formed of the evidence of Mr Carr. I found him a precise, accurate
and reliable witness upon whose evidence I am confident I can place reliance
where it conflicts with that of the plaintiff. I have in summary form indicated
the basis of his evidence which I accept and further detail can be found by
reading the written record.
He accepted
that Mr Farrant did introduce a purchaser, that it was as a result of Mr
Farrant’s efforts that that came about. I use the word ‘purchaser’ in the lay
sense and not somebody who in fact was ready, willing and able to purchase. Mr
Connerty described the efforts that Mr Farrant put in in order to obtain this
introduction as ‘tremendous’. I do not think I could myself accept that as an
applicable epithet as to the efforts, but Mr Carr accepted that it was as a
result of Mr Farrant’s efforts that Mr Halabi came on the scene. As I say, I am
persuaded to accept the account that Mr Carr gave me.
I heard from
Mr Goddard, whom I accept as a witness upon whose recollection I can base my
judgment. It is right that he was a business associate of Mr Carr, but I accept
his account of the meeting in his offices at Duke Street, attended by Mr Carr
to advise Mr Goddard on questions of tax. No mention was made at this meeting
or previously of Mr Farrant’s terms of business and Mr Carr was introduced to
Mr Farrant at the meeting as a personal friend only.
I am not
satisfied there was any oral contract between Mr Farrant and Mr Carr, nor am I
satisfied that Mr Carr conducted himself in such a way that it was clear that
he had entered into an agreement to employ the plaintiff for reward, albeit an
unspoken agreement. The letters which passed and the activities which occurred,
in my view, are consistent with the plaintiff acting as what has been described
by a witness whom he called (Mr Jones) ‘a runner’, that is somebody who seeks
to bring parties together in property deals and hopes to obtain a share of the
commission which an agent has earned. I am not persuaded that Mr Carr ever
intended to or did in fact employ the plaintiff as his agent. Mr Carr believed
(and I believe reasonably) that what Mr Farrant was doing was with a view to
obtaining remuneration from the purchaser’s agent. References by Mr Jones and Mr
Finnemore to Mr Farrant as ‘your agent’ (that is Mr Carr’s agent) do not
persuade me to change this view.
Mr Carr
believed that the plaintiff would seek his remuneration from the eventual
purchaser. This was not an unreal belief on his part. I accept that is what he
thought, and it is a fact that according to Mr Jones, who was called on behalf
of the plaintiff, about 50% of his dealings with the plaintiff were on a ‘no
fee’ basis and the plaintiff’s services would be rewarded by a share of the
fees earned by Mr Jones. I am satisfied that this is also what the plaintiff in
this case hoped. Unfortunately, in spite of the substantial efforts that Mr
Jones and his firm put in, he did not get a penny piece for his efforts. My
belief that the plaintiff thought that in the event of a successful sale he
would obtain his remuneration from a share of Mr Jones’ fees or commission
explains why there was no written record by the plaintiff of this alleged
agreement or the terms of the remuneration which he said had been agreed.
However, if I
am wrong and there was an agreement between the plaintiff and the defendants
that he should be remunerated for finding a purchaser ready, willing and able,
I am still satisfied that on the facts of this case, as I find them, the plaintiff
would not have been entitled to remuneration because there was no fee-earning
event. It is a ‘belt and braces’ decision on my part, having already found that
there was no agreement, but I think it is right that I should decide this point
as well.
It is accepted
that in order for the fee to be earned the fee-earning event would have to be
the introduction of a purchaser ready, willing and able. If such a person was
introduced by Mr Farrant and the reason why the eventual purchase was not
completed could be laid at the doors of the defendants, it has been settled law
for a very long time that in those circumstances the defendants would be
obliged to pay the fee to their agent because they themselves had prevented the
agent from earning the fee to which he or she would otherwise be entitled.
I am wholly
satisfied here that the reason why the sale was not completed was Mr Halabi’s
inability to complete the purchase price; it was not due to any default on the
part of the defendants; that is Mr Halabi, though ready and willing as he was
to purchase, was not able. He had sought unsuccessfully to raise the finance
necessary to reach the purchase price required by the defendants. Part of that
was by way of a loan from the pension fund of the defendants. I must confess I
viewed that with a little alarm and
have a stake in what was hoped to be a successful transaction which would bring
a profit to the pension fund, that feeling of disquiet has not entirely
evaporated.
However, a
useful summary of the facts of the matter can be found in a letter from the
defendants’ division general corporate counsel, Mr Martin Edgar, to the
plaintiff’s solicitors in answer to the writ which had been served by Radcliffe
& Co in respect of the plaintiff’s claim. That, in my view, succinctly sets
out the factual basis of what happened after the introduction of Mr Halabi.
I come to the
conclusion that the failure to complete was because Mr Halabi was unable. In addition,
there is the evidence of Mr Jones called by the plaintiff, who says in his
written statement:
Towards the
end of the transaction, Mr Halabi did all his own negotiation. Accordingly,
there was nothing further my firm could do except to offer to help as and when
necessary. I understood at the time that Mr Halabi had a funding difficulty. I
now know that although contracts were exchanged, completion was not effected
apparently because of Mr Halabi’s inability to raise funds.
Mr Carr told
me:
In order to
delay matters, Statemile raised bogus objections based upon the net area
conditions and environmental conditions contained in the contracts. This was
clearly designed to gain Statemile Ltd further time in order for them to be
able to raise the necessary funds. Certainly the environmental conditions were
satisfied by the supply of a full environmental audit to Statemile. Mr Halabi’s
continual excuses to me relating to the obtaining of finance finally resulted
in Unisys’ solicitors, Norton Rose, advising that notices to complete ought to
be served. This was done. It is thus clear from what transpired subsequent to
the 31st December 1990 that Statemile was never in a position to finance the proposed
purchase.
Mr Butler’s
evidence (a solicitor and partner in the firm of Norton Rose) supports the view
that I have formed that Statemile were having trouble in raising the money.
Mr Parry-Jones
(formerly a solicitor in the employ of Norton Rose) dealt in more detail with
what happened, which I have said is summarised in the letter at p264 onwards.
He says it was apparent and in breach of the agreement that Statemile was not
able to complete. He took the view that it was clear the overriding problem Mr
Halabi had was lack of funding. He said:
At the end of
the day although Statemile had, it appeared to me, always been willing to
complete prior to the 10th May 1991, it was unable to do so due to its
inability to raise funds and in an attempt to save face it alleged
non-compliance with the environmental and net area conditions, which was raised
in an attempt to put blame onto Unisys Ltd. I am in no doubt that once
contracts had been exchanged Unisys Ltd was always ready, willing and able to
complete in accordance with its contractual obligation.
I accept that
evidence.
Mr Connerty
seeks to rely upon two matters. One is a letter written by Statemile’s
solicitors, Wilde Sapte, in respect of which a notice was served under the
civil Evidence Act 1968, albeit somewhat tardily. I am afraid I cannot accept
that letter as evidence upon which I am prepared to act. Mr Connerty also says
what happened was that there was a mutual cessation of the hostilities between
the defendants and Statemile (litigation having been commenced) and therefore
because the defendants had not continued and had abandoned attempts to make
sure the sale was completed they were in part to blame for the event which
prevented Mr Farrant from earning his fee or commission.
I am quite
satisfied that the compromise which did occur was due (and due solely) to the
fact that the introduced purchaser was not able to complete. It seems to me
quite nonsensical to suggest that if the purchaser cannot complete you should
still continue to incur costs in trying to get him to do something which you
come to the conclusion he has not got the funds to do in any event. I do not
regard any of those matters as in any way altering the view which I formed that
the reason why the fee-earning event did not occur was because the purchaser
though ready and willing was not able. In my judgment, even if there was a
contract the fee-earning event never occurred.
I should also
add that I heard evidence from two experts, which I bear in mind, but they do
not greatly assist me except to the extent that Mr MacLeod (who, as I have
already indicated, is an expert for the plaintiff) says the invariable practice
is to put agreements such as these and the terms thereof in writing.
For these
reasons the plaintiff has failed to satisfy me that there was any contract
between himself and the defendants, or, for that matter, if there was such a
contract any event occurred which required the defendants to compensate him for
his services.
In those
circumstances there must be judgment for the defendants.
