Estate agents — Commission — Sole selling rights — Potential purchaser introduced by agent during period of sole selling rights agreement — Agreement terminated — Subsequent sale to same person through different agent — Whether first agent entitled to commission — Whether first agent required to show that its services were effective cause of sale
In 2003, the appellant entered into an agreement with the respondent estate agent regarding the sale of a property in Beaconsfield that consisted of licensed premises with a flat above. The agreement was headed “Estate Agents Act 1979 Sole Selling Rights Agreement” and was determinable on four weeks’ notice in writing. It entitled the respondent to a commission in the event that unconditional contracts were exchanged, during the period for which the respondent had sole selling rights, for the sale of the property to a purchaser “introduced to you during that period by us or any other person including yourself or with whom we had negotiations about the property during that period”. The respondent prepared the sales particulars and put the property details onto its website with a guide price of £950,000, later reduced to £800,000. The appellant became disenchanted with the respondent’s services, and it was agreed that matters would be placed on hold, although the signboard would remain in place and the property would remain on the market. In January 2004, the respondent informed the appellant that it had received enquiries about the property from several people, including A. The appellant did not reply until February, when she gave notice to terminate the agreement and asked the respondent to remove its signboard. She then instructed a new estate agent. A saw the property on the new agent’s website, went to view it and ultimately purchased it for £775,000. In proceedings against the appellant to recover a commission on the sale, the respondent contended that, on the true construction of the agreement, it was not obliged to show that it had been the effective cause of the sale. In the county court, HH Judge Serota QC rejected that argument but allowed the claim on the ground that the respondent had in fact been the effective cause. The appellant appealed and the respondent cross-appealed.
Held: The appeal was dismissed and the cross-appeal allowed. The general principle applicable to estate agents’ contracts is that an agent will not be entitled to a commission unless its services are the effective cause of the transaction that has been brought about. Where the agreement requires the agent to find or introduce a successful purchaser, a term will be implied that the agent must be the effective cause of the sale. However, where the agreement does not contain such a requirement, the effective cause term will be implied only if it is needed to give business efficacy to the contract. It is not necessary to imply such a term into a sole selling rights agreement; to do so would be inconsistent with the terms of the agreement. The wording of the contract between the appellant and the respondent did not create an obligation to introduce or find a purchaser; the words “introduced to you during that period by us or any other person including yourself” merely created an obligation to introduce somebody who turned out to be the eventual purchaser, even if that person became the purchaser by a route that was unconnected with the original agent. Even though the appellant had disinstructed the respondent, that did not prevent the respondent from claiming a commission if, under the terms of the contract, the right to commission had been established by a relevant introduction prior to the termination. The respondent had introduced A during the period of the sole selling rights agreement and was accordingly entitled to its commission. The fact that it had carried out no negotiations did not alter that conclusion; it did not have to introduce and negotiate in order to be entitled to a commission under the relevant clause.
The following cases are referred to in this report.
Burney v London Mews Co Ltd [2003] EWCA Civ 766
Chasen Ryder & Co v Hedges [1993] 1 EGLR 47; [1993] 08 EG 119
Christie Owen & Davies plc v King [1998] SCLR 786
Christie Owen & Davies plc v Ryelance [2005] 18 EG 148 (CS)
Christie Owen & Davies plc v Sykes [2002] EWCA Civ 1663
John D Wood & Co v Dantata [1987] 2 EGLR 23; (1987) 283 EG 314
Peter Yates & Co v Bullock [1990] 2 EGLR 24; [1990] 37 EG 75, CA
The was an appeal by the appellant, Jennifer Dashwood, and a cross-appeal by the respondent, Fleurets Ltd, from a decision of HH Judge Serota QC, sitting in Milton Keynes County Court, allowing the respondent’s claim for commission under a sole-selling-rights agreement.
Nicholas Baldock (instructed by Lord & Co) appeared for the appellant; William Moffett (instructed by Sprecher Grier Halbarstam LLP) represented the respondent.
Giving judgment, Nelson J said:
[1] This is an appeal against the decision of HH Judge Serota QC given in a reserved judgment handed down on 24 October 2006. The case concerns the circumstances in which an estate agent’s commission is payable under a sole-selling-rights agreement, whether it was an implied term of the agreement that the agent had to establish that it was the effective cause of the sale of the property before being able to recover commission, and whether, if it was to be so implied, effective cause was established on the facts.
Facts
[2] The appellant, Ms Jennifer Dashwood, owned the Prince of Wales pub in Old Beaconsfield. In 2003, it had not been trading for some time because of the illness of Ms Dashwood’s daughter. The property consisted of freehold licensed premises with a three-bedroom flat above. With adaptations and an extension it could take up to 100 covers.
[3] Ms Dashwood decided that she wished to sell the property and, on 14 August 2003, spoke to Mr Yaser Martini, of Fleurets, the |page:8| respondent in this appeal. A sole selling rights agreement was entered into on 1 September 2003, under which Ms Dashwood granted to Fleurets the sole selling rights for an initial period of 18 weeks and thereafter unless determined by at least four weeks’ notice in writing by either party to the other by recorded delivery. Sole selling rights were defined as follows:
You will be liable to pay remuneration to Fleurets in addition to any other costs or charges agreed, in each of the following circumstances: if unconditional contracts for the sale of the property are exchanged in the period during which Fleurets have sole selling rights, even if the purchaser was not found by Fleurets but by another agent or by any other person including yourself if unconditional contracts for the sale of the property are exchanged after the expiry of the period during which Fleurets have sole selling rights but to a purchaser who was introduced to you during that period whether by us or any other person including yourself or with whom we had negotiations about the property during that period.
[4] The contractual document is headed “ESTATE AGENTS ACT 1979 Sole Selling Rights Agreement”. The agreed asking price was stated in the agreement to be £950,000, although Mr Martini considered that this was too much. Sale particulars were prepared by Fleurets, which put details of the property onto its website.
[5] Ms Dashwood wished the property to be sold discreetly and, initially, did not agree to have a sale board outside the property. There was, however, little interest in the first three weeks in which it was marketed, and Mr Martini persuaded her, on 22 September 2003, that a sale board should be erected. She also then agreed to reduce the guide price to £800,000. Several people had seen the property but no real offer had been produced.
[6] Ms Dashwood became increasingly disenchanted with Fleurets. First, she considered that its valuation of the premises was too low and, second, the open day that it had organised was fixed for the one day of the week on which she said it should not occur, namely market day, when there was little parking, and some of the advertisements for the event were published only after it had occurred. Third, and most importantly, an accusation was made by a Mr Uddin, who had expressed an interest in purchasing the property, that Mr Martini had demanded a bribe or “kickback” from him. Mr Uddin lacked funds and the judge found that Mr Martini was right in thinking that the deal with Mr Uddin was going nowhere. Ms Dashwood, already generally dissatisfied with Fleurets, was, the judge found, probably minded to accept the truth of Mr Uddin’s allegations. The judge had no doubt that the allegation led to a total destruction of any trust and confidence that Ms Dashwood had in Fleurets and in Mr Martini.
[7] Ms Dashwood’s response to this allegation, which Mr Uddin had assured her personally, on 26 October 2003, was true, was simply to take no action save to make herself unavailable to Fleurets. Mr Martini was quite distraught at the allegation by Mr Uddin. He contemplated defamation proceedings, but was persuaded by his fellow directors that he should not do so. He said that the allegation was untrue and that he was devastated by it. The judge found him to be a reliable witness and accepted his evidence.
[8] On 23 November 2003, Ms Dashwood suffered an accident as a result of which she was seriously injured and temporarily confined to a wheelchair. As a consequence of this and her dissatisfaction with Fleurets, she avoided addressing the issue of the sale of the pub until 10 December 2003, when she spoke to Mr Martini. She told him that she had lost faith in him and also told him about the allegation by Mr Uddin, and about her accident. Mr Martini agreed with Ms Dashwood that the signboard would remain on site, that the property would be left on the market until such time as Ms Dashwood returned from her Christmas holiday, and that persons making further enquiries would be informed that the matter was “on hold” until the New Year “owing to the fact that the owner is unavailable until then”. The judge accepted Mr Martini’s evidence that this is what had occurred, as he had confirmed in his letter of 11 December 2003.
[9] After that date, Ms Dashwood avoided Mr Martini and did not respond to correspondence or calls. The signboard remained in situ, particulars were supplied to persons who telephoned seeking them or who made a request through Fleurets’ website. Prospective purchasers were told that the sale of the property was on hold and that Fleurets was awaiting confirmation from the client. It appears that while the property was thus on hold, they were not informed of the guide price of £800,000.
[10] Mr Ahkter was one of those prospective purchasers. In early January 2004, he saw the signboard outside the pub. He visited the website, contacted Fleurets and received the particulars of the property on or around 12 January 2004. When he telephoned Fleurets, he was given the standard response that the proposed sale of the property was on hold.
[11] Mr Ahkter is a solicitor, formerly an assistant solicitor at Masons and then in-house counsel with Siemens UK. His family, who comes from the Potteries, operates a number of Indian restaurants in the north-west of the country and also in the Bromley area. In 2003 and 2004, Mr Ahkter was interested in finding premises within Old Beaconsfield for an Indian restaurant. He was also looking elsewhere but had identified a gap in the market for an Indian restaurant in Old Beaconsfield. As the judge found, Mr Ahkter was right; since his purchase of the premises, it has become a flourishing restaurant and is valued at considerably more than he paid for it.
[12] When Mr Ahkter first saw the pub, he regarded it as ideal. It met all his criteria. He researched the possibility of moving his family to Beaconsfield, as he did in 2006. He asked Fleurets to let him know if anything transpired in relation to the property because of his interest and said that he was very enthusiastic about the purchase and never ever lost his interest in it. In late January 2004, a local agent, a Mr Thorn, made enquiries on Mr Ahkter’s behalf by telephoning Mr Martini and was again told that the pub was on hold.
[13] Mr Martini informed Ms Dashwood by letter of 20 January 2004 that Fleurets had received enquiries from six people who wished to inspect the premises in the event that the property became available again. He stated that he considered the asking price of £950,000 to be completely unrealistic, suggested that they went back to the market inviting offers of around £700,000, although he believed that this was £100,000 in excess of the value of the property. There was no response from Ms Dashwood, to whom he wrote again on 30 January 2004. He spoke to her on the telephone on 10 February 2004, when Ms Dashwood informed him that she wanted nothing more to do with Fleurets. She sent an e-mail on the same day, disinstructing Fleurets and asking that the sign be removed.
[14] On 9 March 2004, the termination of the respondent’s contract took effect and, on 10 March 2004, Ms Dashwood instructed another estate agent, Christie Owen & Davies. Mr Ahkter saw the property on Christie’s website and, on 15 July 2004, Mr Ahkter informed Mr Harkness of Christie that he was very interested. He viewed the property, as did his brother, and they made an eventual offer of £775,000. He sought to raise finance through Christie’s finance company, Christie’s 1st. He also negotiated a lock-out agreement for £10,000 that gave him the exclusive right to purchase the property for a six-week period commencing 23 July 2004.
[15] Christie’s 1st had to obtain an independent valuation and when it did so the valuation was put at £700,000. Mr Ahkter came under pressure from his family to reduce the offer, but Ms Dashwood, on advice from Mr Harkness, stood firm and Mr Ahkter eventually persuaded his family that the purchase of the property for £775,000 represented a good deal. Contracts were exchanged on 3 September 2004, with completion on 6 December 2004, at which time Mr Martini learnt of the sale to Mr Ahkter. Fleurets sent an invoice for its commission to Ms Dashwood in July 2005.
Judgment
[16] The judge found that Fleurets’ selling agency was not determined by the events of December 2003. Fleurets was not disinstructed then, but, by agreement, continued to market the property to a limited extent; the sale board remained in place, the property remained on its website, and particulars were distributed when requested, although would-be |page:9| purchasers were told that Ms Dashwood was unavailable and it was hoped further instructions would be available in the New Year.
[17] In rejecting Fleurets’ submission that the sole selling rights agreement did not require the estate agent to establish effective cause, the judge noted that the terms of Fleurets’ contract was closely based upon the Estate Agents (Provision of Information) Regulations 1991 (the 1991 Regulations), made under the Estate Agents Act 1979 (the 1979 Act). The judge also noted that the 2006 edition of Bowstead on Agency suggested that the forms prescribed in the regulations appeared to entitle the agent to commission on a mere introduction without requirement of effective cause. He was also informed of a similar passage in Murdoch’s Law of Estate Agency (Murdoch), but was not shown that particular textbook. He was satisfied that the general principle that the courts had applied to estate agent contracts was that an estate agent was required to show that it had been the effective cause of the transaction if it were to be paid commission for introducing a purchaser. He cited the case of John D Wood & Co v Dantata (1987) 283 EG 314* and the passage in Nourse LJ’s judgment, in which he concluded that the question that had to be asked, in deciding which of two agents that had introduced the purchaser to the sale was entitled to the commission, was, which of the two firms was the effective cause of the sale or of the transaction.
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* Editor’s note: Also reported at [1987] 2 EGLR 23
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[18] The judge concluded as follows, in para 45:
It is also important to bear in mind that every case will be fact sensitive and every contract must be construed in accordance with its terms. Despite the views of Bowstead I am satisfied that the language of the contract in question in the present case only entitles the Claimant to remuneration on the introduction of a purchaser if it can demonstrate that it was the effective cause of the purchase.
And, in para 51:
Nothing in the language of the contract, in my opinion is sufficient to displace the general approach of the courts to such contracts. However it matters not because I am satisfied on the facts of this case that the Claimant was the effective cause of the transaction.
[19] The judge regarded Mr Ahkter’s evidence as crucial. He found him to be an honest, reliable and impartial witness. The judge was satisfied upon his evidence that once he had learnt of the property, he never lost interest and always wished to purchase it. He would have been prepared to make an offer as soon as he saw it and his enthusiasm remained between January and July. As soon as he first spoke to Mr Harkness of Christie, he had told him that he was already talking about making an offer as soon as he and his family had seen the property. The judge quoted para 31 of Mr Ahkter’s witness statement, in which he said that had the property been offered for sale by Fleurets, he would have seriously and actively pursued this and, in all probability, been successful in doing so. It made no difference to him whether the selling agent was Fleurets or Christie; it was the property that was the determining factor. The judge found that this was not a speculative statement but represented the true position. The judge found that all the witnesses were seeking to tell him the truth, but Ms Dashwood had a poor recollection of matters in issue and where her evidence differed from that of Mr Martini and Mr Ahkter, he preferred their evidence.
[20] Although the judge accepted that Fleurets did relatively little, while Christie did most of the work and was paid commission, he did not consider that it was unfair to Ms Dashwood, in spite of her disenchantment with Fleurets’ sales performance, for her to pay a commission to Fleurets. She had been informed by Mr Martini that details of the property had been given to at least six people who were willing to see it, and she was therefore on notice by its letter of 20 January 2004 of the risk that Fleurets might introduce the eventual purchaser, even though at that stage she did not know Mr Ahkter’s name.
Submissions
[21] The appellant submitted that the judge was right to find that Fleurets had to establish that it was the effective cause of the sale of the Prince of Wales pub, but was incorrect in concluding that it had established effective cause. The respondent supports the judge’s finding as to effective cause, but, by way of cross-appeal, contends that the judge was incorrect in finding that effective cause was implied into the sole selling rights agreement.
Appellant’s submissions on the appeal
[22] Mr Nicholas Baldock, on behalf of the appellant, submitted that the judge had correctly identified the effective cause test but had not properly applied it. Although he had said that everything had to be weighed up, he did not perform that exercise. He essentially relied upon one feature of Mr Ahkter’s evidence, namely that he was keen on the property from when he first saw it. A proper balance of the factors would have led him to identify that the effective cause of the transaction was Christie rather than Fleurets. Ms Dashwood was dissatisfied with the respondent from early on. There was a disagreement as to the proper price to be asked, upon which issue Fleurets was proved to be wrong; it handled the marketing of the property inadequately in relation to the open day; it received no offers or, indeed, interest from anyone with funds and, after the incident with Mr Uddin, Ms Dashwood lost all confidence in it and made herself unavailable to it. When the property was on hold, no price was given to any of the six prospective purchasers, including Mr Ahkter. Ms Dashwood did not even know of his identity until Christie informed her. When the property was on hold, Fleurets, by the letter of 20 January 2004, gave an inadequately low valuation of the property.
[23] The failures of Fleurets are to be contrasted with the activities of Christie. There was intensive activity after Mr Ahkter had made his first viewing and offered £775,000. He raised finance through Christie, which negotiated a lock-out clause on his behalf. Christie had to carry out further work when the purchaser sought to reduce the price to £700,000 after the valuation and pressure from his family, and Christie advised the appellant to stand firm, which she did, even if she would have done so without such advice.
[24] The judge failed to consider the fact that, under John D Wood, it was the introduction to the transaction that mattered. Although the judge addressed whether Ms Dashwood might feel that the payment of commission to Fleurets was unfair, he did not properly balance out the work that had been done and determine effective cause. It appeared to be implicit in his judgment that Christie was not entitled to any commission. There is no proper sustainable reasoning as to why Christie was not entitled to the commission and Fleurets was. The only time that the judge appeared to consider the work actually done by Christie was his throw-away line to it having done “most of the work”. The crucial element of Mr Ahkter’s evidence that the judge said he relied upon, namely that he would have bought the property through the respondent anyway, was irrelevant because the property was not even on the market when Mr Ahkter obtained the particulars. The burden remained upon the respondent to show that it was the effective cause. It was a further error of law on the part of the judge to deal with the matter as though it were solely a question of causation.
[25] Business efficacy does demand the effective cause test to be implied since it is artificial to suppose that the agent is to receive commission by mere introduction without any more. If this were correct, there would be far too many cases of two fees being payable.
Appellant’s submissions on the cross-appeal
[26] The term relied upon by Fleurets provides for two situations in which commission becomes payable: first, where the purchaser was introduced to the vendor during the period of sole agency whether by the agent or any other person; and, second, where the purchaser was someone with whom the agent negotiated during the sole agency period.
[27] Such a clause was considered in Christie Owen & Davies plc v Sykes [2002] EWCA Civ 1663 and the court there affirmed the effective cause test. In so far as Murdoch does suggest that the |page:10| effective cause test is inappropriate in terms drafted in accordance with regulations, it does so only in the case of mere negotiations, and not in the case of introductions to which the effective cause test still applies. It is very difficult for an agent to argue that it was the effective cause of an introduction to the eventual contract to purchase when it was not involved in any negotiations with the purchaser at any stage. Fleurets did not negotiate with Mr Ahkter at all and this is not one of those extreme cases where an agent that did not negotiate might nevertheless be found to be the effective introduction to a transaction. The judge found all the facts and, hence, the appellate court can draw any inference that it thinks appropriate, and can more readily interfere with an evaluation of the facts as found. Thus, the judge’s decision in favour of Fleurets should be set aside.
Respondent’s submissions on the appeal
[28] There is no judicial definition of effective cause; each case must be considered on its own facts. There is no basis for interfering with the judge’s finding here.
[29] The judge was, in any event, correct in his conclusion. The proper test, where the first agent introduces the eventual buyer but a second agent closes the deal, is whether the purchaser’s interest has evaporated between dealing with the first and second agents: see John D Wood, in para 8A, and Christie Owen & Davies plc v Ryelance [2005] 18 EG 148 (CS) and Peter Yates & Co v Bullock [1990] 2 EGLR 24, in paras 26D and 26M. In the latter case, the question effectively asked by the court was did the work of the second agent break the chain of causation and turn a dead interest into a live one?
[30] Here, Mr Ahkter plainly had an ongoing and continuing interest throughout. The area and the premises were ideal and there was no real alternative. He was, as was said in submissions before the judge, wildly enthusiastic for the property. He had therefore clearly formed a desire for the property that outweighed the desire of other purchasers. That interest was effected by the introduction by Fleurets and the chain of causation was not broken.
[31] The price that would have been obtained was probably the same in any event, since the asking price had not been lowered from £800,000. Furthermore, Ms Dashwood would not have lowered the asking price herself. She played a significant part in the negotiation and it was she who drove a hard bargain on Mr Ahkter’s evidence. The lock-out clause was of no consequence since it was requested by Mr Ahkter because of his already established eagerness to acquire the pub. He would have asked for it in any event.
[32] Ms Dashwood cannot rely upon her own deliberate unavailability to Fleurets to establish her case. In any event, her reason for putting the sale on hold as far as Fleurets was concerned was Mr Uddin’s allegation against Mr Martini, which transpired to have been false.
[33] The balance of authorities now suggests that “an” effective cause is all that is required rather than “the” effective cause. Fleurets can certainly establish that it was “an” effective cause and, in any event, it is possible for two commissions to be payable, depending upon the terms of the contracts to which the parties have chosen to sign up.
Respondent’s submissions as to the cross-appeal
[34] Mr William Moffett, on behalf of Fleurets, submitted that this contract is a sole selling rights agreement, that is, a period of exclusive marketing by reference to which the fee is payable whether the work that actually results in the sale was carried out by the agent or another party. The clause makes it clear that the introduction that leads to the sale may be made by the agent, by the principal or any other person. Nor does it matter if contracts are exchanged after the sole selling rights period. The terms of the contract therefore dispense with any need to engage in the uncertainties of applying the effective cause test. They are clear and do not require the implication of the effective cause test in order to give business efficacy to the contract.
[35] The terms echo those prescribed by the 1991 Regulations. Both Bowstead, in para 7-028 and 7-037, and Murdoch (4th ed) 2003, at pp129-130, support the view that these terms dispense with the need to show effective cause.
[36] The terms in John D Wood were quite different to those in the present case. In John D Wood, it was in the event of the agent “producing a successful purchaser”. Here, what was required was not an introduction to the transaction, but an introduction to “you”. An “introduction to you” cannot be an introduction to a purchase or a transaction but simply to a purchaser by anyone, provided that purchaser was introduced during the sole selling rights period. This was clearly satisfied here because all that was required was an introduction of the potential purchaser to the pub for sale. The Scottish case of Christie Owen & Davies plc v King [1998] SCLR 786 (where effective cause was not argued) supports the proposition that no personal introduction of the eventual purchaser to the vendor is required; it is sufficient if the potential purchaser was introduced to the property or brought into a relationship with it by the acts of the agent. Fleurets informed Ms Dashwood of the existence of six unnamed potential purchasers, one of whom was Mr Ahkter, by letter dated 20 January 2004. The introduction between Ms Dashwood and Mr Ahkter was brought about by Fleurets’ marketing. That was sufficient, and hence if the effective cause test was not implied Fleurets was clearly entitled to its fee.
Conclusions
Law
[37] I shall deal first with the terms of the contract and whether Fleurets had to establish effective cause in order to claim its commission and, second, with the nature of the effective cause test and the manner in which it is to be applied. Although this means dealing with the cross-appeal first, the logical starting point is the contract, its terms and their scope.
[38] There is no doubt that the general principle applicable to estate agents’ contracts is that an agent is not entitled to a commission unless its services were the effective cause of the transaction being brought about: see Bowstead, in para 7-027. An agent must earn its commission and where the agreement requires it to “find a purchaser” or “introduce a purchaser” or “produce a successful purchaser”, a term to the effect that the agent must be the effective cause of the sale will be implied: see Bowstead, in 7-028 and John D Wood. Where there is no such requirement upon the agent, the effective cause term will be implied only if it is necessary to give business efficacy to the contract.
[39] Here, the relevant part of the sole selling rights agreement that entitles the agent to the commission reads:
if unconditional contracts for the sale of the property are exchanged after the expiry of the period during which Fleurets have sole selling rights but to a purchaser who was introduced to you during that period whether by us or any other person including yourself or with whom we had negotiations about the property during that period.
This is a different term to that considered in Bowstead, in para 7-027 and 7-028, and that considered in John D Wood. It is a sole selling rights agreement under the 1979 Act and in substantially the same form as that prescribed in the regulations. Such a clause has not yet been directly considered by the English courts. A similar clause was considered in Sykes, but that was a renewed application for permission to appeal a county court decision and not an inter-parties hearing. The clause was substantially the same, but the brief judgment does not make it clear whether it purported to be, as here, in accordance with the regulations under the 1979 Act. For these reasons, Sykes can be distinguished and is not binding upon this court.
[40] It is to be noted that, in King, effective cause was not argued and the case determined upon the correct meaning of “introduced to you”.
[41] There is, however, academic support for the proposition that the wording of the forms prescribed by the regulations does not require the implication of effective cause. Thus, in Bowstead, in para 7-028, it is stated that, in some cases, such as in the definition of sole selling rights under the regulations, the terms of the contract or the nature of the transaction mean that there is no room for the implication of effective cause: see Bowstead, in para 7-028, footnote 50. In para 7-037, the editors of Bowstead state that the regulations appear to entitle the agent to commission on a mere “introduction” without the requirement of effective cause, although not where the principal withdraws the |page:11| property. Ms Dashwood did disinstruct Fleurets in this case, but that does not, in my judgment, disentitle an agent to commission (nor was it so argued before me) if, under the terms of the contract, the right to commission or remuneration has been established by a relevant introduction prior to the termination. If this were not the case, a vendor could readily disentitle an agent of commission even though it had properly been earned.
[42] In Murdoch, the author expresses the same view as Bowstead as to the effect of the 1991 Regulations. It states that there is no requirement that the sole agent’s introduction should be the effective cause of the sale in question and, indeed, mere negotiation with the ultimate purchaser will be sufficient. I reject Mr Baldock’s contention that Murdoch is limiting its view that effective cause is not to be implied only in the case of negotiation cases as opposed to introduction cases. There is no logic in this proposition. A “mere” negotiation is no different from a mere introduction. Negotiation, albeit conducted, may be brief and unsuccessful in the same way as an introduction can be no more than the bringing together of a potential purchaser with the property. I am quite satisfied that Murdoch is expressing the same view as Bowstead as to the effect of the prescribed form under the regulations or similarly expressed terms.
[43] A sole selling rights agreement provides to the agent an exclusive period of marketing of the property and, as a consequence, an entitlement to a fee even where a sale is concluded after the exclusive period, provided that the eventual purchaser was somebody who was introduced to the vendor during the exclusive period by the agent or, indeed, any other person. If, therefore, the agent does introduce the eventual purchaser during the exclusive selling period, it is entitled to commission even if another agent concludes the deal. For my part, I see no business reason to imply effective cause into such a contract. It is inconsistent with the clear wording of the terms of the contract, unnecessary and does not pass the officious bystander test. The wording “introduced to you during that period by us or any other person including yourself” is different to an obligation to introduce a purchaser or find a purchaser. It is merely an obligation to introduce somebody who turns out to be the eventual purchaser even if that person becomes the purchaser by another route that is unconnected with the original agent.
[44] I therefore conclude that the effective cause term is not implied into the wording of this particular contract.
[45] If, however, I am wrong in this conclusion and effective cause is to be implied, its nature and application need to be considered. The authorities show that these cases, as the judge said, are fact-sensitive. It is sometimes difficult on the facts of any given case to determine whether an agent’s acts are the operative cause of the sale (the causa causans) or the events, without which the sale would not have taken place, even though they are not the operative cause (the causa sine qua non). The choice between a first agent or a second agent may, as here, be difficult. Hence, different approaches have been taken by the courts. Effective cause in John D Wood was said to be the effective cause of the transaction, but this test, although confirmed in many other cases, including by Nourse LJ in Peter Yates, carries with it difficulties if applied too literally, since it may be thought to favour in most cases the agent that concludes the deal rather than the first agent that effected the introduction. This problem was pointed out by Waller LJ in Burney v London Mews Co Ltd [2003] EWCA Civ 766, where he gave this example of the problem, in [26] and [27]:
Assume an estate agent provides particulars to A, and that A takes them away and contacts the vendor direct. Assume negotiations then ensue between A and the vendor direct, or between A’s solicitor and the vendor’s solicitor direct, and it is those negotiations which conclude the purchase. In my view, even if the negotiations between A and the vendor, or A’s solicitors and the solicitors for the vendor were an, or even the, effective cause of the bargain actually reached, the original supply of the particulars would amount to an introduction by the estate agent.
It would, as it seems to me, drive a coach and horses through the agreements which all estate agents make with vendors, if the mere fact that a would be purchaser, who picked up the particulars from an estate agent’s desk, carried out all the necessary bargaining thereafter, had the effect of depriving the estate agent of their commission.
[46] What must be considered, as Mr Baldock rightly submitted, is all the circumstances of the case. This requires the court to consider the respective acts carried out by each of the competing agents in order to determine which of them was the effective cause of the purchase. Each case will depend upon its own circumstances and there may well be a number of cases in which two agents’ fees are payable because of the nature of the terms of the contracts of agency into which the vendor entered.
[47] There are several cases in which the courts have approached the matter solely on the question of causation and asked the question as to whether the interest aroused by the first introduction had evaporated by the time of a second agent’s introduction. This was the test laid down at first instance by Forbes J in John D Wood and commented upon, although not formally adopted, by Nourse LJ in the Court of Appeal. Again this is not a definitive test, as Staughton LJ said in Chasen Ryder & Co v Hedges [1993] 08 EG 119*, although there may be a shift of the evidential burden of proof if the first agent can establish that it introduced the purchaser and that a purchase subsequently followed. The question of whether the chain of causation between the first agent and the subsequent sale, or whether interest has evaporated after the introduction of the first agent, are matters that the court has to take into account, but are not in themselves decisive tests. On the facts of any given case, however, the nature of the introduction and the interest of the purchaser may be such that some very significant event might be required for that first introduction to be “in some way nullified or rendered of no effect, where the purchaser had quite clearly remained interested in purchasing the property”: see per Buxton LJ in Sykes, in [11].
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* Editor’s note: Also reported at [1993] 1 EGLR 47
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Application of the law to the facts
[48] On the basis that I am right in finding that effective cause was not incorporated into this contract, there can be no doubt that Fleurets is entitled to its commission. Mr Ahkter was undoubtedly introduced to the vendor by Fleurets during the period of its sole selling rights. The fact that there were no negotiations carried out by Fleurets does not alter this conclusion. An agent does not have to introduce and negotiate in order to be entitled to commission under this clause.
[49] If my interpretation of the contractual terms is incorrect and effective cause was incorporated, I remain of the view that the judge did not come to the wrong conclusion. He may not have weighed each and every action by each of the agents expressly in his reasoning, but he sets out his findings of fact in substantial detail and with great clarity. Those findings include all the actions carried out by Christie on behalf of the vendor. I am satisfied that the judge carried out the balancing exercise, looking at his judgment as a whole, perfectly properly.
[50] The decision that he had to make was not entirely straightforward because each agent had carried out important functions leading to the eventual sale. Fleurets did very little, while Christie did most of the work. As Mr Baldock submitted, Ms Dashwood was dissatisfied with Fleurets, which made errors in its advertising of the open day and failed to produce any offers backed with funds. By contrast, Christie effected a second introduction between Mr Ahkter and Ms Dashwood, achieved an offer of £775,000, raised finance through its finance company, dealt with negotiations concerning the lock out and the purchaser’s attempt to reduce the price and concluded the transaction. That the judge had these matters firmly in mind is clear from [35], [36] and [37] of his judgment, as well as his comment, in [53], about Christie carrying out most of the work.
[51] Nevertheless, the key feature in the judge’s mind was the evidence of Mr Ahkter. The intensity of his desire to purchase the property was, the judge found, clear. This was formed as soon as he had seen the property from the outside and formed the opinion that Old Beaconsfield was an ideal location for his proposed restaurant. His |page:12| receipt of Fleurets’ particulars and the examination of the property on its website no doubt fuelled his desire to buy the property. It was, as he said in para 31 of his witness statement, the property itself that was the determining factor, not the agent. Although he looked at other properties elsewhere, his real wish remained to buy Ms Dashwood’s pub. Clearly, his interest had not evaporated and, in this sense, the chain of causation had not broken. He was one of the six prospective purchasers who were introduced to Ms Dashwood by Fleurets letter of 20 January 2004.
[52] The judge’s conclusion in these circumstances, that Fleurets was entitled to a commission on the basis that it was the effective cause of the sale, was tenable and, indeed, appropriate on the facts as he found them.
[53] I therefore conclude that whether the contract terms included an obligation on Fleurets to establish that it was the effective cause of the transaction, the judge was right in his conclusion that it was entitled to its commission. I do not need to decide the issue as to whether the true test is not “the” effective cause but rather “an” effective cause. If, as Bowstead and some of the more recent authorities suggest, the proper test is “an” effective cause, Fleurets would also succeed in recovering its commission.
[54] Accordingly, the appeal is dismissed, and the cross-appeal is allowed.
Appeal dismissed; cross-appeal allowed.
