Estate agents — Commission — Sole agency contract — Vendor appointing joint sole agents to sell residential property — Sale to party introduced to vendor prior to agents’ appointment — Vendor retaining agents to seek purchaser for resale — Whether agents entitled to commission on first sale or resale — Whether waiving entitlement in connection with first sale — Whether term to be implied that agents be effective cause of sale to qualify for commission
In April 2001, the respondent, a company owned and controlled by K, appointed the appellants as joint sole agents to sell its property in Kensington, London. The terms of the appointment were set out in a letter. This provided that K would pay a fixed fee of £1m plus VAT for the appellants’ services in the event that one of them “introduces an applicant, who subsequently purchases the property” or a reduced fee of 20% of that sum “if I procure a purchaser through my own endeavours”.
K found a purchaser (C) through his own efforts, resulting in a sale for £50m. This was completed in October 2001 together with an overage agreement under which the vendor and purchaser would share the profits on any resale of the property within the following five years. At a meeting in November 2001, the outcome of which was recorded in a letter, K agreed to continue the appellants’ agency agreement to find a suitable purchaser for such a resale. The appellants arranged a viewing for a prospective purchaser, M; they informed K of M’s interest but played no further part. In June 2004, the property was sold to a company owned by M for US$105m (around £57m).
The appellants claimed commission fees on both sales in the respective sums of £200,000 and £1m, plus VAT. Dismissing the claim, the trial judge held that: (i) although the first sale to C had triggered the right to a 20% commission, the appellants had agreed to waive their entitlement to that sum on entering into a new agency contract in respect of the proposed resale; (ii) it was an implied term of the new agency contract that the appellants had to be the effective cause of the resale if they were to qualify for their commission; and (iii) the appellants had not proved that they had been the effective cause: see [2010] EWHC 1120 (Ch); [2010] 21 EG 91 (CS). The appellants appealed.
Held: The appeal was allowed in part.
(1) The appellants were not entitled to commission on the first sale. They had waived their right to that commission as part of the later arrangement to act on the proposed resale. It was inherent in the new arrangement that the appellants would relinquish any right to the reduced commission on the first sale in return for the chance of earning the much larger sum of £1m on a resale. Once the second agreement had been made, the original rights and obligations were exchanged for a new set, such that the appellants were no longer entitled to recover £200,000 in respect of the first sale. (2) The appellants were entitled to £1m commission on the resale. The first agency agreement formed the basis of the second agreement, which was to be construed as entitling the appellants to a fixed fee of £1m if they introduced an applicant that subsequently purchased the property on the contemplated resale. The second agreement did not include an implied term that the appellants had to be the effective cause of the sale in order to achieve their commission. Although the authorities favour implying such a term or construing the express terms to that effect, such a construction does not apply universally if the contract points in the opposite direction. The terms of the parties’ agreement militated against implying a requirement for the appellants to be the effective cause of the resale. The original deal, on which the second agreement was based, was favourable to the appellants and entitled them to a reduced commission even if they did not effect an introduction to a purchaser; that being so, it would be bizarre if the second agreement were to be construed so as to deny the appellants any commission in circumstances where they had effected an introduction, albeit that it was not the effective cause of the sale. Accordingly, neither the first nor the second agreement required the appellants to be the effective cause of the sale, and an introduction to a party that ultimately purchased would suffice. Further matters supporting that conclusion were that: (i) the contract between the appellants and the respondent was not a standard form of contract but had been made expressly for the purposes of a sale of a special property, such that its terms displaced the normal construction; (ii) although the property had originally been sold as a family home, and the implication of an “effective cause” requirement was readily made in a residential consumer contract, a weaker presumption arose where, as here, all the relevant parties were companies and had access to sophisticated advice; and (iii) under the second agreement, the respondent was no longer the owner of the property and could not determine the price at which the resale took place, such that there was little that the appellants could have been expected to achieve in respect of the resale price or the other terms of the resale contract.
The following cases are referred to in this report.
Brian Cooper & Co v Fairview Estates (Investments) Ltd [1987] 1 EGLR 18; (1987) 282 EG 1131, CA
Chasen Ryder & Co v Hedges [1993] 1 EGLR 47; [1993] 08 EG 119, CA
Foxtons Ltd v Bicknell [2008] EWCA Civ 419; [2008] 2 EGLR 23; [2008] 24 EG 142
Glentree Estates Ltd v Favermead Ltd [2010] EWHC 1120 (Ch); [2010] 21 EG 91 (CS)
John D Wood & Co v Dantata [1987] 2 EGLR 23; (1987) 283 EG 314, CA
McCann (John) & Co v Pow [1974] 1 WLR 1643; [1975] 1 All ER 129; (1974) 232 EG 827, CA
Millar Son & Co v Radford (1903) 19 TLR 575
The County Homesearch Co (Thames & Chilterns) Ltd v Cowham [2008] EWCA Civ 26; [2008] 1 WLR 909; [2008] 1 EGLR 24; [2008] 15 EG 178
This was an appeal by the appellants, Glentree Estates Ltd, Beauchamp Estates Ltd and Savills L&P Ltd, from a decision of Sir Edward Evans-Lombe, sitting as a High Court judge, dismissing a claim against the respondent, Favermead Ltd, for commission on the sale of a residential property. |page:24|
Jonathan Gaunt QC and Robert Deacon (instructed by CKFT Solicitors) appeared for the appellants; John Wardell QC (instructed by Davenport Lyons) represented the respondent.
Giving judgment, Longmore LJ said:
Introduction
[1] Houses in Kensington Palace Gardens are expensive. Number 18-19 is no exception. It was bought in 1995 by a company owned and controlled by Professor Khalili, an expert in and collector of Middle Eastern and Oriental art. That company sold the house in September 2001 to a Liechtenstein trustee for the family of Mr Bernie Ecclestone, of Formula 1 racing car fame, for £50m together with a share of profit on any resale. That Liechtenstein trustee, in March 2004, sold the house to a company owned and controlled by Mr and Mrs Lakshmi Mittal, the Indian entrepreneurs, for US$105m. The appellant estate agents say that they acted pursuant to instructions contained in agreements made with one of Professor Khalili’s companies, Favermead Ltd, in respect of both transactions and that they are entitled to a commission of £200,000 plus VAT in respect of the first sale and a commission of £1m plus VAT in respect of the second sale. Sir Edward Evans-Lombe, sitting as a judge of the Chancery Division ( [2010] EWHC 1120 (Ch*)), has dismissed the claims of the estate agents, which now appeal to this court with the permission of Arden LJ.
[2] The original agreement made between Mr Jonathan Hewlett, of Savills, which was the lead agent to the appellants, and Favermead was contained in a letter of 3 April 2001, written by Professor Khalili on Favermead-headed paper in the following terms:
18/19 Kensington Palace Gardens, London W8
Thank you for your letter of 19th March 2001 setting out the fee structure regarding the sale of the above property.
I agree that I have appointed FPD Savills, Glentree Estates and Beauchamp Estates to act as my joint sole agents in respect of the above property with FPD Savills acting as the main co-ordinating agent.
I confirm that I will pay a fixed fee of £1m (excluding VAT), on completion of the sale of the property. The matter of the sub-division of the fee is a matter solely for agreement between the three agents.
The Terms of Business for Sales which accompanied your letter to me does not form part of our Agreement.
I will pay the agreed fee on the basis that one of you introduces an applicant, who subsequently purchases the property from us.
If I procure a purchaser through my own endeavours, then you will be entitled to a reduced fee of 20% of the £1m.
I am not bound to pay fees to you under any other circumstances.
The content of this letter is our sole agreement and shall remain fully confidential.
[3] Mr Ecclestone and the Liechtenstein trustee (which I shall now call Corfiducia) were in fact introduced to Professor Khalili and Favermead by other agents, but two months after the sale to Corfiducia, Favermead confirmed by a fax dated 16 November 2001 to Mr Hewlett that the property was still for sale at the asking price of £85m. On 19 November 2001, Mr Hewlett met Professor Khalili and the agreement reached at that meeting was recorded in a letter of the same date from Mr Hewlett to Professor Khalili:
Further to our meeting this morning I write to confirm the outcome of our various discussions.
I understand from you that we are still instructed to continue to search and find a suitable purchaser for the above property. You informed me that Lovell White Durrant will be the solicitors should a purchaser be found.
Whilst writing I confirm that you have agreed to keep in place our agency agreement as per your letter 3rd April 2001 though I understand that this fee is now to be shared by the three agents mentioned in the letter and a new fourth party. I am very grateful to you for this, as you have personally agreed to settle our fee should a buyer be found. This agreement also covers our fees should the clients of Clyde and Co purchase the house. I am sure that both Beauchamp Estates and Glentree will also be delighted to have this warranty from yourself.
In addition we discussed the offer received from Clyde and Co on the above property. You have stated to me that I should go back to them offering them a seven-day exclusive at £75 million subject to contract for the house and the contents. This price would be agreed on the following basis; £65 million for the house and £10 million for the extra contents non negotiable.
(The reference to Clyde & Co refers to an offer made by that firm of solicitors on behalf a client to purchase the property for £60m that did not in the event proceed). This arrangement with Professor Khalili caused the appellants to circulate other agents including, by letter of 30 January 2002, Knight Frank.
[4] Favermead contends that the agreement made on 19 November 2001 and reflected in the letter was that the appellants would waive any claim for commission arising from the sale to Corfiducia in exchange for the opportunity to continue as agents on the original terms so as potentially to earn commission on any resale to a fresh purchaser.
[5] There matters seem to have rested until, more than two years later, Mr Abrahmsohn of the first appellant in a letter of 4 February 2004 drew the attention of Mrs Mittal to the property, on sale for around £85m and, on 26 February, a Mr Roddy Craggs, of Knight Frank, asked Mr Hewlett if the property could be viewed by him and an associate of his, Mr Jaideep Singh, of Knight Frank’s Indian department, to see if it might be suitable for the Mittals. The viewing took place on the next day. On 4 March, a further viewing took place with Mr Mittal and his son, Aditya, in attendance. At the end of that view, Mr Mittal asked if the owner would accept £65m but Mr Hewlett said that any offer would have to be over £70m.
[6] A short time later, rumours began to circulate that the property had been sold without any further involvement either of the appellants or of Knight Frank. Mr Singh made inquiries of Mr Aditya Mittal who told him that contracts had been exchanged. That occurred on 31 March 2004. The purchaser was Laken Properties Ltd (Laken). The judge proceeded on the basis (but expressly made no findings (see [59]) that a friend of the Mittals, Mr Ashok Tandon, appeared on the scene and was introduced to a Mr Macdonald on behalf of Corfiducia, the vendor. Mr Tandon was shortly to marry Mr Mittal’s niece and was shown round the property by Mr Macdonald and Mr Ecclestone. In the course of subsequent negotiations, Mr Mullens (to whom Mr Tandon seems to have been introduced by Mr Ecclestone as having authority to negotiate on behalf of Corfiducia) offered to pay Mr Tandon a commission of 3% of the purchase price if completion resulted. After completion Corfiducia paid US$3.15m to Mr Tandon.
[7] Savills considered that the appellants were entitled to a fee of £1m and served a statutory demand on Favermead for that sum. Favermead then issued proceedings to restrain the appellants from presenting a winding up petition. That application was granted by Patten J on 2 March 2005. These proceedings were begun on 4 October 2007.
[8] The judge listed seven issues for decision in [25]:
1.1 Did the sale by Favermead to Corfiducia trigger a right to recover commission of £200,000 plus VAT under the agreement of 3rd April 2001?
1.2 If so, was any right to that commission waived as a result of the meeting of 19th November 2001?
1.3 If it was, is there any basis for recovering it now?
2.1 Was it a term of the agreement that the Claimants had to be the effective cause of the sale by Corfiducia to Laken [the Mittals’ company]?
2.2 If so, were the Claimants the effective cause of the sale to Laken?
2.3 If so, does the fact that they used sub-agents disentitle them to their fee?
2.4 Does the fact that the price was below £70 million give rise to a separate defence to the claim for commission on the sale to Laken?
[9] He answered those issues:
1.1 Yes.
1.2 Yes.
1.3 No.
2.1 Yes.
2.2 Not proved.
2.3 Not applicable. |page:25|
2.4 Not applicable;
and dismissed the claim
Rights under first agreement of 3 April 2001
[10] Favermead now accepts that the appellants did acquire a right to £200,000 on the sale to Corfiducia. Professor Khalili did not accept that at the time and apparently persuaded Mr Hewlett, of Savills, that it was not a “real sale” because Corfiducia was intending to resell at a profit and that Professor Khalili or one of his companies would (as I have mentioned) share in such profit made on resale. This was to be achieved by an “overage agreement”. Mr Hewlett did not ask too many questions about this but seems to have accepted either that commission would not be payable on what he called a “technical sale” in his witness statement or, at least, that he would not press any claim that there might be to the promised commission because he was now to have the opportunity, once again, of an introduction that would lead to the acquisition of a £1m commission.
[11] Mr John Wardell QC argued that although the intended resale could not mean that there was no “real sale” or that there was only a “technical sale” that would give rise to no right to commission, nevertheless the later arrangement recorded in Mr Hewlett’s letter to Favermead of 19 November 2001 meant that the right to the earlier commission had been waived. The judge said that, after 19 November 2001, the phrase in the 3 April 2001 agreement that the agreed fee would be paid if one of the appellants “introduces an applicant, who subsequently purchases the property from us” had to be treated as amended to read “purchases the property from Corfiducia”. He then said that the fees were alternative not cumulative and that it was counterintuitive for an agent to expect to receive commission twice on successive dispositions of the same property by his principal. He concluded that the appellants must either expressly or by implication “be taken to have accepted” that the second arrangement involved a waiver of commission on the sale to Corfiducia.
[12] Mr Jonathan Gaunt QC, who appeared for the appellants on this appeal, pointed out that there was no reason why an agent should not earn commission on successive dispositions because there were two separate transactions. Whereas an agent should expect only one commission on one sale, there was no reason why such an agent should not have commission on each of two separate sales. He also submitted that if (as appeared to be the case) neither Professor Khalili nor Mr Hewitt thought that there was any right to commission, Mr Hewitt could not have waived any such non-existent right.
[13] There may be some force in Mr Gaunt’s criticisms of the way in which the judge expressed himself. Nevertheless, it seems to me that the judge’s instincts were right. It may be that Mr Hewlett did not give much thought to the matter at the time, but he was presented with an opportunity, once again, to earn a commission of £1m for an introduction that he had not, on any view, achieved on the first occasion. It was, to my mind, inherent in the new arrangement that any right there may have been to commission the first time round was absorbed into the new arrangement or, to put the matter a little more legally, he gave up any right he already had (which appeared at the time to be a matter of some controversy if it existed at all) to a comparatively small sum of money for the chance of earning a good deal more. To this extent, therefore, I agree with the judge. Once the second agreement was made, the original rights and obligations were exchanged for a new set of rights and obligations and there was thus no longer any right in the appellants to recover £200,000 in respect of the sale to Corfiducia. So, like the judge, I would answer questions 2 and 3 “yes” and “no” respectively and dismiss the appellants’ first claim.
Need for introduction to be effective cause of purchase?
[14] The judge rightly formulated this issue as being whether it was a term of the (second) agreement that the appellants had to be the effective cause of the sale by Corfiducia to Laken, but I prefer to formulate the question more generally because it is unlikely that the second agreement contained such a term if the first agreement did not, and the starting point for consideration of this question should, in my view, be the first agreement. That agreement formed the basis of the second agreement save for the phrase “who subsequently purchases the property from us”, which has to be read in the second agreement as “who subsequently purchases the property from Corfiducia”.
[15] The first thing that strikes one concerning the original deal is how favourable it is to the appellants. They are to be the joint sole agents so they would not be competing with anyone else. They are to receive a fixed fee of £1m on the basis that one of them introduces an applicant that subsequently purchases the property from Favermead. If the matter had rested there, it might well have been that, on the true construction of the agreement, such introduction would have to be the (or perhaps an) effective cause of the purchase. The authorities are strongly in favour of either the implication of such a term or a construction of the express terms to that effect: see Millar Son & Co v Radford (1903) 19 TLR 575, John D Wood & Co v Dantata [1987] 2 EGLR 23 (where Nourse LJ considered (at p25K-L) that the phrase “introduction of a purchaser” meant “the introduction of the person who ultimately purchases, not to the property, but to the purchase… to the transaction which ultimately takes place”) and Foxton Ltd v Bicknell [2008] EWCA Civ 419; [2008] 2 EGLR 233, in [22], [23] and [36]. The rationale usually offered for this construction of commission contracts is that it is only if they are construed in this way that the principal can avoid (or at least minimise) the risk of paying two commissions: see The County Homesearch Co (Thames & Chilterns) Ltd v Cowham [2008] EWCA Civ 26; [2008] 1 WLR 909*. Another justification is that an agent is usually expected to do more work to earn its commission than merely to effect an introduction, for example, to participate in what may be either cursory or lengthy negotiations with the purchaser.
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* Editor’s note: Also reported at [2008] 1 EGLR 24
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[16] This construction is not, however, universally applicable if the contract points in an opposite direction. Thus, in Brian Cooper & Co v Fairview Estates (Investments) Ltd [1987] 1 EGLR 18, the vendor was a large-scale property company that was offering a number of flats in a big building on lease to prospective purchasers, but since it had its own employees who would expect to do all the negotiations there was no reason for the agent to do more than effect an introduction: see Woolf LJ, at p19J-M. Similarly, in County Homesearch, where the principal was the prospective buyer instructing his agent to find a property (rather than sell it), there was much less work that the agent could be expected to do, and there was, moreover, a “deemed introduction” clause. In both cases, the courts refused to construe the contracts as requiring the agent to be the effective cause of the relevant transaction.
[17] What is particularly striking in the present case is that Favermead does not merely agree to pay commission on the introduction of an applicant:
who subsequently purchases the property from us
but also agrees to pay commission (albeit at a reduced rate):
if I [the vendor] procure a purchaser through my own endeavours.
If, therefore, what one may call the traditional approach to construction of commission contracts is correct, one would have a situation in which if the appellants introduce a purchaser and are the effective cause of the transaction they obtain commission, if they effect no introduction at all they still obtain (a reduced) commission but if they do introduce someone who does purchase but they are not the effective cause of the transaction they get no commission at all. Mr Gaunt described that as “bizarre” and I can only say that I agree with him. That, to my mind, militates strongly against any implication or construction that, in order to get commission, they must be the effective cause of the transaction. An introduction to someone who does purchase will suffice.
[18] The judge came to the opposite conclusion because he thought that the cases (particularly Foxton) that required the introduction to be the effective cause of the transaction for which commission was claimed were too strong and the contrary indications in the contract were too weak to allow any other conclusion. He distinguished Cooper |page:26| on the basis that the principal in that case had all the necessary staff and expertise to convert any introduction into an agreed lease and he relied on the fact that Corfiducia, at any rate initially, set out to purchase the property as a home for the Ecclestone family and must be treated as a residential consumer. As to the first point, all the cases recognise that the natural construction can be displaced by the express terms of the contract. The present contract is not a standard form of contract but was made expressly for the purposes of the sale of a rather special property and, in my view, its terms do displace the normal construction. The second point derives from the first proposition in [20] of Foxton, where Lord Neuberger said that the implication that the introduction had to be the effective cause of the transaction was very readily made “especially in a residential consumer contract”. That is, of course, true, but must be a somewhat weaker presumption when all the relevant parties are companies (no doubt created for business and/or tax purposes) and have access to sophisticated advice if they need it.
[19] Ironically, if one looks at the second agreement in isolation from the first, the indications that it is not necessary for the introduction to be the effective cause of the transaction are even stronger because the appellants’ principal, Favermead, is no longer the owner of the property but merely a party having an interest in the proceeds of resale by reason of the overage agreement. Favermead cannot determine the price at which the resale takes place, as shown in a somewhat dramatic fashion by the fact that, on 4 March 2004, Mr Hewlett was saying to the Mittals that only an offer of more than £70m would be acceptable, when contracts were exchanged on 31 March (just four weeks later) for what we were told was the dollar equivalent of £57m. In these circumstances, there was not much that the appellants could ever have been expected to achieve in respect of the resale price or the other terms of the resale contract and the transaction is by no means typical of transactions made by “residential consumers”.
[20] As it is, however, I am satisfied that, in the context of this particularly one-off case, neither the agreement of April nor that of November 2001 required the appellants to be the effective cause of the transaction, and I would therefore answer the judge’s fourth question in the negative.
Effective cause in fact?
[21] In the light of the above conclusion, it is unnecessary to come to any view on this question. The circumstances in which Mr Tandon became involved with Corfiducia, whether he was acting for the Mittals, to whom he was about to become related, or for Corfiducia, which he evidently persuaded to pay to him 3% of the purchase price paid by the Mittals, and how he persuaded Corfiducia to agree a price that apparently meant that nothing was due to Favermead under the overage agreement are all wrapped in mystery. Neither the Mittals nor Mr Tandon gave evidence; Mr Ecclestone, who had been personally sued as a third party for allegedly warranting that he had had the authority of Corfiducia when he did not, did give evidence, mainly to the effect that he did not have any authority from Corfiducia and had never said that he did. (The proceedings against him were either settled or withdrawn before the end of the trial.) In these circumstances, it is not surprising to find the judge saying, in [59]:
I make no findings as to the role played by Mr Tandon after the 4th March events. In particular, I do not find that he was thereafter acting as agent for Corfiducia and that he received the commission payment of 3% of the purchase price on the sale to the Mittals in that capacity.
[22] Mr Wardell, for Favermead, tried to persuade us that the judge should have made positive findings and, in particular, findings that: Mr Tandon did act for Corfiducia with regard to the sale to the Mittals; the consequence was that his commission was an expense to be deducted from any profit on resale; and since the overage agreement (particularly as a result of the deduction) never came into effect, Favermead had in effect had to pay (at any rate half of) Mr Tandon’s commission and should not have to pay to the appellants a second commission in respect of the sale. It is asking a great deal of an appellate court to make all these findings when the judge expressly declined to do so, and, for myself, I would decline to embark on any such exercise. The state of the evidence does not, in my judgment, permit it. Nor is it necessary because no one can suggest that Corfiducia was in any way the principal of the appellants. The appellants have only ever had one principal, namely Favermead, and only the agreement that they had with Favermead has to be construed.
[23] The judge, however, concluded that the appellants had failed to discharge the burden of proving that they were the effective cause of the sale by Corfiducia to Laken. Although it is strictly unnecessary, for the purpose of disposing of this appeal, to express any view on this, I will add, in the light of the arguments we received, that I would not myself have come to that conclusion. On the basis that the only relevant facts about which there was satisfactory evidence were:
(i) the appellants, with the authority of Professor Khalili, circulated Knight Frank (and other agents) on 30 January 2002 with information concerning the property ([10] of the judgment);
(ii) on 4 February 2004, the first appellant drew the attention of Mrs Mittal to the property and its availability for sale for a sum in the region of £85m ([19]);
(iii) Knight Frank, which knew that the Mittals had been the underbidder for another house in Kensington Palace Gardens, asked Mr Hewlett if they could see the property to assess its suitability for the Mittals and that a viewing took place on 27 February 2004 in the company of Mr Hewlett (also [19]);
(iv) a second viewing took place on 4 March in the company of Mr Hewlett at which both Mr Mittal senior and his son, Aditya, were present and reference to a possible price was made ([20]); and
(v) contracts for the sale of the property to the Mittals were exchanged on 31 March 2004 ([21]);
I would myself have concluded that the appellants were the effective cause of the transaction. It is true that Mr Hewlett thought that the price would have to be above £70m and that the property was in fact sold for £57m, but it is well known that vendors sometimes accept much less than they appear to want at the start of negotiations. Mr Wardell pointed out that in May 2003 a Ms Adina Kohn had drawn the Mittals’ attention to the property as she had done in 1997 and 1998, but that information must have receded into history by the time the appellants became involved in February and March 2004. The proximity of their first involvement in February to the exchange of contracts in March speaks for itself, unless there is credible evidence to show that some other person or persons were the effective cause of the transaction. The judge held that there was not, and so the prima facie position that the appellants were the effective cause remains undisplaced.
[24] In Chasen Ryder & Co v Hedges [1993] 1 EGLR 47, at p48G-H, Staughton LJ put the matter in this way:
The burden is on the plaintiff to show that his introduction in any case was the effective cause of the purchase. If, however, he shows that he was the first to introduce the purchaser, and that a purchase followed, and if no other facts are established, then it may well be that the judge will infer that the plaintiff was the effective cause. It can therefore be said that the evidential burden in such a case passes to the defendant, whether the other agent or the vendor, to prove more facts, which displace that inference.
[25] This statement of the evidential position seems not to have been cited to the judge. Indeed, its relevance becomes material only once primary facts have been found, but if the judge had had the advantage of reading what Staughton LJ had said he might have come to a different conclusion on the facts of this case. As it is, on my view of the matter, the appellants did not have to prove that they were the effective cause of the purchase and they must therefore be entitled, on the face of it, to commission of £1m.
Respondent’s notice
[26] That is, of course, an unfortunate result for Favermead. It is perhaps a pity that Professor Khalili did not consider inserting a term into the November agreement to the effect that commission would be payable only if the overage agreement took effect. Mr Wardell did indeed contend that the effect of the 19 November 2001 agreement was that the appellants had to introduce a purchaser that paid more than |page:27| £70m, but there was no express term to that effect and there is no basis on which it could be implied.
[27] Mr Wardell also contended that the appellants had appointed Knight Frank as sub-agent and, on the authority of John McCann & Co v Pow [1974] 1 WLR 1643*, had therefore forfeited their right to any commission. The judge refused to find that Knight Frank was appointed sub-agent of the appellants at any relevant time and, with respect, was clearly right so to refuse. It cannot be suggested that Knight Frank was itself authorised by Favermead to show people round the property (it had no keys and had to apply to Savills for permission to view) or that it had any direct relationship with Favermead. Whether the judge was right to go further, in [19] and [59], and say that Knight Frank was actually acting for the Mittals is a moot point. Quite possibly he was, but it does not matter. On no view was it acting for Favermead.
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* Editor’s note: Also reported at (1974) 232 EG 827
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Conclusion
[28] In the event, however, I would decide that this appeal must be allowed to the extent of entering judgment for the appellants in the sum of £1m plus VAT because the fourth question posed by the judge should be answered in the negative.
Smith LJ said:
[29] I agree.
Norris J said:
[30] I also agree.
Appeal allowed in part.
