Estate agency — Sharing of commission — Dispute between two sets of estate agents — Appeal, involving some points of pleading and procedure, from decision of Whitford J dismissing an appeal from a master, who gave judgment for plaintiff firm in default of defence for one half of commission received by defendants — Defendants, who had received the commission, had in fact delivered a defence but had failed to comply with an order for delivery of particulars, so that their defence had been struck out — Plaintiffs claimed that the vendors had appointed them joint sole selling agents with the defendants in respect of the sale of certain flats on the terms of payment of 3% commission on the sale price, such commission to be divided equally between them — The flats had been sold and the defendants had received payment of commission, but the plaintiffs had received no payment — Plaintiffs therefore claimed an account for one half of the commission received by the defendants, alternatively for the excess of the amount so received over 1 1/2% of the sale price of the flats — The master had ordered the defendants to account for the commission received and to pay to the plaintiffs one half thereof — Whitford J, in dismissing an appeal from this order, expressed the view that he need not consider the basis of the plaintiffs’ claim but merely look at the assertion in the statement of claim (to which in the events which had happened there was no defence) that the plaintiffs were entitled to one half of the moneys received — The Court of Appeal, while affirming Whitford J’s actual decision, expressed disagreement with his approach, which did not distinguish between the primary facts pleaded and their consequences in law — However, on the principle of equitable dealings between parties to a joint venture, and in accordance with the maxim that ‘equality is equity’, the court held that the defendants were accountable for one half of whatsoever they had received, not merely for any excess over 1 1/2% — Appeal dismissed
This was an appeal
by Garrard Smith (Estate Agents) Ltd, defendants in an action by Hampton &
Sons, from a decision of Whitford J, who had dismissed an appeal by the
defendants against a decision of Master Dyson in favour of the plaintiffs. The
master had awarded the plaintiffs judgment in default of defence, the defence
having been struck out for failure to deliver particulars.
D C Unwin
(instructed by Grangewoods) appeared on behalf of the appellants; E M Cohen
(instructed by Tarlo Lyons) represented the respondents.
Giving the
first judgment at the invitation of O’Connor LJ, DILLON LJ said: This is an
appeal by leave of this court by the defendants in the action, Garrard Smith
(Estate Agents) Ltd, against a decision of Whitford J given on November 23
1984. Whitford J on that occasion dismissed an appeal by the defendants against
an order of Master Dyson of October 16 1984. That was an order of the master
which awarded the plaintiffs judgment in terms which I shall have to mention in
default of defence.
The defendants
had served a defence in the action, but that defence had been struck out for
failure to deliver particulars. It was in those circumstances that the matter
came before the master and then on appeal before the judge on an application
for judgment in default of defence. It is clear under Order 19, rule 7 that
where such an order is made, the court shall give such judgment as the
plaintiffs appear entitled to on their statement of claim. A minor procedural
point was taken on behalf of the plaintiffs that on such an application for
judgment in default of defence, the court was entitled to look only at the
statement of claim and not at further and better particulars of the statement
of claim which had been delivered. In this particular case, before the defence
was struck out, there had been a request for further and better particulars of
the statement of claim and particulars had been delivered pursuant to that
request.
I agree with
the judge on this point that once particulars are delivered they become part of
the statement of claim and are to be read with the statement of claim.
Accordingly the court is entitled to look both at the statement of claim as
originally served and at the particulars which supplement and clarify the
plaintiffs’ case as pleaded in the statement of claim.
The nature of
the plaintiffs’ claim is this. Both the plaintiffs and the defendants are
estate agents. It is alleged that in or about the month of July or August 1977
the owners of a property known as 22-23 Down Street, London W1, appointed the
plaintiffs joint sole selling agents with the defendants in respect of the sale
of flats forming part of that property upon terms which provided for the
payment to the plaintiffs and the defendants of commission and fees at the rate
of 3% of the sale price of those flats plus value added tax, such commission
and fees to be divided equally between the plaintiffs and the defendants. It is
not suggested that the defendants were parties to the contract between the
plaintiffs and the owners of the property by which the plaintiffs were
appointed joint sole selling agents, but it is said that at the same time there
was a separate contract between the owners and the defendants which appointed
the defendants joint sole selling agents in respect of the selling of flats in
the property on the same terms, that is to say 3% of the sale price by way of
commission, to be divided equally between the plaintiffs and the defendants. It
is then pleaded that that joint sole selling agency continued until April 24
1978.
The pleading
sets out in para 4 that:
at all times
during the said agency the defendant as joint sole selling agent with the
plaintiff in respect of the said flats owed
certain duties
to the plaintiffs, including a duty
to account to
the plaintiff for one half of all commission and fees received by the defendant
. . . during the said agency in respect of the sale of the said flats,
alternatively for all of such commission and fees in excess of 1 1/2% of the
sale price of the said flats plus value added tax thereon.
It is then
pleaded that the plaintiffs and the defendants
acted as joint
sole selling agents in respect of the sale of the said flats until the 24th day
of April 1978 and flats forming part of the property were . . . sold.
In para 6 it
is pleaded that:
The plaintiff
has never received any commission or fees in respect of the sale of the said
flats but the defendant has received such commission or fees at a rate
exceeding 1 1/2% of the sale price of the said flats plus value added tax.
The Order made
by Master Dyson ordered: (1) that an account be taken of ‘all commission and
fees received by the defendants and earned by the defendants prior to the 24th
day of April 1978 in respect of the sale of flats forming part of the property’
and (2): ‘that the defendants do pay to the plaintiffs one half of all
commission and fees found to have been received and earned by the defendant on
the taking of the said account’. There were then procedural directions as to
the taking of the account, the vouching of the account, and discovery, and
directions as to costs, reserving the costs of the account.
When the
matter came before Whitford J he dealt with it on the footing that there was a
pleading in para 4 of the statement of claim that the defendants owed the
plaintiffs the duty to account for one half of all commission and fees as I
have mentioned. He said this:
in my view of
the matter, in accordance with the rules and orders, all I have to do is look
at the statement of claim . . . and taking into consideration
certain other
parts of the statement of claim
it appears to
me that it is not for me to decide what basis, if any, there may or may not
have been for the claim by the plaintiffs that they are entitled to one half of
the moneys received by the defendants in respect of commission or less in
connection with the sale of the properties in question. There is a plain
assertion in the statement of claim that the plaintiffs are so entitled, which
is not denied, and I think the master was quite right, in all the
circumstances, to make the order that he did.
For my part I
do not agree with that approach. The plaintiffs, in para 4, have pleaded a duty
to account on two alternative bases, either for one half of all commission and
fees received by the defendants or for all of such commission and fees in
excess of 1 1/2% of the sale price of the flats. Those pleadings are pleadings
of the consequences in law of the primary facts pleaded, and the judge, in
giving judgment on such a claim in default of defence, is not bound by the
assertion in the pleading of what the consequence in law is of the facts
pleaded. Therefore the mere fact that the plaintiffs have pleaded a duty to
account for one half of all commission and fees is not enough to entitle the
plaintiffs to judgment for that. Unless it was clear that one half was indeed
the plaintiffs’ entitlement, the appropriate order would, I apprehend, be to
direct an inquiry, as the judge did, of the commission and fees received by the
defendants and earned prior to April 24 1978 in respect of the sale of flats
forming part of the property, and to direct an account of the amount or
amounts, if any, of the commission and fees so received to which the plaintiffs
were entitled under or by virtue of the appointment referred to in the
statement of claim as joint sole selling agents with the defendants.
It remains to
be considered whether the consequence in law is that the plaintiffs are
entitled to one half of all commission and fees received by the defendants. The
plaintiffs have pleaded that they did not themselves receive any commission or
fees in respect of the sale of the flats but that the defendants have received
such commission or fees. Those are primary facts which are deemed to be
admitted and established for the purposes of judgment. If the defendants had
been paid the full 3% commission referred to in para 3 of the statement of
claim in respect of all the sales which had been effected, then clearly, and
this is common ground between the parties, they would hold one half of that sum
on a constructive trust for the plaintiffs. If the defendants had received more
than 1 1/2%, say 2 1/2%, of the selling price of the flats, but not the full
3%, by way of commission, it would be equally clear that the defendants were
accountable to the plaintiffs for some proportion of what they had received.
The question would be whether the proportion was one half of their receipts or
merely the amount by which what they had received exceeded 1 1/2% on the
footing that the 1 1/2% paid to them was their own share and only the surplus
was the plaintiffs’ share.
In the course
of his argument Mr Cohen for the plaintiffs referred us to the speech of Lord
Wright in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour
[1943] AC 32, and in particular to a passage at p 61 where Lord Wright said:
It is clear
that any civilised system of law is bound to provide remedies for cases of what
has been called unjust enrichment or unjust benefit, that is to prevent a man
from retaining the money of or some benefit derived from another which it is
against conscience that he should keep.
He also
referred us to a citation by Lord Wright at p 62 from a judgment of Lord
Mansfield CJ where Lord Mansfield had said:
the gist of
this kind of action is, that the defendant, upon the circumstances of the case,
is obliged by the ties of natural justice and equity to refund the money.
A little later
he said:
If the
defendant be under an obligation from the ties of natural justice to refund,
the law implies a debt and gives this action . . . founded in the equity of the
plaintiff’s case, as it were, upon a contract.
I find those
general statements not very helpful so far as the present case is concerned
because they do not indicate the circumstances which make it against conscience
that the defendants should keep the money or do oblige the defendants, by the
ties of natural justice and equity, or to refund the money. They do not
indicate how much they should refund. It does seem to me, however, that this is
a claim which lies within the field of equitable dealings between parties. It
is not a partnership, but it is a joint venture raising obligations of good
faith towards the plaintiffs. The money (the commission and fees) is received
by virtue of the arrangements. It has all been received by the defendants and
on the pleadings no part has been received by the plaintiffs, and it is a
well-known maxim of equity that equality is equity. If, therefore, the
defendants had received more than 1 1/2% but less than 3%, say 2 1/2%, the
defendants would be accountable to the plaintiffs, and it seems to me, in
accordance with the maxim referred to, that they would be accountable for one
half of their receipts. They were receipts in respect of commission or fees at
the rate of 3%, to be divided equally between the plaintiffs and the
defendants, not in respect of commission or fees at the rate of 1 1/2% to be
paid to the defendants for their own use.
If that is
right, it must follow that if the defendants had received a smaller sum, say 1
1/2% or even less, then, in default of agreement by the plaintiffs to the
contrary, the defendants would be accountable to the plaintiffs for one half of
what they had received. In the result, therefore, though I do not follow the
route which the judge took, I arrive at the same conclusion, that the
defendants are accountable to the plaintiffs for one half of all commission and
fees found to have been received and earned by the defendants. Therefore the
Order made by the master was in my judgment correct in the circumstances of
this case, and I would dismiss this appeal.
O’CONNOR LJ
agreed and did not add anything.
The appeal
was dismissed with costs.
