Estate agents’ claim for commission on sale of houses–Any commission due to agents to be paid by purchasers–Claim for commission disputed on ground that an arrangement made by B (at that time a partner in the agents’ firm) with one of the possible purchasers was not consistent with agents’ duty to vendor–Arrangement concerned future letting agency for developed site comprising area of these and other houses–Agents held to be disentitled to commission on this ground and also because B’s negotiations were not the effective cause of the sale
In this action
Henry Smith & Son, estate agents, of Horsham, Sussex, claimed commission
against the estate of the late Mrs Neville in respect of the sale of two
houses, 44 and 46 Springfield Road, Horsham, to Sheraton Securities
(International) Ltd, the third party in these proceedings. The defendant, Mr
Muskett, was the personal representative of Mrs Neville. The facts are fully
set out in the judgment of MacKenna J. It was stated at the hearing that Mr Baker,
who was concerned in the negotiations described in the judgment, had ceased to
be a partner in Henry Smith & Son some time before.
Alan H Ward
(instructed by Lovell, Son & Pitfield, agents for Anderson, Longmore &
Higham, of Petworth) appeared on behalf of the plaintiffs; Jeffrey Burke
(instructed by L B Marks & Co, agents for G S Godfree & Co, of
Brighton) represented the defendant and the third party.
Giving
judgment MACKENNA J said: Henry Smith & Son, the plaintiffs, a firm of
estate agents in Horsham, claim commission for services in connection with the
sale of two houses once owned by Mrs Neville, now deceased, whose personal
representative, Mr Muskett, is the defendant. The houses were sold to Sheraton
Securities (International) Ltd, whom I shall call ‘Sheraton,’ who are the third
parties, and it was one of the terms of this contract that Sheraton would on
completion of the sale pay any commission owed by Mrs Neville to the estate
agents. Sheraton do not dispute that, if Mrs Neville’s estate is liable to pay
the commission, they are bound to indemnify it. The only question in the action
is whether Henry Smith & Son are entitled to commission from Mrs Neville
and if so at what rate.
Mr K J Baker,
formerly a partner in Henry Smith & Son, was the only witness called by the
plaintiffs. I say at once that his evidence was not convincing and that I do
not accept it, except where it is confirmed by the contemporary documents, or
where it agrees with Mrs Neville’s statement put in under the Evidence Act, or with
the evidence of witnesses called by the other side.
The houses in
question were 44 and 46 Springfield Road, Horsham, and they were sold to
Sheraton on September 10 1973 at high prices, £23,050 for 44 and £34,575.60 for
46. There was a property boom at the time of the sale and Sheraton, who agreed
to pay these prices, wished to develop for commercial purposes an area of
Springfield Road which included 44 and 46 and other neighbouring properties on
the even numbered side of that road. Another company, Mountjoy Investments Ltd,
whom I shall call ‘Mountjoy,’ had similar schemes in mind and were competing
with Sheratons for the purchase of the properties.
The case
against the plaintiffs can be stated in a few sentences. It is that Mr Baker,
unknown to Mrs Neville, had made an agreement with Mountjoy which gave his firm
an interest in Mountjoy’s acquiring Mrs Neville’s houses, that in the
negotiations for the sale, because of this interest, he favoured Mountjoy, and
that Sheraton eventually became the owners not because of Mr Baker’s efforts
but in spite of them.
According to
Mrs Neville’s statement, which I accept, she went to see Mr Baker in April
1973. She wanted help in obtaining planning permission for the development of
her properties, which, if it were obtained, would enable her to sell them at a
better price. She was at this time acting along with the Dances who owned 40
and the Straughins who owned 42, and they too visited Mr Baker. He appears to
have advised them not to apply for permission but to leave this matter to the
property developers. On June 22 Clifford Dann & Partners, a firm of estate
agents at Burgess Hill, wrote to Mr Neville. They said that they were acting
for Mountjoy and asked whether he would consider selling them the freehold interest
of 46. They did not know that the wife was the owner of 46 and that she also
owned 44. Similar letters were written by Clifford Dann to the Dances and to
the Straughins, and they, as well as Mrs Neville, referred the letters to Mr
Baker.
On July 9 Mr
Baker wrote to his friend Mr Squire of Clifford Dann’s in these terms:
Dear Malcom,
40-46,
Springfield Road, Horsham
Further to
your letters to the owners of the above properties they have instructed me to
act on their behalf. Perhaps we could therefore meet to discuss the matter
further.
They met on
July 17 or 18 in Mr Baker’s office, along with Mr David Alcock, who was
Mountjoy’s director handling this business. The effect of their discussion is
given in Mr Alcock’s letter to Mr Baker of July 19, which I shall quote:
Dear Keith,
I confirm the
meeting held at your office yesterday to discuss the possible development of
38-46 Springfield Road. I understand that you are acting for the owners of
40-46 and that we shall negotiate with you in the purchase of these properties.
With regard to 38 and 38a it was agreed that you will act in the purchase of
these properties jointly with Clifford Dann and Partners. Should we be
successful in the purchase of all the properties and subsequently proceed with
the redevelopment, I further confirm that you will be retained in the reletting
on a joint basis with Clifford Dann and Partners, and paid fees based
on the standard RICS scale of charges. I would be pleased if you would confirm
that the above instructions are satisfactory to you.
Mr Baker told
me that after the meeting he informed Mrs Neville that he had agreed to act for
Mountjoy in the purchase of 38 and 38a and in the letting of the developed
property, if that development took place. I do not accept Mr Baker’s evidence on
this point. I shall return to it later in this judgment.
On July 20,
which was presumably the date when Mr Baker got Mr Alcock’s letter, he wrote
six letters, one to Mr Alcock confirming that he would be happy to deal with
the matter as Mr Alcock had suggested, two to the owners of 38 and 38a, and
three to Mrs Neville, Mrs Straughin and Mrs. Dance. The letters to each of the
ladies was in common form. I shall quote that written to Mrs Neville:
44 and 46, Springfield Road
Further to
our recent meeting I write to confirm that I shall be happy to act on your
behalf, and I am at the present time negotiating with a number of developers who
have expressed interest in your properties, but I feel that none of them will
come up with a sensible offer until they can acquire more properties in
addition to 44 and 46, and I have therefore taken the liberty of writing to the
owners of 38 and 38a to find out whether or not they have been approached so
that I can liaise with them to get the best price for you.
He wrote as
follows to the owners of 38 and 38a:
We have been
retained by Mrs Neville in connection with the possible sale of her properties,
and I understand that your firm may have been similarly approached by
developers asking whether you wish to dispose of your premises, and I therefore
feel it would be a good idea if we could get together to discuss a mutual
approach to these people.
Neither of the
owners of 38 and 38a, nor any of the three ladies, would have understood from
these letters that Mr Baker’s firm were Mountjoy’s agents to buy 38 and 38a,
and it is clear to me that they were not meant to understand it. I should
mention that nothing came of this approach to the owners of 38 and 38a.
A few days
later, on July 25, Mr Baker wrote a number of letters in common form to
property dealers in London, bringing to their attention three sites in North
Street, Horsham, and two in Springfield Road, on opposite sides of that road,
of which one I think must have been 40 to 46.
On August 7 Mr
Rosen of Land and Town Development (London) Ltd wrote to Mr Baker:
Re: 38-46
Springfield Road
Further to
our conversation of yesterday I confirm that we are most interested in
purchasing the above site, and would accordingly instruct you to forward the
offer of £35,000 subject to contract for the freehold interest and vacant
possession of nos 44 and 46 and £17,500 subject to contract each for nos 40 and
42 with vacant possession.
Next day Mr
Baker wrote to Mrs Neville:
44 and 46
Springfield Road
I write to
inform you that I am now beginning to receive offers for your property, and
whilst I turned down some out of hand I would inform you that I have today
received an offer of £35,000 subject to contract only for your two properties
as above. I think it should be possible to get nearer to £40,000 and perhaps
you would therefore kindly let me know what sort of figure you would be
prepared to accept.
Mrs Neville’s
statement deals with this letter. She states:
Having got
Henry Smith’s letter of August 8 my husband went to see Mr Baker of Henry Smith
and said that he thought the price should go to £40,000. Mr Baker told my
husband that he thought £40,000 was a reasonable price and wanted to know
whether my husband would be prepared to accept. My husband said that if Mr
Baker thought that was reasonable, then fair enough he would. He (Mr Baker)
told me eventually that this would have been shortly after August 8 that a firm
called Mountjoy Investments were prepared to go to £40,000.
It is likely
that Mr Baker had already been in touch with Mountjoy about Mr Rosen’s offer
before he wrote to Mrs Neville on August 8, and had got from them the figure of
£40,000 which would outbid Mr Rosen’s £35,000. It is certain that there was a
meeting on August 10 between Mr Baker and Mr Alcock of Mountjoy to discuss the
purchase of 40-46. Mr Alcock’s letter to Mr Baker of August 11 deals with this
discussion. It would seem from the second paragraph of the letter that Mountjoy
had already offered £20,000 to the Straughins, who were negotiating for the
purchase of another house, and that one of the matters discussed with Mr Baker
was the completion of the sale of 42 at that price. The letter continues:
I would
further confirm that offers should be made to the owners of 40, 44 and 46
Springfield Road, in the sum of £20,000 each, subject to contract and subject
to planning permission. I would be pleased if you would inform me as to the
various vendors’ reactions. Offers are also to be made for the freehold of nos
38 and 38a Springfield Road, in the sum of £50,000 each subject to contract and
subject to planning permission. I will leave you to negotiate the best possible
terms.
I would thank
you for your co-operation and trust that we will achieve a successful event.
Mr Baker
replied on August 15:
40-46
Springfield Road, Horsham
Thank you for
your letter of August 11 and I have instructed Mrs Straughin’s solicitors
accordingly. With regard to nos 40, 44 and 46, I have been able to ascertain
that they would be prepared to accept £20,000 each, but subject to contract
only and to your company paying legal and agents’ fees. The owners would,
however, agree to a delayed completion.
Unhappily for
Mountjoy other estate agents were in touch with the Straughins. This was Mr
Bruce Trent’s firm who were acting for the vendors of a property which the
Straughins hoped to buy with the proceeds of sale of 42, and who were also
retained by Sheraton to find them properties suitable for development. Mr Trent
heard from the Straughins that they were selling 42, and that Mrs Dance, who
was, I think, Mrs Straughin’s daughter, was selling 40 and he told Sheraton,
who intervened before Mountjoy had completed the purchase of 40 and 42.
The rivals,
Sheraton and Mountjoy, met on August 24 in the office of Tarran, Jones &
Co, the Straughin solicitors. Mr Steadman was there representing Sheraton and
Mr Alcock for Mountjoy. Each made a bid for 40 and 42. Mr Steadman’s was the
higher, and contracts for the sale of these properties were exchanged that
afternoon.
Sheraton came
to know that Mrs Neville was the owner of 44 and 46 and was willing to sell. Mr
Trent says that he was given the information by Mr Burstow of Messrs Tarran,
Jones & Co on the afternoon of August 24 and that may be true.
Mr Baker says
that he met Mr Steadman, whom he already knew, at least by sight, that same
afternoon in the street in Horsham, and that Mr Steadman made a joking
reference to his company having got nos 40 and 42. Mr Steadman says that he
does not recollect this meeting.
There was a
chance meeting that night in a public house in Horsham. Mr Steadman and Mr
Makepiece, who was another Sheraton executive, were in the public house along
with their agent Mr Trent, when Mr Baker came in. He joined the others and they
spent the rest of the evening together drinking. What they talked about is in
dispute. Mr Baker says that the sale of 44 and 46 was mentioned and that
£35,000 was offered by Mr Steadman and turned down by Mr Baker. Mr Steadman and
Mr Trent say that there was no discussion of a sale, and that neither of them
knew at this time that Mr Baker was Mrs Neville’s agent. I do not know who is
telling the truth about this, and I do not think it matters.
Four letters
were written on August 28, two by Mr Baker and two by Mr Trent. Mr Baker’s were
to Godfree & Co,
were Mountjoy’s. Each of these letters told these solicitors that Mr Baker had
that day arranged the sale of Mrs Neville’s properties to Mountjoy for £40,000
subject to contract and to the payment of legal and estate agents’ fees. Mr
Trent’s letters were to Mrs Neville and to her solicitors. The letter to Mrs
Neville told her that clients of Mr Trent were keenly interested in buying 44
and 46 and that an immediate decision could be made and that contracts could be
exchanged within seven days. The letter to the solicitors said much the same.
Mrs Neville
passed this information on to Mr Baker, who spoke to Mr Trent on the telephone.
A price was discussed between them. Less than £40,000 was offered at first, but
on Friday August 31 Mr Trent increased his figure to £40,000. He was told by Mr
Baker that he would take his client’s instructions. Mrs Neville’s statement
does not mention any discussion of an offer of £40,000 by Sheraton. Mr Baker
told me in his evidence-in-chief that he did discuss it with her, but I am
doubtful whether that is true. Mr Trent confirmed his offer of £40,000 by
letter of September 3 which he says he delivered by hand at Mr Baker’s office.
On the same day Mr Baker wrote to Mr Trent.
44 and 46
Springfield Road, Horsham
Further to
our letter of August 28 addressed to my client Mrs Neville and our subsequent
telephone conversation, I write to inform you that I have submitted your
revised offer to our client and she has decided to accept a higher offer from
another source.
Mr Baker was
questioned about this supposed higher offer. In his evidence-in-chief, he said
that Mountjoy had by this time increased their offer from £40,000 to £46,000.
That was certainly untrue, and in cross-examination he admitted the untruth. He
tried to justify the use of the words, ‘a higher offer’ in other ways, but in
my opinion unsuccessfully. I believe that he untruly told Mr Trent that his
client had a higher offer which she had decided to accept as a device to put
Sheraton off, so that Mountjoy might get the properties.
Mr Steadman
and Mr Trent were doubtful whether their offers were getting through to Mrs
Neville, and Mr Steadman was rightly suspicious that there was some kind of
tie-up between Mr Baker and Mountjoy. On September 4 Mr Steadman decided to
approach Mrs Neville through her solicitors, Godfree & Co. He spoke on the
telephone to Mr Muskett, a legal executive of that firm, who made a note of the
conversation, which I shall quote:
4 September.
Received telephone call from Mr Steadman of Sheraton Securities Ltd offering
£40,000 for this property. I told him that I had instructions that I was not to
negotiate and that Mrs Neville proposed to proceed with the sale that had been
negotiated. I was asked whether an offer of £40,000 was likely to be
entertained and I said ‘No.’Â The offer
was then increased to £46,000 and I was told that this was the maximum. I
pointed out that I had instructions not to negotiate although I would report
the offer to my client. This I did.
Mr Muskett
must have told Mrs Neville, because she says in her statement, ‘I heard from my
solicitors that £46,000 had been offered, and I went round to Mr Baker and told
him of this. He told me that Mountjoys would go to this figure.’
By September
5, which was a Wednesday, no answer had been received by Mr Steadman or Mr
Trent to Sheraton’s increased offer of £46,000. Mr Steadman telephoned Mr
Baker, who told him that £46,000 was not enough. Mr Steadman raised the figure
to £51,000. Mr Baker said that he would take instructions. I do not think that
he did take Mrs Neville’s instructions on this offer. Her statement does not
mention any discussion of such an offer. Twenty-four hours went by without any
communication from Mr Baker to Mr Steadman, who was by this time very
suspicious. He rang Mr Baker on September 6 and asked him whether he had any
decision. He said ‘Not at the moment.’Â
Thereupon, Mr Steadman withdrew the offer of £51,000 and reinstated the
lower figure of £46,000. I asked him why he did this. He answered, ‘I thought
we were being given the runaround. I had a feeling the other company were
working off our back. I thought our offers were being passed on to the other
company.’Â This was on the Thursday. Mr
Steadman got no answer on that day or on the Friday morning.
He and Mr
Trent made efforts to meet Mr Baker but did not succeed until lunchtime, when
they met at a public house, the Wessex Oak. Mr Steadman, Mr Trent and a friend
of theirs, Mr Williamson, local manager of the Abbey National Building Society,
were together in the bar when Mr Baker came in. There was a short conversation
of which I have been given conflicting versions. I am satisfied of the
following matters: (1) that Mr Steadman and Mr Trent asked Mr Baker whether
Sheraton’s offer of £46,000 was accepted or rejected; (2) that Mr Baker told
them that he could not yet give them a decision; (3) that they asked him to let
Mr Trent know by telephone that afternoon; (4) that Mr Baker said that he
would; (5) that Mr Baker was not told on this occasion that the offer of
£46,000 was Sheraton’s last word; (6) that Mountjoy had not at this stage
agreed to pay £51,000.
If, on this
occasion, Sheraton’s offer of £46,000 had been unequivocally rejected by Mr
Baker, and if Mr Steadman and Mr Trent had made it plain that this was
Sheraton’s last word, it would have been pointless to ask Mr Baker to
telephone. There would have been nothing to talk about. But I have no doubt
whatever that Mr Baker was asked to telephone and that he said he would. That
was Mr Williamson’s evidence, agreeing on this point with Mr Steadman and Mr Trent,
and disagreeing with Mr Baker, and he was, I thought, a completely reliable
witness.
I base the
finding that Mountjoy had not at this stage agreed to pay £51,000 upon a note
by Mr Muskett of a telephone conversation later that afternoon with Mr Radcliffe
of Speechly, Mumford & Soames, who were Mountjoy’s solicitors. Mr Radcliffe
told Mr Muskett that no price had been agreed, that Mrs Neville had been asked
to say what she wanted, and that if Mountjoy thought this was a fair figure and
they approved the terms of the contract they would sign it. An appointment was
made to meet at Mr Muskett’s office at ten o’clock on the Monday morning.
Mr Baker, who
was about to go on his holidays, did not telephone Mr Trent but instead wrote
him a letter which he could not receive until the Saturday morning after Mr
Baker’s departure, This is what he wrote:
44 and 46
Springfield Road, Horsham
Further to
your letters of September 3 and 5 and our various telephone conversations, I
write to inform you that your clients’ offer is still not acceptable to my
client, Mrs Neville and she has therefore sold the property to the other party.
I am actually
disappointed at this outcome, but my duty lay with Mrs Neville to obtain the
best price.
The statement
about his duty was true, but it was not true that the property had been sold to
the other party. There was not even an agreement to sell it, and if there had
been Mr Baker would not have been disappointed. Why had he not telephoned to Mr
Trent? I suspect it was because he did
not wish to negotiate with Sheraton but preferred to do a deal with Mountjoy.
Mr Trent got the letter on the morning of September 8 and told Mr Steadman.
They were angry. They thought Mr Baker had let them down. They went straight to
Mrs Neville at her home who put them in touch with Mr Muskett. They made him an
offer which Mr Trent confirmed by telegram.
Re: 44 and
46, Springfield Road, Horsham. Our clients, Sheraton Securities, instruct us to
confirm their offer of £55,500 subject to contract for the freehold interest of
the above. . . will arrive at your office with my client by 9.30 am Monday to
exchange and pay 10 per cent.
On the Monday
morning, Mr Alcock of Mountjoy, Mr Steadman and Mr Trent met Mr Muskett in his
office. At his request each side wrote down their offer on a piece of paper and
gave it to Mr Muskett. Sheraton’s offer for the two houses totalled £57,625.60
and Mountjoy’s was £53,150. So Sheraton won. Mr Muskett accepted their offer
and contracts were exchanged that afternoon. The contracts provided that
Sheraton would pay fees and commission.
A few days
later, on September 13, Sheraton’s solicitors wrote to Godfree & Co. They
referred to Mr Baker’s letter of September 7 with its incorrect statement that
the property had been sold to Mountjoy, and not unnaturally took the point that
the writer of the letter ‘made no contribution to the eventual sale to our
clients and on the contrary appears to have endeavoured to avoid such an
agreement being entered into.’Â Though Mr
Steadman had for some time suspected there was a tie-up between Mountjoy and Mr
Baker, he did not yet know of the agreement under which Mountjoy were to employ
Henry Smith & Son as their agents to relet the developed site. Sheraton
came to know of this agreement only when Mr Alcock’s letter of July 19 was
disclosed upon discovery.
I turn now to
consider the issues in the action. I must first decide what agreement, if any,
was made between Mrs Neville and Henry Smith & Son. I find that Mrs Neville
employed this firm as her agents to negotiate a sale of her properties to
Mountjoy or to any other buyer who might make a better offer for them, and that
they were to be paid commission at the usual rate if they negotiated the sale.
I infer the existence of this agreement from the correspondence, from Mrs
Neville’s statement, and from the probabilities of the case. The next question
concerns the agreement of July 17 under which Mountjoy were to employ Henry
Smith & Son as their agents in reletting the developed site if they
acquired it. The making of this agreement was in my opinion inconsistent with
the duty owed by Henry Smith & Son to Mrs Neville. It gave them an interest
in Mountjoy’s becoming the owner of these properties which might conflict with
Mrs Neville’s interest to sell her properties at the highest price, which might
not have been obtainable from Mountjoy. I would be prepared to hold that the
mere making of this agreement with Mountjoy disentitled the agents from
obtaining commission under their agreement with Mrs Neville, even if it were
clear that the agreement had in fact no influence on the agent’s conduct of the
negotiations. I think that Mr Baker did what he could to negotiate the sale to
Mountjoy in preference to Sheraton and that in this matter he may have been
influenced by the tie-up with Mountjoy. This is, I think, an additional reason
for rejecting the claim for commission.
It was argued
by Mr Ward that the sale of the two other properties, 40 and 42, to Sheraton on
August 24 had frustrated the agreement of July 17 between the estate agents and
Mountjoy, and that the agents’ right to commission from Mrs Neville, if it had
temporarily ceased to exist, thereupon revived. I do not accept this argument.
Nor do I accept Mr Ward’s other argument that because the agents in fact made
no profit from their agreement with Mountjoy it cannot affect their right to
commission.
Mr Burke on
the other side argued that Mr Baker’s negotiations were not the effective cause
of the sale to Sheraton, and that this was a further reason for rejecting the
claim to commission. I accept this argument, and for all these reasons reject
the claim.
The
plaintiffs’ claim against the defendant was dismissed and the defendant’s claim
against the third party was dismissed. The plaintiffs were ordered to pay the
defendant’s costs, these costs to include the costs payable by the defendant to
the third party. The defendant was ordered to pay the third party’s costs.
