Estate agents — Commission — Property introduced by plaintiff agents but vendor refused to pay agents’ share of commission — Allegation by vendor that a higher price could have been obtained but for agents’ negligence or breach of contract — Vendor, in fact, achieved a very good price, £925,000, when the guide price was thought to be £900,000 —
concerned the sale of a property known as Rush Manor, Wallingford, Oxfordshire
— There was no question that the plaintiff agents had introduced the purchaser
who bought the property, but the defendant vendor refused to pay the plaintiffs
the share of commission due to them — The plaintiffs had acted jointly with
local agents, whose share of commission had been paid by the defendant — The
defendant had been hoping for £1m for the property and, in fact, sold it to a
Mr Potter for £925,000 — He claimed to be entitled to withhold the plaintiffs’
commission on the ground that there was ‘every prospect’ of a higher price
being achieved but for the plaintiffs’ failure — There was a counterclaim by
the defendant in support of his allegation
found that the defendant’s evidence was distorted by irritation which had
clouded his judgment and produced unjustifiable criticism of the plaintiffs —
Disregarding irrelevant matters, the defendant’s main complaint was that a
representative of the plaintiffs had failed to keep him fully informed of the
interest and attitude of the Mr Potter who eventually purchased the property —
Mr Potter was an astute businessman who played his cards close to his chest —
He had given the plaintiffs to understand that he would not go above £805,000 —
When the plaintiffs became aware that another bidder, negotiating privately
with the defendant, had made an offer of £875,000, they did not think that Mr
Potter would be interested at that sort of figure — There were, however,
strange developments — The defendant made a deal with the other bidder, a Mr
Pither, for the sale of the property to him for £900,000, but this deal was
later ‘unscrambled’ — Apparently ‘the astute Mr Potter’ persuaded the defendant
to retreat from the private deal and accept Mr Potter’s own bid for £925,000
conclusion was that there was no substance in the allegation against the
plaintiffs’ representative — She had acted reasonably throughout and with all
due care — The defendant was kept well informed of Mr Potter’s interest — The
defendant had got a good price for the property in a sparse market — The
plaintiffs were entitled to their commission and earned a commendation from the
judge, who was ‘impressed by the moderation and care of their witnesses’ —
Judgment for plaintiffs on claim and counterclaim
The following
cases are referred to in this report.
Dunton
Properties Ltd v Coles Knapp & Kennedy Ltd
[1959] EGD 221; (1959) 174 EG 723, CA
Smith v Burns The Times February 1 1991
In this action
Knight Frank & Rutley claimed against Denys Randolph their share of
commission due on the sale of the defendant’s property at Rush Manor,
Wallingford, Oxfordshire. The arrangement was that the commission of 3% was to
be shared between the plaintiffs and Adkin Commercial, of Oxford, in the
proportion of 1 3/4% and 1 1/4% respectively. The defendant had paid the amount
due to Adkin Commercial but not the amount due to the plaintiffs.
David Jeremy
(instructed by Corbald Rigby & Co) appeared on behalf of the plaintiffs;
Alan Steynor (instructed by Lewis Silkin) represented the defendant.
Giving
judgment, MACPHERSON J said: Since I do not believe in unnecessary
suspense I say at once that the plaintiffs succeed in this case.
In this
judgment I shall refer to the plaintiffs, Knight Frank & Rutley, as KFR and
to the defendant (who is plaintiff on the counterclaim) as Mr Randolph.
On August 15
1989 Mr Randolph agreed to sell the property known as Rush Manor, at
Wallingford, to Mr David Potter. In fact the property was jointly owned by Mr
and Mrs Randolph and sold, I believe, to Mr and Mrs Potter. Neither Mrs
Randolph nor Mrs Potter has given evidence, although both of them figure in
this unfortunate story.
The sale was
admittedly the result of the introduction by KFR of Mr Potter to the property
and its owners. KFR acted, in fact, in concert with other local agents called
Adkin Commercial, represented in this case by Mr Harper. The deal with the
agents was that Mr Randolph would pay 3% plus VAT and expenses should there be
a fruitful introduction. The commission was to be shared between KFR and Adkin
as to 1 3/4% to KFR and 1 1/4% to Adkin.
Mr Randolph
was hoping for the magic £1m for his property. But throughout this relevant
time the guide price was indicated to be £900,000. So that price was eventually
exceeded by £25,000. In my judgment, £1m was never on the cards.
There is no
doubt that KFR did the lion’s share of the joint agents’ work. They incurred
virtually all the expenses during the sale period. Mr Stephen Lambert [FRICS],
in Oxford, and Miss Nicky Althaus, in London, were engaged in the activity, and
so was Mr William Yates [FRICS], the head of the residential division of the
firm, and others.
KFR produced
the glossy brochures which are familiar to those interested in expensive
property. They did all the usual circulation and advertising. All this can be
seen in the uncontested part of Mr Yates’ evidence, which was put in and proved
in statement form. This practice was sensibly followed for all the witnesses as
they were called. No extensive reference by me to the papers and evidence is
necessary.
Adkin have
been paid their 1 1/4%, £13,296.88, with the thanks and congratulations of Mr
Randolph. But this action arises because Mr Randolph has refused to pay KFR. In
a nutshell, he says that he is entitled to withhold payment because ‘there was
every prospect’ of a higher price having been achieved but for KFR’s breach of
contract or negligence. Mr Randolph in his proof says that he believes that he
could have achieved ‘possibly as much as £50-£100,000 higher’. I feel bound to
say that this assertion is fanciful and has no support from the evidence.
I am in this
context disappointed to have to say that I found Mr Harper’s evidence, on
behalf of Adkin Commercial, on this aspect of the case disingenuous. He does
seek to say that he believes that if there had been competitive bidding the
price could have been as high as £975,000. But I find as fact that on September
8 1989 he said to his fellow agent that £925,000 was ‘a bloody good figure’ and
that the sale to Mr Potter was ‘one of the luckiest sales of the year’. He also
told his client that the figure was ‘very satisfactory . . . in the light of
current market conditions’. Later he repeated to Mr Lambert by letter his view
that the price that was eventually achieved was a very good one, taking into
account the property and the market.
Of course, Mr
Harper’s position is a difficult one. He was joint agent with KFR. Mr Randolph
castigates KFR, yet Mr Harper has been paid in full. Mr Harper did somewhat
half-heartedly say that KFR might bear some blame for a failure of
communication. But my strong impression was that his heart was not in that
criticism. He said twice that what he thought would happen after the protest
and storm died down was that Mr Randolph would pay up to KFR and the whole
matter would be over. In my judgment, it is a pity that this did not happen.
Very large cost has been incurred in litigation which should, in my judgment,
have been avoided. But the trouble is that sometimes hindsight and
justification rule the head. I believe that this is what happened in this case
to Mr Randolph, helped perhaps unwittingly by Mr Potter, who has given evidence
in Mr Randolph’s support.
I say at once,
however, that I am sorry that Mr Jeremy, counsel for the plaintiffs, impugned
the good faith of Mr Potter and indeed, to some extent, of Mr Randolph. Both of
them have, as it seems to me, warmed to the task of fighting this case, to an
extent which has led to exaggeration; and the prospect of more money does
distort views. But I do not find that there has been any purposeful or devious
scheme afoot. Both Mr Randolph and Mr Potter are highly successful and
honourable businessmen. And I believe that their temporary irritation (to be
seen in the early letters and attitude of themselves and their wives) has been
unnecessarily prolonged and has indeed clouded their good judgment, but no more
than that.
Mr Potter has,
of course, no financial axe to grind. He achieved this property at £925,000 and
is living in it. But certainly in some respects his contentions are not made
out by his evidence, as I will shortly demonstrate. For example, his mistaken
belief that his secretary passed on his message from the beach in Portugal on
July 20 or 21 1989 has wrongly coloured his part in this case.
As to Mr
Randolph, he too has, I fear, to a considerable extent allowed irrelevance and
unjustifiable criticism of KFR to infect his approach to the heart of this
case. For example, he has said that he believes that the change of name of this
property from ‘The Cottages’ to the more impressive ‘Rush Manor’ was bad for
the sale, and he plainly seeks to blame KFR for this. KFR did say that ‘The
Cottages’ was not perhaps a good selling name, but it is palpable that the idea
of ‘Rush Manor’ came from Mrs Randolph. She researched the Victorian history of
the Liberty of Clapcot and said to KFR: ‘I am sure you will agree that the
house should be called Rush Manor. Had I known in 1965 that which I now know it
would not have been called The Cottages, but all that is past.’ In the circumstances any criticism about the
name of the house cannot possibly be put at the door of KFR.
Nor, in my
judgment, has the failure to achieve the agreed Country Life
advertisement date any bearing on the case, apart from the fact that it was (as
Mr Yates accepted) an error which should not have happened. But I expect that
even in Mr Randolph’s business life he must have seen such mistakes made by
staff. And KFR at once accepted that it was their mistake, entered an
alternative Country Life advertisement, and paid for two separate
advertisements in leading newspapers as well.
Yet this
complaint appeared in the pleadings and still troubles Mr Randolph two years
later, although his pleadings accepted, when particulars were sought of him,
that this error did not cause any loss to him but ‘was one of a number of factors
which caused the defendant to lose confidence in the plaintiff’. Loss of
confidence is not a cause of action.
Without
wishing to waste time on irrelevant matters, I am also convinced that Mr
Randolph’s criticism about the projected splitting of the property is
unjustified. Mr Lambert told me that it went ahead for a time because of a
client’s inquiry and was simply part of KFR’s efforts to achieve the best
possible price. Certainly Mr Randolph never vetoed the idea at the time. I do
not believe that his irritation over this matter is reasonable. In parenthesis,
the joint agent Adkin did not consider the proposal to be a waste of time
either.
The response
to the offer for sale was disappointing. People liked the site but not the
house. All options were followed, including for a time the split, which had
been an idea emanating from a client’s inquiry.
In the witness
box Mr Randolph also slipped in a criticism about the availability of those
dealing with the matter of KFR. He has not any good word for them. I believe
that these criticisms have fed upon themselves and are unjustified.
I turn, then,
to the heart of the case. As often happens, the heart can now, at the end of
the day, be clearly seen. The main issues are in a narrow compass. The duty of
the agents in law is to act with all reasonable care and skill and to do their
job properly as professionals. Specifically, as is set out, for example, in Dunton
Properties Ltd v Coles Knapp & Kennedy Ltd (1959) 174 EG 723:
The duty of
an agent engaged . . . upon the sale of a property must be in broad terms, as
Mr Bagnall stated, to do all that they can as professional men to get for their
principals the best possible price. It is not in issue and has been decided,
that if before any binding bargain is made it had come to the notice of the
defendants that another purchaser was available offering a higher sum of money
they would have had so to inform their principals . . .
(see Lord
Evershed MR, p 723).
The general
duty is usefully and broadly set out in Bowstead on Agency, 15th ed p 144:
An agent must
exercise such skill and care and diligence in the performance of his
undertaking as is usual or necessary in or for the ordinary or proper conduct
of the profession or business in which he is employed or is reasonably
necessary for the proper performance of the duties undertaken by him.
The question
here is whether Miss Althaus made culpable mistakes and failed in her duty in
two directions between July 17 and July 24 1989. First, as pleaded in the
defence, para 9(b), in failing to pass on relevant information to Mr Randolph.
I stress the way in which the case was originally pleaded; not because I wish
or intend to be over-formal or rigid about the case or the pleadings, but
because it is, in such a case as this, important to see where the original
thrust of the case aimed. An amendment was made to the pleadings after the
speeches were ended. It is unusual even to contemplate such late amendment: see
Smith v Burns, The Times February 1 1991. But since the
alternative case (pleaded now as para 9(c)) was canvassed in evidence, it
seemed to me right to allow that second interlocking seam to be followed.
Thereby Mr Randolph says that Miss Althaus failed properly or fully to respond
to a request made for information about this sale made by Mr Potter’s secretary
on July 19 1989. The full allegation can be seen in the amended subparagraph.
The course of
the proceedings connected with the sale from the moment the agency was agreed
until the end can be seen in the full bundle of documents and in the statements
of the witnesses. There are, however, some important factual findings which I
make having seen and heard the witnesses. In my judgment, these findings,
together with my conclusions as to Miss Althaus’ actions in the light of all
the circumstances, tested against the standard set by the law, decide this case
in the plaintiffs’ favour.
First and
foremost, I do not accept Mr Randolph’s evidence that until the receipt of Mrs
Potter’s letter dated July 27 he ‘had no idea that Mr Potter was interested in
the property nor had I realised that he had submitted a bid’. I reject his
evidence that he was ‘not notified of Mr Potter’s interest in the property in
June or July . . .’. It is palpable both from KFR’s witnesses and from the documents
that Mr and Mrs Randolph were told about Mr and Mrs Potter’s interest on a
number of occasions. If indeed Mrs Randolph did not tell Mr Randolph about her
telephone calls, that cannot be the fault of KFR. Indeed, I am sure that both
Mr and Mrs Randolph were told all that the telephone notes record. These were
all fully verified in evidence. The result is that I find as fact that the
Randolphs must have known the following facts:
(a) that Potter was interested. He had been twice
to see the property. His interest was clearly passed on to the Randolphs;
(b) that Potter had bid only £765,000 and then
later £805,000, but had said that he was not interested at £900,000 and had
said that he would ‘not be budged’ from his offer;
(c) that Potter would not increase his bid, but
did wish ‘to be kept informed’;
(d) that by July 10 Mr Pither was well and truly
on the scene and was the most interested viewer and the only bidder who
approached £900,000 at any time until July 27.
Furthermore, I
am wholly satisfied from Mr Potter’s evidence that, until he heard from his
secretary on July 19 or 20 that which Miss Althaus told her, he played his
cards close to his chest. That is what he told Mr Lambert and accepted readily
in the witness box. He played a waiting game, and as it turned out he waited
nearly too long. He did say that £805,000 was a figure at which he would stick,
and I find that Miss Althaus wholly believed this to be the position. If it was
not the position I do not see how Miss Althaus can be blamed for believing that
it was and that Mr Potter was not and would not be interested at £900,000. He
did say that he wished to be kept informed. But at no time did he say that
which Mrs Potter set out in her letters, or that which Mr Potter set out in his
proof, namely that Mr Potter ‘insisted that no sale should be agreed without
seeking a further offer from us’.
Mr Potter
accepted readily in the witness box that he did not add that he must be allowed
to respond to any higher offers that might be made, nor in evidence did he
assert that he had indicated ‘very strong interest and that we were prepared to
bid higher as and when necessary’. Certainly he never transmitted that to Miss
Althaus, or his private view that he might go up to £950,000 or £975,000. Any
such intention was, in my judgment, totally invisible on the back of the cards
which were held close to his chest. He is not to be blamed for this, of course.
He was a buyer; and negotiation can be like a game of poker. But the result
was, I am perfectly satisfied, to cause Miss Althaus to believe that he was not
a keen bidder above his highest recorded bid of £805,000. It is with that
finding in mind that I approach Miss Althaus’ actions between July 17 and 24.
By that date
Mr Pither was well on the way to the agreement that he made privately with Mr
Randolph. By July 17 the offer was £875,000, and Mr Randolph indicated that he
would take over the reins and did not require KFR to be present. Mr Yates was
not happy about this, but Mr Randolph told him that he would carry on alone. We
know that he made an agreement at £900,000 at about 10 am on Monday July 24.
Completion was to be in December because Mr Pither could not produce the money
until then.
The notes show
that Miss Althaus and all concerned knew about the £875,000 bid by July 17 or
18 1989. Miss Althaus did not inform Mr Potter. This she accepted was in
hindsight probably wrong. But her attitude, and I accept her evidence about
this, was that Mr Potter would not be interested at that figure. In any event,
Mr Potter’s secretary, Miss McGowan, telephone call on July 19 overtook any
such error, because on that day Miss McGowan rang and asked if
of ‘asking my husband’s secretary to contact the agents, say we were away, but
contactable, and re-express our very keen interest in the house’. This does not
square with the note of her actual request for ‘any developments’. Miss McGowan
was not called to give evidence.
It should of
course in parentheses be noted that Mrs Potter’s letters were written after
July 24 when she and her husband came out into the open and registered for the
first time, as I find, their great keenness to buy. Furthermore, the letters
were aimed at persuading Mr Randolph to unscramble the sale to Mr Pither. This
was, as we know, later achieved. It was not, I suppose, a really bad gazump on
Mr Pither, who was told that completion must be advanced, thus making purchase
by him impossible. But he did necessarily pull out, leaving the field free for
Mr Potter’s accepted bid of £925,000.
I do not
accept that Miss Althaus can be justifiably criticised for giving the
information that she did to Miss McGowan, in the manner and words set out. She
did not think that the request for information was keen or urgent. She did not
regard the waiting Mr Potter as likely to come in over the keen Mr Pither. And
I am absolutely sure that Miss McGowan never came back to Miss Althaus with
whatever orders Mr Potter gave her from the beach in Portugal. Again I say that
Miss McGowan has not been called; and Miss Althaus’ note of July 26 1989
(Wednesday) is plainly genuine. Mr Lambert saw it very soon afterwards when he
went over Miss Althaus’ file.
Of course, if
Mr Potter had said to her (by himself or through Miss McGowan) that he was
going to make a competing bid on the 24th, that would have been something which
had to be passed on to Mr Randolph: see Dunton v Coles. But I am
sure that such an intention was not transmitted to her. And, of course, Mr
Potter made no personal contact with anybody else until it was too late — or
seemed to be too late — on Monday July 24 or thereafter, although he was in the
United Kingdom by Friday morning, July 21.
As to that
contact by Mr Potter, I believe that he may unsuccessfully have tried to make
contact on July 24. But I am satisfied, because of the dated notes, that the
successful contact was made on July 25, perhaps by Mrs Potter, when Miss
Althaus was fully and otherwise pleasurably engaged at Buckingham Palace.
Nothing very much turns on this part of the case in any event. But those are my
conclusions.
It may well be
because he was unwell and had to attend two hospitals at once on his return
that Mr Potter did not press his suit before Monday, July 24.
I wholly
acquit Miss Althaus of negligence or breach of her duty of care in that which
she did vis-a-vis Mr Potter.
Again I stress
that in fact Mr Potter achieved what he regards as a good deal, because he did
persuade Mr Randolph to unscramble the deal with Mr Pither. And his offer of
£925,000 was snapped up with understandable alacrity by Mr Randolph, who thus
gained £25,000 above the price which he had also gladly accepted on his own
account from Mr Pither, who was the only other interested bidder.
That disposes
of all but the originally pleaded case. In this context I note that in evidence
Mr Randolph was in fact perhaps keener upon the amended point than the original
plea. This may well be because, as para 9(a) shows, the plea is based upon the
unsustainable allegation that Mr Randolph was
told by the
Plaintiffs that the only potential purchaser interested in acquiring the
property for a price in the region of £900,000 was a Mr Pither. This was
incorrect. Mr and Mrs Potter, the eventual purchasers, had told the plaintiffs
that they were very interested in the property, that they were cash buyers, and
that they wished to be kept closely informed and that no sale should be agreed
without a further offer being sought from them. The plaintiffs failed to pass
this information to the defendant. On July 19 1989 the Potters’ secretary
telephoned the plaintiffs and reiterated that the Potters were still interested
and wished to be kept informed. The Plaintiffs failed to pass this information
to the Defendant.
I have already
indicated that the suggestion that Mr and Mrs Potter were ‘very interested’ and
that they should effectively be given the ‘last refusal’ is not sustained at
all by the evidence. All that the Potters said and offered up to July 17 was,
as I have found, transmitted to the Randolphs. If that information went, so to
speak, over the top of their heads, that is not KFR’s fault. Indeed it is
important to note that Mr Harper himself agreed that the earlier bid and
information about the Potters was passed on to Mr and Mrs Randolph.
The final
question as to liability, then, is whether Miss Althaus should have transmitted
the information about Miss McGowan’s call to Mr Randolph. The highest, in my
judgment, that this can be put is that with hindsight and in some circumstances
it might have been better if the call had been passed on. But, as I have
already said, I do not blame Miss Althaus for believing that the Potters were
cool, if not cold, and for not being much affected by the anodyne request of
Miss McGowan as to ‘any developments’.
It must also
be noted that if Mr Randolph’s belief or knowledge was as he said that it was,
namely that he had never ever heard of the Potters, he would not have been
likely to pause in his negotiations with Mr Pither, whose bid was £95,000 up on
Mr Potter’s apparently final offer and with whom he wished to personally to go
ahead.
The duty of
Miss Althaus was, in my judgment, to act reasonably and with all due care. I am
not prepared for a moment to find that she failed in her duty or that she could
possibly be described as being negligent in failing to pass on the content of
Miss McGowan’s call and her response to it. Furthermore, no later call came back
from Miss McGowan. Miss Althaus could not possibly know that Mr Potter was in
Portugal. He was in fact contactable and could himself have telephoned if he
were keen enough so to do. Silence until the end of the week reinforced Miss
Althaus’ view that there was nothing further to report. She was justified, in
my judgment, in that conclusion.
Once again I
stress also that Mr Randolph was not ‘landed’ with Mr Pither’s bid. He was able
to extract from that agreement, and then he chose to open up the field and
start fresh, competitive bidding. He went at once for Mr Potter’s good bid of
£925,000. If he was allowed to contract with Mr Pither when he would not have
done so but for Miss Althaus’ failure, he was able in fact to retrieve the
situation.
I saw Miss
Althaus in the witness box. She is younger than the professional men in the
case. But I was impressed by her evidence and by her attitude. If she thought
for a moment that she was in breach of her duty to Mr Randolph I believe that
she would have accepted blame. Neither she nor the two very experienced
partners in KFR, Mr Yates and Mr Lambert, thought that she had erred. Nor, I
believe, in his heart of hearts did Mr Harper. Nor do I.
In addition,
and for good measure, I repeat that, in my judgment, £925,000 was a good price
for Rush Manor. It was not a popular house among the many viewers. There were
in truth very few bidders. Even if a competition should have begun between Mr
Pither and Mr Potter I am most doubtful whether £925,000 would have been exceeded.
Mr Pither’s offer was subject to contract and in particular to survey. I have
seen his survey report. His surveyor was ‘deeply concerned that this particular
property is unsuitable for your individual needs,’ and he thought ‘the overall
transaction unattractive’. With that albatross round his neck, and particularly
with Mr Randolph’s insistence upon October completion, which made the deal
financially impossible for Mr Pither, I do not see how he could be considered a
likely competitor against the astute Mr Potter, who came in with a well-timed
‘ace’ at £925,000. I repeat my reference in this context to Mr Harper’s
repeated and considered views given at the time that £925,000 was a very good
price. He was Mr Randolph’s favoured agent. Even if there were a breach of duty
— which I do not believe there was — I would have awarded no damages in this
case.
I end simply
by repeating that, in my judgment, there are no knaves or villains in this case
at all. Unfortunately, I believe firmly that Mr Randolph’s irritation about
irrelevant matters allowed him to embark upon this refusal to pay KFR’s fees.
And some exaggeration of the true position and perhaps some fatal lack of
communication by Mr Potter with his own secretary have allowed him to continue
his case. I am sure that following Mr Harper’s views he should have made a
short protest and then paid up. That he will now have to do.
As to KFR, I
was impressed by the moderation and care of their witnesses, and I find no case
proved against them.
There will
therefore be judgment for KFR on the claim and counterclaim.
