Sale commission — Vendor of flat held liable for commission to two different estate agents whom he had instructed — Case where a purchaser was in effect bidding against himself and where vendor through his son indulged in ‘gazumping’ and encouraged a ‘contract race’ — Purchaser, having made an offer through agents A, was told that a similar offer had been made through agents B — Purchaser thereupon increased his offer, neither he nor agents A appreciating that the offer which had stimulated the increase had been the offer of the purchaser himself — The increased offer was accepted and the sale completed — The contract with agents A was that the vendor would pay commission in the event of their introducing an applicant who purchased the property — The contract with agents B was that the vendor would pay commission in the event of these agents either (a) being instrumental in negotiating a sale by private contract or (b) introducing a purchaser on terms acceptable to the vendor and who subsequently completed the transaction — There was a complication that agents B had been appointed sole agents, but the vendor in fact continued to instruct agents A to find a purchaser and clearly wished to obtain the advantages of competition — The judge, in determining the entitlement to commission, found that agents A were an effective cause of the sale, having introduced an applicant who purchased the property, the chain of causation not having been broken by the activities of agents B — He found also that agents B were ‘instrumental in negotiating a sale’ at the price which was accepted — In the event both agencies had done what entitled them to commission — There was no good reason in law why a vendor might not be liable to two agents in respect of the same transaction, provided that either (a) both parties were instrumental in effectively causing the sale or (b) the different contracts entitled each of the agents to commission for different reasons — In the judge’s opinion it was fair and just in all the circumstances that the vendor should lose, by the payment of two commissions, part of the enhanced price which his manner of using the two agencies obtained — Judgment in favour of each agency accordingly
There were in
fact two actions against the defendant, Mr E K Balcombe. The first was by Lordsgate
Properties Ltd as plaintiffs, the second by Brian Lack & Partners Ltd. The
actions were not consolidated, the second action having been stayed, but all
parties were before the court in the present action by Lordsgate Properties and
the judge was seized of the issues in both actions. The plaintiffs in the
second action, Brian Lack & Partners Ltd, are referred to in the judgment
as the ‘claimants’. Lordsgate Properties Ltd, the plaintiffs in the present
action, although managers of the block of flats which included the subject flat
at 121 Northgate, Prince Albert Road, St John’s Wood, London NW8, acted
sometimes as estate agents in respect of sales of flats in the block.
Michael
Brindle and P A Brook Smith (instructed by Memery Crystal & Co) appeared on
behalf of the plaintiffs, Lordsgate Properties Ltd; John Hamilton (instructed
by Stallard & Co) represented the defendant, E K Balcombe; T R Mowschenson
(instructed by Fugler Middleweek) represented the claimants, Brian Lack &
Partners Ltd.
Giving judgment,
DRAKE J said: In March 1983 Mr E K Balcombe, the owner of the leasehold
interest in a flat known as 121 Northgate, Prince Albert Road, St John’s Wood,
London NW8, agreed to sell the flat to a Mr Saeed for £165,000. The sale was
subsequently completed, the flat being sold to a company owned or controlled by
Mr Saeed.
Mr Saeed first
saw the flat on Wednesday, February 23 1983, when he was shown round and
introduced to Mr Balcombe by a Mr Rapson acting on behalf of the plaintiffs,
Lordsgate Properties Ltd, who were, on that occasion, acting as estate agents
to find a purchaser for Mr Balcombe. Lordsgate act principally as managers of
the block of flats which includes no 121 Northgate but sometimes, as on this
occasion, act as estate agents in respect of flats in the block.
On Friday,
February 25, Mr Saeed again viewed the flat, this time accompanied by the
representative of the claimants, Brian Lack & Partners Ltd, who are
commercial estate agents and who were also acting on behalf of Mr Balcombe, as
estate agents, to find a purchaser for him.
On Monday,
February 28, the plaintiffs put forward an offer from Mr Saeed to Mr Balcombe’s
son Phillip acting on behalf of Mr E K Balcombe to buy the flat for £160,000.
Later on the same day the claimants also put forward an offer from Mr Saeed to
buy the property for £160,000. They were told of the existing offer made by the
plaintiffs but did not appreciate that it had been made on behalf of Mr Saeed.
They reported back to Mr Saeed that the property was under offer for £160,000
and later that day Mr Saeed, apparently not realising that he was bidding
against himself, decided to increase his offer through the claimants to
£165,000. This was put forward by the claimants and accepted by Mr Phillip
Balcombe on behalf of Mr E K Balcombe. So Mr Saeed, acting through two
different agents, bid against himself.
Both estate
agents claim that they are entitled to commission at 3% plus VAT on the sale.
Mr Balcombe admits that he is liable to pay commission to one of them, but
denies that he is liable to pay both. On an interlocutory hearing in the action
started by Lordsgate, and after Mr E K Balcombe had unsuccessfully applied to
interplead, the master directed that the dispute should be resolved by the
trial of an issue whether the defendant, Mr E K Balcombe, is liable to pay
commission to the plaintiffs (Lordsgate Properties Ltd) or to the claimants
(Brian Lack & Partners) or to both. The other action by Brian Lack &
Partners was stayed.
The
contracts between Mr E K Balcombe and each of the two estate agents. (The terms of these are not in issue.)
1 With the plaintiffs,
Lordsgate Properties Ltd
The
contractual terms are contained in a letter dated October 13 1982 from Mr
Rapson to Mr E K Balcombe. That letter confirmed an earlier oral agreement;
alternatively the terms stated were accepted by Mr E K Balcombe by his
subsequent words or conduct.
Mr Balcombe
agreed that Lordsgate Properties Ltd should try to find a buyer and agreed to
pay them commission of 3% of the sale price plus VAT in the event of their
‘introducing an applicant who purchases’ the property.
2 With Brian Lack
& Partners Ltd — the claimants
On or shortly
before October 28 1982 Mr E K Balcombe also instructed Brian Lack &
Partners Ltd to act as estate agents to find a buyer. They confirmed the agreed
terms by their letter dated October 28 1982. Commission was to be payable in
the event of these estate agents either:
(a) being instrumental in negotiating a sale by
private contract; or
(b) introducing a purchaser on terms acceptable
to Mr Balcombe and who subsequently completed the transaction.
Thus the
contract with Brian Lack & Partners Ltd obliged Mr Balcombe to pay
commission not only if they introduced a purchaser who subsequently completed
but also in the event that they were instrumental in negotiating a sale by
private contract, even where they had not introduced the buyer to Mr Balcombe.
It is also
worthy of note that on or shortly before October 25 Mr Balcombe had appointed
Brian Lack & Partners Ltd as sole agents, notwithstanding that he had very
recently instructed Lordsgate to act for him and not, as I find, withdrawn
those instructions.
After Brian
Lack & Partners Ltd had been instructed, they prepared particulars of sale
and advertised the flat in their usual way. It is also clear that although Mr
Balcombe had appointed them as sole agents he continued his instructions to
Lordsgate to try to find a buyer and Lordsgate introduced some prospective
buyers and took them to view the flat, but no sale resulted. One of those
prospective buyers was a Mrs Atkins and Lordsgate showed her the flat on
November 15 1982. Then a Mrs May was taken for a view on January 21 1983; but
in taking her for a view it seems that Lordsgate were acting as managers of the
flats and that Mrs May was introduced through another estate agent — not Brian
Lack & Partners Ltd. So this was a third firm of agents instructed to find
a buyer.
Having agreed
to appoint Brian Lack & Partners as sole agents Mr E K Balcombe was
apparently prepared also to ask other estate agents to look for a buyer. It
would seem that he was prepared to further the chances of a sale at an
acceptable price by introducing an element of competition, although he had
agreed with Brian Lack & Partners that he would not do so.
However,
nothing came of any of these prospective sales. I now turn to the events
leading directly to the sale.
Events
leading to the sale
On Tuesday,
February 22 1983, Mrs Murray of Lordsgate Properties Ltd took a Dr Jawad to
view no 121. I heard no evidence of this beyond the fact that Mrs Murray made a
note of the view. There is no evidence that Dr Jawad displayed any interest
beyond that fact of viewing the flat.
As I have
already said, Lordsgate are the managers of the block of flats, some 153 in
all. The freehold of the block was some time ago bought by a number of the
lessees, who formed Lordsgate as a non-profit-making company to manage the
property. But Lordsgate, who are in a position to know when lessees want to
sell, also act as estate agents to help find buyers. Lordsgate have their
offices at the block of flats and it is common for prospective buyers to call
at the office to see if any flats are for sale. Lordsgate do not advertise such
properties in the manner of most commercial estate agents, but they
nevertheless act as such in respect of some of these flats and charge a normal
commission.
On Wednesday,
February 23, the ultimate buyer, Mr Ahmed Gazeem Saeed, first appeared on the
scene. As a finding of fact I have no doubt at all that it was on that day, at
about 1 pm, that he called at the Lordsgate offices.
Mr Saeed was
with another man, his cousin. Mr Rapson got the impression from what they said
that they had already heard from some source that some flats in the block were
for sale. Also they had with them some papers, which Mr Rapson thought were
probably particulars obtained from an estate agent. The claimants do not
suggest that by that date, Wednesday, February 23, they had any knowledge of Mr
Saeed. So anything that Mr Saeed may have known about any of the flats for
sale, and any particulars of sale he may have obtained, had certainly not come
from the claimants.
Mr Rapson told
them that five flats were for sale, namely, nos 25, 60, 93, 17 and Mr
Balcombe’s no 121. Mr Rapson had the keys for no 60; and he at once telephoned
and arranged with an occupier of each of the other flats to show Mr Saeed and
his cousin the premises. When Mr Rapson telephoned no 121 he spoke to Mr E K
Balcombe, who said that his flat was already under offer — but that as Mr Saeed
was present he was welcome to see no 121 on the understanding that it was
already under offer to someone else.
Mr Rapson
showed Mr Saeed and his cousin nos 25, 60, 93 and Mr Balcombe’s 121. Mr Saeed
had no time to view no 17 as he was in a hurry to get to the Mosque; he said he
would return later to view no 17.
When the
viewing party got to no 121 Mr Rapson introduced Mr Saeed and his cousin to Mr
Balcombe, who shook hands with them. After the view Mr Saeed and his cousin
said they liked no 121. But it was at that point that they cut short their
viewing tour, before seeing no 17, in order to get to the Mosque.
Neither Mr
Saeed nor his cousin were called as witnesses. Mrs Tomms, who is the London
personal assistant to Mr Saeed and many of his relatives, did give evidence,
but her memory of her contemporaneous communications with Mr Saeed was poor.
After the sale was completed she telephoned Mr Saeed in The Yemen and obtained
some information from him which she passed on to his solicitors, Denton Hall
& Burgin, who in turn referred to it in correspondence. It provides a little,
but not very much, help in finding the facts; and I revert to what happened
after Mr Saeed viewed no 121.
At some time
on that day, Wednesday, February 23, Mrs Tomms telephoned the claimants and
spoke to Mr Robert Fraser and asked him to send particulars of properties which
might suit Mr Saeed. Mr Fraser sent these later that day; and the next morning
Mrs Tomms again telephoned to make an appointment for Mr Saeed to view no 121.
She did not tell Mr Fraser that Mr Saeed had already seen the flat.
I think it
probable that Mr Saeed, having liked no 121, wanted to show it to his wife, and
having received the written particulars of no 121 from the claimants merely
told Mrs Tomms to telephone the claimants to arrange a view — without telling
Mrs Tomms that he had already seen it.
An appointment
to view was made and the view held on the afternoon of Friday, February 25. Mr
Saeed was with his wife. Mr Saeed, as I find, did tell Mr Fraser that he had
already been to this block of flats. Furthermore, Mr Fraser agreed that he knew
that no 121 was already ‘under offer’, and it appears that he got this
information from Mr Rapson of the plaintiffs. This offer had, he believed, been
negotiated through another firm of estate agents called Barget. After the view,
Mr Saeed asked him to put forward an offer of £150,000, and he did so that same
afternoon. Mr Fraser was unable to remember whether he put this offer to Mr E K
Balcombe himself or to his son Phillip to whom Mr Balcombe certainly referred
the later negotiations. In any event, the offer was refused and Mr Fraser
informed Mrs Tomms of the refusal.
On Monday,
February 28, Mr Saeed again went to the block of flats and this time viewed no
17. But not, as he had said he would, with Mr Rapson, but with a Mr Rose of yet
another firm of estate agents called Philip Fisher.
The
plaintiffs, as managers of the block, had been informed of the fact that Mr
Rose was to take a client to view no 17. But Mr Rapson was taken aback when he
met Mr Rose as he was leaving no 17 after the view, for he saw that the client
was Mr Saeed. However, Mr Rapson was relieved when Mr Saeed told him that he
did not like no 17 but was anxious to buy no 121. Mr Saeed asked Mr Rapson if
he thought Mr Balcombe would accept £160,000. Mr Rapson was unaware of the
offer already made by Mr Saeed, through the claimants, of £150,000. He told Mr
Saeed that he thought Mr Balcombe would not accept a higher offer but would
honour his agreement to accept the lower offer previously made by a third
party. In other words, Mr Rapson did not think Mr Balcombe would engage in the
practice known as ‘gazumping’. But he agreed, nevertheless, to put forward Mr
Saeed’s offer of £160,000. He spoke to Mr E K Balcombe, who said that his son
Phillip was to deal with the matter on his behalf.
Meanwhile, on
that Monday Mr Fraser of the claimants had also been in touch with Mr Saeed. Mr
Fraser cannot remember the sequence of events, but at some time during the day
he also put forward an offer on behalf of Mr Saeed of £160,000. I find that
this was before Mr Rapson telephoned Mr Phillip Balcombe. For when Mr Rapson
did so, he was told by Mr Phillip Balcombe that there were two other offers in
being, namely, one put forward by Barget on behalf of some unnamed buyer for
£147,500, and another by the claimants, Brian Lack & Partners Ltd, for
£160,000; and now Mr Rapson’s offer of £160,000. Phillip Balcombe told Mr
Rapson that there would have to be a ‘contract race’, ie the first offerer to
sign
applicant would join in a ‘contract race’. Mr Rapson then telephoned Mr Saeed’s
office, spoke to Mrs Tomms and told her what had happened. She said she would
ask Mr Saeed if he would join in the ‘race’. Mr Rapson’s memory of subsequent
events is vague, but he thinks it probable, and I accept it as a fact, that he
later again telephoned Phillip Balcombe, only to learn to his surprise that the
property had been sold for £165,000. Mr Rapson telephoned Mrs Tomms to tell her
so, and learned to his further surprise that it was Mr Saeed who had agreed to
pay the £165,000, through the claimants, Brian Lack & Partners Ltd.
I think it
probable from the evidence of Mr Fraser, and I so find, that Mr Phillip
Balcombe told Mr Fraser of the rival offer of £160,000. Mr Fraser informed Mr
Saeed that there was a rival bidder at the same price and Mr Saeed, not
appreciating that he was bidding against himself, instructed Mr Fraser to raise
the offer to £165,000. Mr Fraser did so and this offer was accepted and the
contract and completion followed at that price.
Thus, on my
findings of fact, it was the plaintiffs, Lordsgate, who on a Wednesday
introduced Mr Saeed to the property and to the owner, Mr E K Balcombe. Then two
days later, on the Friday, Mr Saeed again viewed the property, this time with
the claimants Brian Lack & Partners Ltd and through them put forward an
offer of £150,000 which was refused. On the following Monday Mr Saeed put
forward an offer of £160,000 through Brian Lack & Partners Ltd; then put
forward an offer of £160,000 through Lordsgate; and finally outbid himself by
the offer of £165,000 through Brian Lack & Partners Ltd, which was accepted
and led to a contract and completion.
I think the
probable explanation for this odd situation was first that Mr Saeed did not
understand the procedure of buying an English property, and his lack of
understanding of the English language may have furthered his confusion. Second,
I think it likely that he wrongly assumed that Lordsgate were merely the
on-site managers of the block of flats, and that anything they did was either
on behalf of the vendor or on behalf of whichever estate agents had the flat on
their books. He has paid for his ignorance by bidding up the price against
himself.
I find that
Lordsgate acted entirely properly and honourably, and I was favourably
impressed with both Mr Rapson and his secretary assistant, Mrs Murray.
I was less
favourably impressed with Mr Fraser of Brian Lack & Partners Ltd. He
changed his evidence on more than one matter. For example, he said that when he
took Mr and Mrs Saeed for the view he was unaware that Mr Saeed had previously
visited the block of flats. But when faced with his affidavit sworn on June 7
1983 he had to retract that. I suspect that he either knew or deliberately
closed his eyes and ears to evidence to suggest that Mr Saeed had in fact
already viewed no 121.
Neither Mr E K
Balcombe nor his son Phillip was called to give evidence. Mr Rapson had
believed that Mr E K Balcombe would not engage in ‘gazumping’. Perhaps if he
had been on his own Mr E K Balcombe would not have done so. But through his son
Phillip that is the effect of what he did. He rejected the earlier agreed
offer, presumably the one made by Barget; then encouraged a ‘contract race’
between the two agents offering £160,000; and finally accepted the raised bid
of £165,000. Although Phillip Balcombe did not expressly invite the two estate
agents to join in a form of auction for the property, I think it probable that
he realised that this was likely.
Furthermore, I
find it hard to believe that Mr E K Balcombe did not appreciate that the two
agents were both acting for Mr Saeed. It was Mr Rapson who had introduced Mr
Saeed to him; and although Lordsgate had shown the flat to a Dr Jawad on the
Tuesday of the same week, I heard no evidence that Dr Jawad showed any interest
in the flat.
I was not told
whether Mr E K Balcombe again met Mr Saeed when the view took place with Mr
Fraser on the Friday. It seems quite likely. But, in any event, Mr E K Balcombe
— directly or through his agents — knew that it was Mr Saeed who was buying the
property when he received notice of the particulars of the offerer, before
contracts were exchanged. So he knew at latest by then that the Mr Saeed who had
been introduced by Lordsgate was buying through Brian Lack & Partners Ltd.
The result of
Mr Phillip Balcombe’s actions was that the price was raised from £147,500 to
£160,000 and finally to £165,000. This was, as I find, the result of his
encouragement (whether intended or not) of the two agents to get their
respective clients, albeit it was the same man, to bid up the price. On this
basis, I find that the action of Lordsgate in introducing Mr Saeed remained one
of the efficient or effective causes of the final sale at £165,000. But it was
Brian Lack & Partners Ltd who were, in the words of their contract with the
vendor, ‘instrumental in negotiating a sale’, at that price.
So far as the
law is concerned, each contract between a vendor and an estate agent must
depend upon the exact terms of the contract in question and upon the true
construction of those terms: see Bowstead on Agency, 14th ed, at pp
174-175 and Luxor (Eastbourne) Ltd v Cooper [1941] AC 108,
especially per Lord Russell of Killowen at p 124.
In the present
case the vendor entered into different contracts with the two agents who claim
commission. On my findings of fact, Lordsgate introduced the buyer, and Brian
Lack & Partners Ltd are not entitled to commission on the basis of doing
so. But they also claim commission on the alternative provisions in their
contract as having been instrumental in negotiating the sale. I do not think
there is any answer to their claim under this provision.
But this
leaves the question whether or not Lordsgate are also entitled to commission,
on the basis that they introduced the buyer and brought about the sale. It is
well established that the mere fact of having introduced the buyer is
not enough to entitle the agents to commission. The law was clearly stated by
Lord Collins MR in Millar, Son & Co v Radford (1903) 19 TLR
575. In holding that the agent was not entitled to commission, he said:
It is
important to point out that the right to commission does not arise out of the
mere fact that the agents introduced a tenant or purchaser. It is not
sufficient to show that the introduction was a causa sine qua non. It is
necessary to show that the introduction was an efficient cause in bringing
about the letting or the sale.
(As in Bowstead,
p 185, I have altered the passage cited from indirect to direct speech.)
But it appears
to me that there is no good reason in law why a vendor may not be liable to two
agents in respect of the same transaction — provided either (a) both parties
were instrumental in effectively causing the sale; or (b) the different
contracts entitle each of the agents to commission for different reasons.
It will no
doubt be very unusual for a vendor to find himself liable to two agents on the
basis that each has been an effective cause in bringing about the sale, without
the chain of causation on the side of one agent being broken by the acts of the
other. But I can see no reason at all why this unusual situation may not occur;
and the possibility has been recognised: see Bowstead, Article 76(7) at
p 229 and the case there cited, namely Greatorex & Co v Shackle
[1895] 2 QB 249. Indeed the principle was recognised, and in my view rightly
so, by the learned master when he refused to order an interpleader and gave
directions in the present case.
The provision
that an agent is entitled to commission in the event that he is instrumental in
negotiating a sale is a different right from that to commission for introducing
a client: see the decision of the Court of Appeal in F P Rolfe & Co
v George (1969) 210 EG 455.
On the facts
as I have found them, I think that a fair result would have been for the two
agents to have agreed to share commission. Unfortunately they have not agreed
to do so. However, on my finding that Brian Lack & Partners Ltd were instrumental
in negotiating the sale they, as I have already said, are entitled to their
commission. But Lordsgate introduced Mr Saeed and that introduction, as I find,
remained an effective cause of the sale at £165,000, with the chain of events
added to but not broken by the actions of Brian Lack & Partners Ltd.
Therefore, I hold that Lordsgate are also entitled to their commission.
This unusual
situation of the vendor being liable to pay commission to two estate agents
was, in my view, brought about by the action of the vendor through his son
Phillip indulging in the practice known as gazumping and in using the services
of two agents to help him bid up the price. It is possible that he did not
intend to run a form of auction and genuinely intended that the first of the
two bidders at £160,000 to sign a contract should obtain the flat at that
price. But, nevertheless, the higher bid was, in my judgment, brought about by
his actions and the employment of the two agents. I find the activities of
Lordsgate contributed as an effective unbroken cause to the sale of the
property. That the vendor will now lose part of the increased price he obtained
in commission to those he used to obtain it is, in my view, fair and just.
I give
judgment for the plaintiffs and for the claimants against the defendants, in
each case in the sum of £5,692.50.
The judge
gave directions as to costs (in favour of plaintiffs and claimants) in both
actions, with interest on the sums of £5,692.50 payable to each.
