Estate agents — Claim by agents against purchasers for commission for services in finding properties — Agents not retained by vendors — Portfolio of properties in various areas — Difficulties caused by arrangements made through intermediaries — Lengthy review of evidence — Different routes by which plaintiff agents might claim entitlement to remuneration, direct contract, contract through other agents, by intermediate agents’ ostensible authority, by ratification on the part of defendants, or, as a last resort, by a quantum meruit claim — Lack of clarity in arrangements leading to misunderstanding — Decision in favour of plaintiffs for a modest ‘reasonable fee’
plaintiffs in the present case, estate agents, surveyors and property consultants,
claimed against defendants, owners and dealers in commercial properties, an
introduction fee of 1% on the purchase price of the properties introduced to
the defendants — The purchase price of the properties in question, a portfolio
of properties situated in Plymouth, Hemel Hempstead, Welwyn Garden City and
Soho Square, London, was £22.3m — At the rate of 1% the fee would have been
£223,000 (plus VAT) — In the result the judge decided that the plaintiffs were
entitled to a fee of one quarter of the amount claimed
figures in the litigation were three, the plaintiff agents, another firm
(referred to in this headnote as ‘NB’) described as retained or in-house
surveyors and agents for the defendant company, and the defendants — The
history of the events which ended in court was described in great detail in the
judgment — The judgment makes it evident that one of the difficulties was a
curious lack of clarity and business precision in the negotiations and
arrangements, leading inevitably to misunderstanding and dispute
review of the evidence and submissions the judge’s finding was as follows:
contract, made either directly between the parties or through the agency of NB,
to pay the plaintiffs a commission of 1% on the purchase price of the portfolio
as claimed;
plaintiffs were entitled to be paid a reasonable fee for their services, either
—
agency of NB to act for the defendants, with an implication that the plaintiffs
would be paid a reasonable fee for their services, or
with ostensible authority to agree that a reasonable fee would be paid to the
plaintiffs, or
or inactivity, ratified the arrangements made by NB with the plaintiffs, or
meruit;
services, whether on the basis of contract or quantum meruit, was 0.25% of the
purchase price of the portfolio
judgment was given in favour of the plaintiffs, on the basis of a fee of 0.25%
of the purchase price of the portfolio (£22.3m), namely £55,750, plus VAT at
15%, £8,360, ie £64,110 in all
The following
cases are referred to in this report.
Armagas
Ltd v Mundogas SA [1986] AC 717; [1985] 3
WLR 640; [1985] 3 All ER 795; [1985] 1 Lloyd’s Rep 1, CA
Batis
Maritime Corporation v Petroleos del
Mediterraneo SA [1990] 1 Lloyd’s Rep 345
In this action
the plaintiffs, Michael Elliott & Partners Ltd, claimed against the
defendants, UK Land plc, the sum of £256,450, being 1% of a purchase price of
£22.3m plus VAT of £33,450, by way of agreed commission for the plaintiffs’
professional services in relation to the purchase of properties by the
defendants.
Andrew Onslow
(instructed by Jeffrey Green Russell) appeared on behalf of the plaintiffs;
Dominic Kendrick (instructed by Russell-Cooke Potter & Chapman) represented
the defendants.
Giving
judgment, JUDGE LEVER QC said: In the spring of 1989 Regent Crest plc,
who are owners of and dealers in commercial property on a very large scale,
were minded to sell a number of their holdings. The value of these properties,
which were of widely ranging types, situated at four sites in Plymouth, Hemel
Hempstead, Welwyn Garden City and Soho Square, London W1, being in the region
of £25m. It followed that the number of potential purchasers was limited, and
if a sale was concluded, it would in all probability be to a company operating
in the same field who would probably acquire them on behalf of investment
clients or for individual development. The properties have been throughout
described in investment terms as a portfolio.
So it
transpired that the defendant company, who themselves trade in land and in
particular commercial property, frequently on behalf of clients who wish to
invest in or develop it, agreed to buy the portfolio for that sum. In the
ultimate event, one of the properties, namely a retail warehouse development in
Plymouth, was withdrawn from the portfolio and in the deal eventually concluded
the defendants purchased the remaining three at a revised price of £22.3m.
The plaintiff
company, who are surveyors, estate agents and consultants in this field, were
one of the intermediaries concerned in this transaction and claim against the
defendants the sum of £256,450, being as to £223,000, 1% of the eventual
purchase price paid by the defendants, plus £33,450 VAT payable on the
transaction. This sum, they claim, represents the fee agreed with the
defendants by way of a 1% commission earned by the plaintiffs for their
professional services in the transaction.
They assert
alternatively — and although the case is not specifically so pleaded in a specially
endorsed writ, no point has been taken in this respect by the defendants — that
if no agreement to pay the specific sum of 1% is to be found in the contract
between the
to pay them a reasonable fee under the contract and that such a reasonable fee
would indeed be 1% of the purchase price.
In the further
alternative they contend that if no binding contract existed between the
parties, then they are entitled to the same sum quantum meruit for
services which they have rendered to the defendants and from which the
defendants have benefited.
The
defendants, by their defence, deny that either directly or through their agents
they concluded a binding agreement for the payment of commission in any sum to
the plaintiffs, and in their pleaded defence deny the plaintiffs’ right to
recover any sum from them quantum meruit. Without prejudice to that
denial they further assert that if quantum meruit is appropriate, then
the true value of the plaintiffs’ services is no more than what must be
described in the context of this case as a nominal sum of £5,000.
As far as the
defence in its pleaded form is concerned I should also say that by para 5 the
defendants further contend that because the original four-property portfolio
agreement of sale between Regent Crest and the defendants was in fact rescinded
on or about July 13 1989, by which date the plaintiffs’ involvement if any in
the transaction had ended, and was thereafter replaced by the three-property
portfolio sale in about September 1989, the plaintiffs were strangers to the
contract eventually concluded and as such disentitled in any event to any fees
by way of professional services in the matter.
At the outset
of the case Mr Kendrick, for the defendants, realistically in the light of the
evidence if I may say so, abandoned this contention in limine, and the
contents of para 5 of the defence and extensive particularisation about its
contents have played no part in the issues I am called upon to resolve.
One of the
more striking features of this case, apart from the remarkably brief timescale
— virtually all the central events spanning a period of hardly more than two
weeks in April 1989 — is the brevity of really significant documentary
evidence. It is also notable that in respect of many of these events and
documents there is a large area of agreement between the parties and their
witnesses as to what was said and done by the various principal actors in the
matter. In these circumstances, it is convenient to set out the history of the
matter primarily by way of an analysis of the evidence of the plaintiffs’ first
and main witness, Andrew Reilly, to which I now turn.
Mr Reilly, 28
years of age at the time and an associate of the Royal Institution of Chartered
Surveyors, is now a director of what is now the plaintiff company, Michael
Elliott. He was, in my judgment, a patently competent but — and I do not use
the word in any pejorative sense — inexperienced practitioner. He was primarily
involved in investment agency work. He told me that his partner, Jeremy Charles
[ARICS], had a telephone call from a firm of estate agents and property
consultants by the name of Lanyon Fleming early in April 1989; that Charles
told him that Lanyon had offered them these properties to act as an
intermediary in their sale in an endeavour to find a suitable purchaser for
Lanyon Fleming’s client, Regent Crest. At first, he said, we only had a rough
outline of the proposition, and the general tenor of Lanyon Fleming’s approach
was that the properties would be offered, as he put it, very discreetly to a
few agents and principals. He and his partners examined the proposition and put
their mind to the question of potential purchasers, and thought of UK Land plc
as being a prime candidate. At that time, he said, they were buying a lot of
portfolios, and they were one of the more aggressive purchasers of property in
what was then a buoyant market.
They had had
previous dealings with UK Land plc, but were not closely connected with them in
any way, and in fact I think they had only been involved in one entirely
unconnected transaction. He told me that the defendants were primarily traders
in property, and to the end of making the approach he contacted a young man
called Simon Marriott [ARICS] of Nelson Bakewell. It is significant in this
case, in my judgment, that Marriott and Reilly were friends and contemporaries.
Marriott was employed by Nelson Bakewell and Nelson Bakewell were variously
described as the retained or in-house surveyors and agents for UK Land. The
fact of the matter is that the defendants and Nelson Bakewell had no particular
contractual relationship with each other, but I accept, as I was told by
members of both firms, that the latter commonly used the former’s services in
the many transactions in which they were involved.
It was in
these circumstances that the two young men met for a drink about April 11, and
Reilly mentioned to Marriott the availability of these properties in a later
telephone call. At that point Marriott asked Reilly to let him have details on
their behalf.
Thereafter,
events moved with exceptional speed. Armed with the information he had from
Reilly, Marriott, on behalf of Nelson Bakewell, wrote to inform the defendants
of the existence of a portfolio which, as he rightly surmised in the event,
would be of great interest to them. The letter in question has played an
important part in the case. It is necessary to examine its contents.
By an
interesting preliminary the subscription to the letter is the initial
‘CJEA/SCM’, which I later learnt indicated that, although ‘SCM’, Simon
Marriott, was dealing with the matter, he was doing so under the general
authority and supervision of Charles Allison [ARICS], a senior partner in
Nelson Bakewell.
The letter in
fact was addressed to Mr Barclay of UK Land plc, who has played no direct part
in the case but was apparently Marriott’s immediate source of contact, and told
Barclay that he, Marriott, had just received details of a Regent Crest plc
portfolio ‘which I am considering on your behalf’. The letter continues by
stating what the portfolio consists of and in its penultimate paragraph informs
UK Land of the following:
This
portfolio has been introduced to me through Michael Elliott & Partners who require
a fee if we are successful in this portfolio acquisition.
Marriott, in
passing, told me in his evidence that he was aware at this time that Michael
Elliott were not the retained agents of Regent Crest.
That letter
was sent to the defendants on April 13 1989 and a copy of it was forwarded to
Reilly himself. The weekend passed, and on April 17 Marriott visited Reilly in
the morning. They discussed the properties in some detail and later on that
day, Reilly told me, Marriott phoned him and said that his clients wished to
proceed with the transaction, and they discussed the relevant timescale.
It was at this
stage that Reilly ascertained from Marriott what the written conditions would
be, and as a result of that caused to be written, under the signature of Mr
Charles, a partner in the firm of which Reilly was at that time an employee, a
letter to Richard Lanyon [ARICS] of Lanyon Fleming, apparently a personal
acquaintance of Charles (hence the personality of the author and the recipient)
in which he set out an offer on behalf of what he described as ‘my clients, UK
Land plc, to purchase the portfolio for the sum of £25m’, and also set out
particulars in the form of description of the properties, that the deal was
subject to contract, subject to survey, timescale, nominated solicitors, and
some general background information.
There appears
in the correspondence, as he told me, a letter which he wrote to Marriott on
the same day, April 18, enclosing a copy of the letter which he had written and
raising for the second time the question of commission. On this occasion he
told Marriott:
I wish to
take this opportunity in confirming that this is an instance where we are
acting jointly with yourselves, and we would therefore be looking to you for a
moiety of your fees should this proceed towards a successful acquisition.
Then, in a
perfectly legitimate attempt to involve his own firm further in the matter, to
their obvious potential profit, he added:
I would also
mention that we would be pleased to have a further joint involvement should UK
Land wish to sell on any of the properties within the portfolio.
He assumed at
that time that Nelson Bakewell, he said, would pay Michael Elliott’s fees; and
indeed, asked by his counsel, if the matter had ended there and then, and there
had been a question of litigation of the matter, that Nelson Bakewell would
have been the appropriate defendants because it was to them and solely to them
that he was looking for his fees. He saw it, he said, as a joint agency at that
time and he did not in fact know what Nelson Bakewell’s fees would be, but he
surmised that they would be agreed on a percentage basis with their principals,
UK Land.
On April 19 he
went to a meeting at Lanyon Fleming’s, and it is accepted — although Lanyon
Fleming have played no part in this case in any direct sense — that the
document which appears in the papers is an accurate minute of a meeting that
took place between himself and Lanyon Fleming. The memorandum concludes:
After the
meeting AR
— that is
Andrew Reilly —
was going on
to see UK Land and Nelson Bakewell and would be talking to Lanyon Fleming if
there was any further questions, disagreements etc. By Monday everything should
be worked out for an engrossment on Tuesday or Wednesday [of the next week].
He agreed that
it was very strikingly the case that he had no direct contact with UK Land
before the exchange of contracts, and on the question of agency or contract
this is an interesting but accurate point, because his assertion to that effect
was confirmed by everybody else who gave evidence on the relevant point. It is
also interesting and true that it appears to have been the case that Nelson
Bakewell had no direct contact with either Regent Crest or Lanyon Fleming in
the negotiations.
‘I then,’ he
said, ‘had a meeting with Nelson Bakewell and told them what had appeared in
the memorandum of the meeting’ to which I have just referred. Nothing specific
was said about the fees. The relevant document represents Lanyon Fleming’s
response and their confirmation that their clients, Regent Crest, were prepared
to sell the property to the defendants. Consequently a contract was concluded
between those two for that sale on that date. There is a further letter not of
major significance, again from Lanyon Fleming, and he forwarded that. His next
problem was to tackle the question of how long was going to elapse between
exchange and completion, and in that respect Mr Reilly did a certain amount of
work, and the relevant correspondence represents the solicitors’ correspondence
in that context.
On April 20 or
21 he and Marriott actually visited two of the properties, at Hemel Hempstead
and Welwyn Garden City, and as appears from his desk diary further
communications took place with Lanyon’s and Marriott on these dates.
In the course
of these discussions — it is important in relation to my judgment in this case
— ‘Marriott told me,’ he said, ‘that his firm did not want Michael Elliott to
be involved in the disposals, and our fee would relate solely to the
introduction.’ I was told by Mr Reilly,
and indeed by virtually all the other witnesses in the case, that agency fees
in these matters can relate sometimes to what I would describe as acquisitions
— that is, the introduction of a property to a potential purchaser who acquires
it — and/or disposals, the agency in those circumstances disposing to further
purchasers the property so acquired. It appears that sometimes fees are paid on
acquisitions; sometimes fees are paid on disposals; but frequently, as is the
case with Nelson Bakewell in relation to the work they carried out for the
defendants, an agent will be paid a fee which will cover both acquisition and
disposal, the fee by convention sometimes being divided.
‘Marriott’, he
said, ‘asked me what our introduction fee would be, I told him 1%. Marriott
said, OK, he would clear it with his clients.’
A couple of days later, Reilly told me, Marriott told him that UK Land
were happy to act on that basis.
I turn now to
the letter which, says Reilly, came to be written against that background. In
that letter for the first time Marriott communicates with Mr Colin Tatt. Mr
Tatt is a director of UK Land who played a major role in this transaction, and
indeed is one of the leading actors in this case, because it was he who was
concerned, if anybody was, with the question of commission which might or might
not be earned by the plaintiffs. Mr Tatt, as chairman, was the recipient of
Marriott’s letter of April 21, and Marriott wrote to him at UK Land’s offices
in Kensington:
Dear Colin, I
am pleased to report that the solicitors have now received the papers on the
Regent Crest plc property portfolio and are proceeding apace with . . .
inquiries and amending the contract.
He told Tatt
about the proposed timetable in these matters and concluded his letter:
I would add
that Michael Elliott & Partners, who introduced the deal to us, have
requested a 1% introductory commission for their work.
He sent a copy
of that same letter to Reilly.
The only
further discussion of fees that Reilly said took place was that he asked for
written assurance, or written confirmation, that these fees had been agreed.
‘We had got’, he said, ‘numerous verbal, oral assurances from Allison [C J E
Allison ARICS, a director at Nelson Bakewell] and Marriott to the effect that
there would be no problem in the matter.’
After April 21, apart from certain liaison work between Lanyon Fleming
and Nelson Bakewell, his firm did very little in the matter. On about May 3 he
had a conversation with Marriott with a further request for written
confirmation of the fee, and Marriott said that he need have nothing to worry
about.
It was in
these circumstances that he received a letter from Marriott indicating what he
was minded to do. The letter said:
Dear Andrew,
I take pleasure in enclosing correspondence from me to UK Land plc on April 13
— that was the
original letter saying that the portfolio had been introduced by Elliott’s who
require a fee —
and April 21
— the letter
which said that Elliott’s requested a 1% introductory commission —
confirming
your involvement in the acquisition of the above. As you are aware completion
is set for July 3 after which you should submit your account direct to UK Land.
Yours sincerely, Simon Marriott.
He said he had
sent a copy of that letter to Mr Tatt.
This was
indeed the sort of reassurance that Marriott was legitimately able to give, and
it was as a result of this that a fee note was finally sent to the defendants
by the plaintiffs. When the fee note arrived, it received a curt and dusty
answer, described in various terms by members of the plaintiff company as a
bitter blow, an ugly shock. The letter simply stated:
Dear Mr
Reilly, Regent Crest Portfolio. Thank you for your letter of 27th June
enclosing a fee note. I understand that you were joint agents with Nelson
Bakewell and I suggest that you should agree your share of the fees directly
with them. Yours sincerely, C.C. Tatt.
He said that,
because we had agreed with Nelson Bakewell that we would take a 1% commission,
this letter, of course, as I have said, was a bitter blow.
The matter was
in fact taken out of his hands, I conclude, by senior members of the firm and
in particular Mr Shipman [ARICS], to whose evidence I will turn in due course,
in pursuing the matter with Mr Tatt.
Under
cross-examination Mr Reilly stated that he regarded the appointment of Michael
Elliott as dating from the meeting of April 17 at which Marriott had told him
that his clients were indeed going ahead, and which led Reilly to write the
letter of offer to Lanyon Fleming. He agreed that introducing agents can often
share a fee with the main agent; that they can make a separate claim, and in
the case of a separate claim the principal might not even know of the same.
As to the
obvious point that he had nothing in writing to support his claim from the
defendants he said, simply and plainly, that ‘I took Marriott’s and Allison’s
word for it’. He himself had not pursued the matter after the letter from Mr
Tatt and left the matter entirely to Shipman.
There was a
certain amount of evidence as to what the plaintiff firm had done by way of
services carried out on a quantum meruit, based on the amount of work in
terms of hours worked, documents produced, but, in my judgment, that is
essentially irrelevant in this case. The question of agency and the possibility
of a fee was primarily concerned with the question of an introduction.
Well, I turn
to analysis of what Marriott himself says he said and did in the matter. Mr
Marriott produced early in his evidence a memorandum of the fee structure
agreed in broad terms between Nelson Bakewell and UK Land plc at whose service
he primarily worked during his two years with Nelson Bakewell. This memorandum
is in the form of a document emanating from Phillip Nelson [ARICS], presumably
the senior partner of Nelson Bakewell, to the directors of UK Land plc. It
states plainly enough that this is intended as a guide only and will be subject
to ratification for each job undertaken and/or completed at the weekly board
meetings, indicating as was the fact that UK Land and Nelson Bakewell were
working in close and frequent co-operation. However, subject to that the terms
were simple enough. On acquisitions introduced by Nelson Bakewell, 0.5% of the
purchase price plus VAT was to be their commission. In the cases of
acquisitions dealt with but not introduced by Nelson Bakewell, a valuation of
0.1% to 0.25% of the value, exclusive of VAT, dependent on work involved and quantum
value.
For the sake
of completeness I should add that the second paragraph deals with disposals and
states that 1.5% of the sale price exclusive of VAT and extraordinary marketing
expenses shall be payable. In other words, in summary, that Nelson Bakewell, if
they dealt with both acquisitions and disposals, would earn commission of 2% on
the entire transaction.
What were the
circumstances in which they came to work together? ‘Reilly and I,’ Marriott said, and he put the
matter bluntly, ‘are mates. We have worked together and our firms have had much
closer contact since we joined respectively.’
His evidence as to how the matter began was essentially in agreement
with that of Mr Reilly. ‘Reilly rang with the details’, he said. ‘We met at a
pub. He told me he was not retained by the vendors and that he would want a
fee. Mr
Allison. It was the next day, April 13, that I wrote to Barclay at UK Land’ —
the letter which I have already quoted. ‘I pointed out, obviously enough, that
Michael Elliott would require a fee’, and then he said, ‘We got cracking’ — a
fair description of the speed with which the matter then moved: reports from
the clients, instructing solicitors, inspecting the properties, finding out all
about them.
When I
received the letter demanding or requesting a moiety of ‘your fees’, I did
indeed tell Reilly
— and he was
supported in this by Mr Allison —
that it was
not Nelson Bakewell’s general practice, and it was not going to be their
practice in this case, to split fees. They were solely involved in the
acquisition. I suggested to him that he might consider a fee payable by UK Land
solely for the acquisition. I discussed that with Allison. Reilly raised the
question of 1 per cent in answer to my question, ‘What would your fee be solely
on the acquisition?’ I said, ‘Very well,
I’ll write to our client and put it to him’. Allison himself thought that 1 per
cent was reasonable, so it was in those circumstances that I wrote the
reassuring letter to Reilly. There was no response from Mr Tatt, and I simply
understood the fee had been agreed. However, later in conversation with Mr
Allison, Mr Allison specifically told me that Tatt had indeed agreed this fee,
and I passed that information on to Reilly.
That was a
critically important piece of evidence, but I should say straight away that it
was met immediately in cross-examination by an equally important piece of
evidence, and that is this: that during the course of these proceedings Mr
Marriott had made a witness statement to both the defendants’ and the
plaintiffs’ solicitors. As a qualified professional man he would, of course,
understand the importance of the forging of an effective contractual chain in
this case, and that evidence that he had given in court could be a critical
link in that chain. There is no mention in either of these statements of his
having been told by Allison that Tatt had told Allison of a fee agreed in these
terms.
Jeremy Charles
is the senior partner in Michael Elliott; Mr Shipman is another; and they were,
if I may so describe them, the plaintiffs’ subsidiary witnesses, not having
played any significant part in the deal itself. It was indeed a telephone call,
Mr Charles said, from Richard Lanyon that set this whole transaction in motion.
He discussed it with Shipman and with Reilly. They thought of UK Land. They had
had dealings with UK Land in 1986 and 1987, to which I will have cause to
refer, and ‘we thought’, he said, ‘it would be ethical to take the matter
through Nelson Bakewell’ who he well knew were the defendants’ retained or
in-house agents.
There was
drawn to Mr Charles’ attention in cross-examination the circumstances of the
previous dealings between the plaintiffs and the defendants in 1986-87 in a
matter which I will describe as the Woolf portfolio in which the plaintiffs
had, apparently as a link in a chain of agents, offered the defendants an
introduction to the purchase of a portfolio, which was eventually carried
through at a price of £14.5m. The acquisition fee on the transaction (roughly
three-fifths of the value of the present one) was in fact agreed between Mr
Tatt of UK Land not in percentage terms but in the sum of £50,000. That sum was
in turn divided between a number of introducing agents, so that the eventual
sum earned by the plaintiffs from the acquisition alone was no more than a
fifth of £50,000, namely £10,000.
All these
matters are self-evident from the separate bundle of correspondence under the
heading of ‘the Woolf bundle’, which was placed before Mr Charles, and
containing, interestingly enough, a specific written confirmation of the
£50,000 fee on the acquisition to the plaintiffs and their fellow agents in the
chain. For completeness, I should say that the evidence came from Mr Tatt as
well as Mr Charles that Michael Elliott also earned I think the sum of £184,000
on sales commission. In other words, they benefited by acting on acquisitions
and disposals in the sum of £194,000.
That
introduction was an exclusive introduction — a topic to which I will turn later
in this judgment.
Finally for
the plaintiffs I heard from Mr Shipman, who came into the picture on receipt of
Mr Tatt’s letter. Mr Shipman was, as he put it very vividly, extremely sickened
by this letter. He telephoned Tatt, and he made a memorandum of his telephone
call after it had been made, and I should say that although Mr Tatt had no
specific recollection of the terms of the telephone call, he had no reason to
deny that Mr Shipman had recorded its terms accurately. Mr Shipman wrote:
I spoke to
Colin Tatt, Chairman of UK Land, Monday morning approximately 11.30 am. I
inquired what Colin Tatt intended us to do with our fee invoice. He advised me
that this deal was a loss-making situation for a trade-on, and that we were due
a moiety of Nelson Bakewell’s commission. He only paid them a couple of
thousand pounds for writing the report and acquisition advice. He offered us
the sale of the lot in Hemel Hempstead and said he would hardly be paying
Nelson Bakewell any form of fee on the disposal of the properties. He advised
me to sort out our position with Nelson Bakewell.
Naturally, Mr
Shipman said this was unacceptable, and effectively no more is to be said of
the plaintiffs’ case than that the specially endorsed writ followed within a
month or two.
He amplified
that memorandum to some extent and said he was astonished by Tatt’s attitude.
Tatt said that Nelson Bakewell were only earning a very small fee — £4,000.
Shipman indicated he could barely believe his ears, and said, ‘You’re only
offering us £2,000 then?’ ‘Correct’,
replied Tatt. The sum, Shipman indicated, was derisory and he felt that Tatt’s
tactic in fact was to offer instructions for the opportunity of acting on
disposals by way of some form of inducement or sweetener.
What had he
considered the position to be?
I took
Allison’s word for it
— quoting the
word that Marriott said that Allison had given —
He is a
highly qualified man of some standing in the profession. It is true I did not
put our case in writing to Tatt. I simply thought that the deal was off, the
disposal deals were off, and there was only one thing to do and that was to
resort to the present litigation. I didn’t want to be involved in any further
discussions. I didn’t want to reflect on Allison’s integrity by asking him for
confirmation in black and white. That was why it had not been done at an
earlier stage.
The defence
case was put in succinct form by Mr Allison and Mr Tatt, and I deal first of
all with the evidence of Mr Allison who, I remind myself, was responsible for
all the letters written by Marriott, even though he very honestly agreed that
he may have given Marriott a free hand to the extent of not ensuring that every
letter complied to the last syllable with what he would have written before he
allowed it to be posted. Mr Allison is the director in charge of the property
investment department at Nelson Bakewell. He told me, in a series of plain and
simple propositions, first that Nelson Bakewell had no authority to agree the
payment of commission from UK Land during the course of their work as UK Land’s
agents. Second, that nobody from UK Land had told him that they had agreed to
pay 1% or any commission at all to Elliott’s. Third, that he never told
Marriott that the fee of 1% had been agreed by Tatt.
As far as his
firm were concerned, the transaction which had appeared to be potentially very
profitable turned out to be the loss-maker that Mr Tatt described when he
discussed the matter with Mr Shipman. In those circumstances, as a matter of
obvious professional prudence and anxiety to ensure that their future relations
were harmonious, Nelson Bakewell totally waived their acquisition fee and
dramatically reduced their disposal fee to the point that the present position,
which still obtains, is that Nelson Bakewell are going to be paid or have been
paid 0.25% on the disposal of the remaining properties.
Under
cross-examination Mr Allison said that he simply had no recollection of the
letter requesting a moiety. He was never aware, he said, that a one-off
acquisition fee, an introductory fee as opposed to the moiety, was ever
discussed. He could not remember if he had ever seen the letter by Michael
Elliott requesting a 1% introductory commission. He conceded that he must have
approved it. He could not remember discussing the matter with Marriott. He
presumed that a letter written again under his name, or under his aegis, was
indeed to reassure Michael Elliott. He said, and I accept that he was correct,
‘I do not think I ever discussed Elliott’s fee with Tatt before Elliott’s sent
their fee note.’
An interesting
letter, however, was written by Mr Allison. This, of course, was when the
matter was moving rapidly towards this court, and was written on September 22
1989. Allison wrote to Tatt on the subject of Elliott’s fees. ‘Andrew Reilly’,
he told Tatt, ‘of Michael Elliott & Partners telephoned me wondering what
the position was regarding any fees which may be due to him for introduction
for the above.’ The question of the
rescinded contract was then canvassed; I pass over that. ‘From the enclosed correspondence’
— and he enclosed the relevant letters — ‘you will see that no actual agreement
was made regarding fees, and I have suggested that Andrew Reilly speaks to you
direct.’
He said that
as far as he himself was concerned he would have charged 0.5% if Lanyon Fleming
had come direct to him; that throughout he simply expected UK Land to pay
Elliott.
Mr Tatt gave
evidence in equally plain terms. He is the chairman of UK Land. He described
Nelson Bakewell as their main agents but not tied to them in any professional
sense. Mr Tatt told me that it was his policy to negotiate a separate fee with
the first introducer, if I can so describe them — the introducer who stood in
the position of the plaintiffs in this case. Nelson Bakewell had no authority
to agree fees, as he put it, off their own bat. After the letter from Mr
Marriott he said he would have expected Michael Elliott to get in touch direct
with him.
Following
Marriott’s assertion, I would add, that Michael Elliott’s who made the
introduction to us have requested a 1 per cent introductory commission. Nobody
ever told me that 1 per cent had been agreed. I would never pay 1 per cent
because, of course, I have my obligations to Nelson Bakewell. We do not want to
have to pay a total of more than 1 per cent on the acquisition.
As he put it,
0.5% under the agreement set out in the correspondence to Nelson Bakewell and
another 0.5% to play around with. ‘Had Michael Elliott approached me, I would
have negotiated a fee in this case. I would have put it in the region of £5,000
to £20,000 because the introduction was not exclusive.’ It will readily be appreciated that that is
something like one-fortieth to one-tenth of Elliott’s claim.
He repeatedly
said that he would never have agreed 1% and stated — and in my judgment this is
a very important piece of evidence indeed — ‘If Elliott’s had picked the phone
up, I would have agreed a fee with them’. It was an assertion that he made on
more than one occasion, and in robust terms. He said he simply did not remember
the letter with the request for 1%. ‘As far as I am concerned, the terms of
commission are always put in writing. It’s my standard practice’; and indeed,
as I have already indicated, he was able to point to the Woolf portfolio bundle
where he had done exactly that. ‘As far as Shipman’s telephone call is
concerned, I have no recollection of that, but I have no reason to quarrel with
Mr Shipman’s account’, Mr Shipman’s memorandum. ‘I certainly don’t deny that it
happened.’
In Woolf, of
course, he paid a £50,000 introductory fee. True, it had to be divided; but,
contended Mr Tatt,
as far as I
am concerned the key to a generous commission, or the opposite thereof, is the
degree of exclusivity in the introduction. I am prepared to pay,
he said,
putting the matter in broad terms,
good money
for an exclusive opportunity to acquire a property. If at the other end of the
scale I feel that the introducer is simply passing on market-place gossip which
can be acquired by anybody in this relatively narrow field of operations, the
few men who are operating in this field, why then I am not prepared to pay a
large fee.
He stated that
he was astonished, or words to that effect, when a bill for £ 1/4m landed on
his desk, when, as he made the point, there had been no previous correspondence
between himself and the person who was making the claim. ‘I did look at the
correspondence’, he said, ‘when that bill arrived, and as a result of that I
wrote the letter to Mr Reilly. At the time that I wrote that letter’ — which
states, of course, ‘you are joint agents with Nelson Bakewell’ — ‘what I had in
mind was the correspondence that I had seen earlier in which Michael Elliott
were talking of a moiety to be shared between the two of them.’ He said this particular deal, in fact, was
far from exclusive. Regent Crest were offering it to agents, and apparently
directly to other potential purchasers. ‘I agree’, he said, ‘that by the time
of Shipman’s telephone call the sky had darkened’, and that by implication he
would have to look with great care at what he was going to have to pay out in
what was already a loss-making situation.
He confirmed
that Nelson Bakewell were being paid only 0.25% on a fraction of the portfolio,
the amount in cash terms amounting to £37,500. ‘If’, he said, ‘fees are not
agreed, those eventually paid by me are usually very much dependent on the
result of the deal’, and it was he who introduced into the case for the first
time the concept of renegotiation; in other words, the agreement of a fee with
the implication that it would be dependent on the success or failure of the
deal, and that the agent, as Nelson Bakewell had done in this case, would be
prepared, in the event of the transaction not being profitable, to renegotiate
his normal fees on a more modest basis.
He said that
if there had been further introducers in previous cases they would generally
get half of Nelson Bakewell’s fee. In his experience he could never recall a
case where he had paid an introducer more than the main agent — although it
should be added, for sake of completeness, that he also said: ‘I must have done
it on some occasion, but I have no specific recollection of it’.
This, then, is
the evidence on which I am called to resolve the issues posed at the outset of
this judgment. The answer to the question, ‘was there a direct contract between
the parties that the defendants should pay the plaintiffs an agent’s commission
of 1% on this sale?’ is plain. Indeed,
it was effectively conceded by Mr Onslow, for the plaintiffs, in the course of
his closing submissions. No such contract was made. There is a complete absence
of evidence that UK Land in writing, or orally by Mr Tatt or Mr Barclay — to
whom the original offer was made by the letter of April 13 — or by conduct,
agreed Reilly’s 1% proposition forwarded to them by Marriott on April 21, by
which date the introduction and UK Land’s offer to purchase had already been
made.
The second
question that falls to be decided is, therefore, did the defendants, through
the agency of Nelson Bakewell, agree to pay to the plaintiffs a fee of 1%? If such an agreement was made, its existence
can only be spelled out from the evidence of Messrs Reilly, Marriott and Tatt,
and in particular that of Mr Marriott. Can the binding links of contract through
an agent be established from what they said, did and wrote?
As far as the
defendants were concerned, I have the evidence of Mr Allison and Mr Tatt that
Nelson Bakewell had no general authority on behalf of the defendants, let alone
specific authority, to fix an appropriate sum or percentage by way of
commission. Mr Onslow contends that such an agreement came into existence on
April 17 when Marriott asked Reilly to write to Lanyon Fleming making UK Land’s
offer, and that the term of the contract that the fee should be 1% is to be
found in the evidence of Mr Marriott. He further contends, in an argument which
I confess I had difficulty in following, that ratification for this is to be
found in the fact that when Allison forwarded to Tatt a copy of the
correspondence in the matter, comprising the letters of April 13, April 21 and
May 10, Tatt on behalf of the defendants made neither comment nor complaint.
In my
judgment, it is quite impossible for the court to read Tatt’s silence as
acquiescence to Reilly’s proposal of a fee of 1%.
What are the
facts of the matter? In my judgment,
they can be decided only in the light of the whole background of the case,
which is very significant. This is a small world of professional men in which
virtually all the principal actors in the case knew each other well. Indeed, I
think the only two witnesses in the case who were not personally acquainted
were Reilly and Tatt. Virtually all the correspondence in the case is in
Christian name terms. In particular, Reilly and Marriott had been at school
together. They had maintained a firm friendship since they had left school and
had embarked on parallel careers. In such a small world it is by no means
uncommon, and it should be said it is not an unattractive characteristic in
itself, not to be too precisely demanding that agreements should be reduced to
writing, particularly in relation to sums of money that one party may be liable
to pay to another; the underlying assumption being that, as between gentlemen
and men of honour, such questions can be resolved without disagreement or,
still less, rancour. Unhappily, there are occasions when misunderstandings do
occur, and in my judgment this was exactly one such.
I find the
facts to be as follows. First, Reilly assumed, and was entitled to assume, that
if the plaintiffs made the introduction and an acquisition followed, they would
be entitled to a fee. Marriott, and for that matter Allison, who approved
Marriott’s letters to Barclay, were of the same mind. Nelson Bakewell knew that
Lanyon Fleming and not the plaintiffs were Regent Crest’s retained agents.
Reilly’s initial proposal was that the plaintiffs should receive one-half of
Nelson Bakewell’s fee from Nelson Bakewell as principals. Why? Because he, not unnaturally, by the custom of
the market — as evidenced in the Woolf portfolio case and other similar cases
cited by later witnesses, to whose evidence I shall turn, in the persons of
Messrs Owen and Roberts — hoped that his firm would make further profits from
fees earned by way of agency work in disposals as opposed to acquisitions.
When Marriott
accurately informed him that Nelson Bakewell would not agree to such an
arrangement, his second proposal was that forwarded by Marriott to Tatt, namely
an introductory commission of 1%; Mr Tatt simply did not respond. I have no doubt
that his failure to do so stemmed from the fact that he was preoccupied with
the problems of carrying through a £23m deal as
less, of that sum.
Reilly and
Marriott were thus placed in a delicate position. The former pressed the latter
to obtain written confirmation of the fee from Tatt, and Marriott did his best
to reassure Reilly that all would be well, in particular by writing a letter of
reassurance and sending a copy to Tatt, reminding the latter of the plaintiffs’
1% proposal in the enclosure. By this time (by the time of the letter of
reassurance) three weeks had passed. I have no doubt that Marriott did raise
the matter with Allison who, he correctly appreciated, as a senior partner with
the firm, would be more likely to have Tatt’s ear; and although in evidence
Allison was somewhat vague on the point, he, Allison, may have said words to
the effect to Marriott, ‘Tell him not to worry; there’ll be no problem over fees.’ In other words, the sort of response that I
have postulated as typical of dealings between businessmen who are also
friends.
What I have to
decide is whether Allison ever said to Marriott words to the effect that Tatt
would pay a 1% fee. Marriott says that Allison did; Allison says he did not. I
have no doubt the latter is correct.
First, I
accept that Allison knew he had no authority to bind the defendants to such a
fee. He knew that Tatt was very much his own man. Second, it would have
involved his authorising a fee twice the size of his own; an unlikely enough
proposition in itself. Third — and it is necessary to remind oneself we are
speaking of a sum of about £ 1/4m — although much of what transpired in this
case took place on a very informal basis, this would have been taking
informality to a quite extraordinary degree. Fourth, no note or memorandum of
that alleged agreement was ever made by anyone. Finally, I remind myself of the
letter in which Allison wrote to Tatt that no agreement had been made. If
Allison had made an agreement, this would involve either an extraordinary
aberration, forgetfulness, or, alternatively, the crudest and most fraudulent
lie to Tatt on his part. I do not think he was guilty of either.
I do not think
that Mr Marriott deliberately lied in the witness box. I think that as far as
he was and is concerned, this is very much a case — as I said during the course
of the submissions — of the wish being father to the thought. In other words,
he has allowed a perfectly natural desire not to let his friend, Reilly, down
by failing to do what the latter asked to translate itself into a conviction
that what was probably an easy and casual assurance by Allison that everything
would be all right meant what he now wants it to mean, and that he read into
Allison’s words something far more precise than the latter intended. I am
conclusively reinforced in this view by the striking piece of evidence, to
which I have referred, emerging in his cross-examination. Before the trial he
had given statements to the solicitors. These statements were at some points
carefully redrafted by him. In neither of them, as I have said, is there any
reference to the conversation with Allison from which he now claims he was
authorised to confirm a 1% fee with Reilly. Further comment on this point is
unnecessary.
In my
judgment, this is a critical finding of fact, because it renders unnecessary
any analysis of whether Nelson Bakewell had any form of authority, express,
implied or ostensible, to conclude the specific agreement of a commission of 1%
contended for by the plaintiffs. My finding is that no agreement, either
express or via an agent, was made between the parties for the payment of a fee
of 1% commission on this transaction.
I now address
myself to the question, was there a binding agreement that in the event of an
acquisition the defendants would pay the plaintiffs for their professional
services, containing an implied term that the services would be paid for at a
reasonable rate?
It is possible
to contend for this conclusion via four possible routes. Canvassed least in the
submissions of counsel was the most direct of these routes, namely that the
agreement was in fact made between the plaintiffs and the defendants direct,
even though the contact between themselves was solely through a third party
until the submission of the plaintiffs’ fee note. The other possibilities
argued before me are that the agreement was reached through the agency of
Nelson Bakewell, either as actual agents or ostensible agents, or in the
further alternative by their ratification of what Nelson Bakewell did.
It is
important to bear in mind that the question to be answered is not whether
Nelson Bakewell had any real or ostensible authority to agree a reasonable fee,
whatever that might be. The question is, did they possess the actual or
ostensible authority to agree that their principal would pay a reasonable fee,
the negotiation of the amount of which would follow in the normal course of
events?
I can deal
with the question of actual authority briefly. Actual authority is either
express or implied. It seems to me that, despite Mr Onslow’s attractive
submissions on the question of agency, his arguments were more properly
directed to the question of ostensible rather than actual authority. In
relation to express actual authority the evidence is simply that of Mr Allison
and Mr Tatt, the agent and the principal in question. They said simply that
their practice was that Mr Tatt should agree fees and not Mr Allison. There is
no reason to disbelieve them. Implied authority is given to an agent where he
is given broad powers to deal with incidental matters, or to do what is usually
and normally done in a particular trade or profession. In my judgment, this is
not such a case. Such an authority cannot arise where it is expressly
understood between principal and agent, as it was here, that the former and not
the latter would deal with the fees of parties acting as intermediaries in
transactions such as the present.
Any remark
that might have been made — and I stress the word ‘might’ —- by Allison to
Marriott and passed on to Reilly to the effect that the latter need not worry
about his fees, and that there was no problem in that direction, falls far
short of his exercising an implied authority to bind his principal to the
payment of a reasonable fee.
However, I do
hold that it is the case here that the defendants in the person of Mr Tatt
always considered themselves contractually bound to pay the plaintiffs a
reasonable fee for their services. If I am wrong in this, then I hold in the
alternative that Nelson Bakewell had ostensible authority to agree such a fee,
and did so. If, yet again, I am in error, I hold that the defendants ratified
Nelson Bakewell’s acts in purporting to agree that a reasonable fee would be
paid by their subsequent actions.
Critical to
all these findings is an analysis of what Mr Tatt said and did, and equally
importantly did not say in the witness box. It was stated several times in the
course of the evidence, and not just by protagonists of the defendant company,
that UK Land plc had over the years won a reputation as ‘good payers’. Never
once in his evidence did Mr Tatt suggest that he did not accept an obligation
that the plaintiffs would be paid. He quite candidly admitted that the letters
of April 21 and May 10 were documents of which he had no recollection. As he
saw the matter, and I believe he still sees it, the first time that the
question of the plaintiffs’ fees came to his mind was when the plaintiffs’ fee
note in what he considered a grossly exorbitant sum reached his desk at the end
of June 1989 — two months after their active involvement in the matter had
ceased. His initial response was to write the letter which said ‘You must agree
your fees direct with Nelson Bakewell’; but, as he stressed in evidence, he had
responded in this way because of his recollection of Reilly’s original moiety
proposal, rather than after perusal of the subsequent correspondence. He stated
quite firmly, and to me convincingly, that after the 1% proposal of April 21
and confessing that he had not consciously directed his mind to it, that he
would have expected the plaintiffs to get in touch with him direct (and I
emphasise and underline the word ‘direct’) to negotiate a mutually agreeable fee.
In my opinion,
as I have already indicated, the most important single piece of evidence in
this case was Mr Tatt’s assertion, which I find entirely convincing and I quote
it again, ‘Elliott’s only had to pick the phone up and I would have agreed a
fee with them.’
A great part
of the significance of that remark lies in implication of the time of which he
was speaking, namely before the fee note arrived. By that time, the time the
fee note arrived, the deal as far as UK Land were concerned was beginning to look
a far less lucrative proposition than Mr Tatt originally hoped: see Mr
Shipman’s memorandum accepted by Mr Tatt as an accurate record of their
conversation of about June 30.
I have to
consider, however, what was in the minds of the parties at the time a contract,
if any, was made. When Nelson Bakewell provided the material for Reilly to
write the plaintiffs’ offer letter it is patent they could have done so only on
the express authority of the defendants. Mr Tatt, and/or his colleague Mr
Barclay, the recipient of the original letter, must have known at the time
(although the matter was clearly not uppermost in their minds, as I have
already said) that the plaintiffs were acting for him in so doing. Contracts
were indeed exchanged very soon after. What was his normal practice in such a
situation? He told me at the very outset
of his evidence. Nelson Bakewell were the agents he normally used. If, he said,
a firm
negotiate a separate fee with them. In other words, we returned to his
assertion that Michael Elliott & Partners only had to pick the telephone
up.
It is,
therefore, my judgment that the plaintiffs were expressly engaged by Nelson
Bakewell to act for the defendants on April 17 or 18; that it was an
implication of this agreement that the defendants would pay a reasonable fee
for their services; that Mr Tatt, on behalf of UK Land, instinctively accepted,
though he may not have given voice to his thoughts, or even troubled to analyse
the precise position in law, that the plaintiffs were entitled to look to him
for a fee which he would negotiate in a reasonable sum. By the time his
conversation with Shipman took place, he made the suggestion that the
plaintiffs should look to Nelson Bakewell; events had moved on a long way.
If I am wrong
in this, I hold alternatively that the circumstances of this case were such
that the defendants clothed Nelson Bakewell with ostensible authority to agree
that a reasonable fee — not, I should emphasise, any particular reasonable fee
— would be paid to them by the defendants.
I take the
general principle of such authority from the text of Bowstead on Agency,
15th ed at p 284:
Where a
person by words or conduct represents or permits it to be represented that
another person has authority to act on his behalf, he is bound by the acts of
such other person with respect to anybody dealing with him as an agent on the
faith of such representation, to the same extent as if such other person had
the authority that he was represented to have, even though he had no actual
authority.
Every such
case must turn very much on its own facts. At one point in his submissions Mr
Kendrick, for the defendants, stated that in this particular case he was indeed
prepared to argue that the contract was simply one between the plaintiffs and
Nelson Bakewell as principal. But in my view, quite correctly, he abandoned the
attempt to do so in limine.
All the
evidence points to the conclusion that Nelson Bakewell, who are estate agents,
were accepted as exactly that by everyone concerned throughout, after Reilly’s
abortive attempt at the outset to negotiate a fee with them direct. It is,
however, true, as Mr Kendrick says, for the law to tend to protect third parties
by giving them rights against the agent rather than the principal where the
agent acts without authority. It is also true that ostensible authority cannot
be held to exist generally in most cases, and in each case the third party must
trust the warranty of an agent that a particular authority has been obtained,
on which topic I was referred to the observations of Robert Goff LJ in the case
of The Ocean Frost* [1986] AC 717.
*Editor’s
note: This refers to Armagas Ltd v Mundogas SA.
What in fact
was the position here? Although we have
no direct evidence as to what happened between the defendants and Nelson
Bakewell before Reilly’s letter of offer was written, it is a fact that UK Land
knew when they made their offer to purchase that the introduction had arrived
via the plaintiffs and that in the normal course of events their offer would
return via the same route. Mr Onslow is absolutely correct, in my view, in
saying that as it was plainly the case that UK Land were giving Nelson Bakewell
authority to accept the introduction, the inevitable implication must be that
UK Land could not expect Nelson Bakewell to use the intermediary services of
the plaintiffs without cloaking them with either actual or ostensible authority
to tell the plaintiffs that they would be remunerated for their services in a
reasonable sum.
UK Land
provided Nelson Bakewell with all the material to allow the plaintiffs to make
the offer; they knew the source of the introduction, and they permitted their
representative to deal with the plaintiffs in all material matters, save as to
the actual quantum of the fee in question. I have no doubt that they
clothed Nelson Bakewell with ostensible authority to permit Marriott or Allison
to declare that a reasonable fee would be payable.
When Marriott
gave Reilly the assurance that there would be no problem over fees, and in
particular when he wrote the various letters to Tatt on the subject, it was
plainly his understanding that a fee of some sort would be payable, and by all
its implication that such a fee would be reasonable. Allison, in approving
these letters, was clearly of the same mind. The entire picture is of men
clothed with ostensible authority to say just that, and Tatt could see that picture
himself throughout by virtue of his receipt of these letters or copies of them.
Finally,
ratification. Once more, I take the general principles set out in Bowstead
on Agency and in particular articles 13, 16 and 17 at p 51 of that volume.
It is unnecessary for me to recite them here.
Mr Kendrick is
right to emphasise that there is no unequivocal, positive conduct by the
defendants to evidence ratification. What do the defendants know at all
material times? First, that the
introduction had come from the plaintiffs; second, that the offer to purchase
was returning via the plaintiffs; third, from the outset that the plaintiffs
were expecting a fee (Marriott’s letter to Barclay). What is there that points
in the direction of ratification? Well, first of all it must be said that it is
the plain and simple fact that the defendants bought the land. Second, they
neither commented on nor still less complained about the use of the words ‘my
clients’ by the plaintiffs in their letter to Regent Crest’s agents as descriptive
of them. Third, they never commented nor still less complained about Nelson
Bakewell’s various reminders that the plaintiffs would require a fee. In
summary, they made absolutely no comment on the relevant letters.
By reason of
this undisputed evidence I am prepared to hold that if, contrary to my earlier
findings (a contract to pay a reasonable fee was made either directly between
the plaintiffs and the defendants, or the plaintiffs and Nelson Bakewell acting
as the defendants’ ostensible agents), there was no contract so concluded, on
the facts as I have previously found them the defendants ratified what had been
done by Nelson Bakewell.
They did not
say or write a single word to suggest that the acts which the plaintiffs were
carrying out on their behalf and to their benefit were unauthorised. In the
circumstances of this case, I infer ratification from the acquiescence or
inactivity of the principal, to quote the words of Bowstead at p 66.
Such acquiescence, it seems to me in this case, was total.
Finally, the
plaintiffs claim quantum meruit. If, they contend, there was no
contractual nexus between themselves and the defendants, they have nevertheless
rendered services to the defendants, who have freely accepted and not rejected
them, with the knowledge that they could not possibly be gratuitous, and the
defendants have incontrovertibly benefited from these services. Consequently,
say the plaintiffs, they are entitled to be paid for these services quantum
meruit.
Although he
did not formally concede the point, Mr Kendrick realised that this was
virtually an impossible claim to contest in general principle, and in my
judgment, in the light of the contents of the relevant letters, and the simple
central fact in this case that the defendants did in fact enter into a contract
which they saw at the time as potentially to their great benefit as a result of
the part played by the plaintiffs, he is right. If no single one of my findings
in law to this point of my judgment is correct, I hold that the plaintiffs are
entitled to be paid a sum quantum meruit in this case. Such a sum is one
which is reasonable and proper in the particular circumstances in which the
obligation to pay arises, and represents no more and no less than the
reasonable implied fee which is due from the defendants if, as I have held,
they are liable in contract to the plaintiffs.
This is an
important point in the present case. This quantum meruit is not,
unhappily, to be assessed in the straightforward terms that might be
appropriate for the services of a tradesman or artisan (say, X days’ work at Y
pounds per day), or a professional man, say a solicitor or an accountant, who
might charge for X hours’ work at Y pounds per hour. In this case the
plaintiffs wrote no more than half a dozen letters, and at most, primarily
through Mr Reilly, devoted probably less than 100 hours of their time to the
defendants’ affairs. It is agreed on all sides that the simple fact that the
plaintiffs introduced the defendants to a £25m deal must be the starting point
of my inquiry.
Mr Kendrick
places reliance on a recent case of The Batis* reported at [1990] 1
Lloyd’s Rep 345, and in particular a passage at p 352 in column 2. But I do not
derive significant assistance from the judgment of Hobhouse J in that case,
because his lordship was there concerning himself with a situation
fundamentally different from that obtaining in the present case, namely the
appropriate quantum recoverable where circumstances have vitiated a
contract already existing between the parties, and one party has gone on to
behave in a manner forced on him by circumstances to the benefit of the other.
In my view, the correct approach to quantum meruit in this case is
indeed to find the answer to the question, had the parties agreed a reasonable
fee at the material time — that is, in the last fortnight of April 1989 — what
would that fee have been?
*Editor’s
note: This refers to Batis Maritime Corporation v Petroleos del
Mediterraneo SA.
Each party
called an expert in these matters to support their contentions. I intend no
discourtesy to these gentlemen if I say that I found their evidence of limited
assistance. Mr Nicholas Owen [FRICS], the chairman of Herring Son & Daw,
and Mr J W Roberts [FRICS], a former partner in Jones Lang Wootton, are both
chartered surveyors with highly impressive experience in the work of estate
agents dealing with commercial property. By a multitude of examples they
demonstrated to me essentially that the commission on a one-off transaction, as
this was, amounted to no more and no less than, as Mr Tatt himself said in
evidence, what the market would bear. The examples of commissions actually paid
on purchases analogous to a greater or lesser degree with the present one range
from 1.5% at one extreme down to a few thousand pounds at the other.
I do not think
I can reach the correct conclusion by deciding that any particular one of the
numerous examples cited to me is especially analogous to the facts of the
present case; because, as both Mr Owen and Mr Roberts told me, many factors
come into play in each case. First, the relationship between the principal
purchaser and the agent. Where, as Nelson Bakewell stand to the defendants, and
Mr Owen’s company stand to organisations like Crusader Insurance, as retained
agents, a generous commission usually seems to be catered for by express
agreement. Second, the exclusivity of the introduction, contended by the
defendants to increase and the plaintiffs not to affect the fee. Third, the
question of the size of the fee in absolute terms. Mr Roberts strongly
contended that a fee should be assessed at the end of the day in pounds and
pence rather than by a percentage when the amount involved was as large as it
is in the present case. Fourth, the proportion of the fee of the introducer to
that of the main agent. I deduce from Mr Owen’s and Mr Roberts’ evidence that
this will seldom be as great, and even more rarely greater. Finally, the
question of renegotiation. This is an important point.
Mr Owen
unequivocally stated that he would not expect a correct fee, as he described
it, to be renegotiated. As it so happened, the purchase of this portfolio by
the defendants resulted in a loss and not a profit. Nelson Bakewell waived the
0.5% acquisition fee which would normally have been theirs, and they have
agreed to accept a greatly diminished fee from that laid down in the original
memorandum; as I have said, at 0.25% commission on disposals, this means that
they will receive in this case no more than a total of some £35,000 or £37,500
from their principals, the defendants. But Nelson Bakewell as the defendants’
retained or in-house agents have, to quote Mr Kendrick’s word in argument,
‘tied their wagon to the star of the defendants’ success in the property
market’. They are the defendants’ advisers. In my view, renegotiation of fees
for a retained agent concerned with both acquisition and disposal is one thing;
the fee payable to an agent who simply introduces a property, and performs no
role in its evaluation or subsequent disposal, is quite another.
It follows
that I decline to approach the question of quantum by reference to the
potential success or, as it transpired, actual failure of the defendants’
venture in purchasing this portfolio.
The crux of Mr
Owen’s evidence was his opinion that 1% would be the correct fee in this case;
or, as he somewhat confusingly modified it, an expectation from which people
would start unless negotiated otherwise. He conceded that skill and knowledge
in the property market would relate to the activities of Nelson Bakewell rather
than the plaintiffs in the present case and that the essential value of the
plaintiffs’ services lay in the introduction.
Mr Roberts
laid great emphasis on the criterion of exclusivity, namely whether the
potential purchaser was being offered an exclusive chance to purchase or
whether, as I have said, at the opposite end of the scale the agent was simply
passing on market-place gossip that a particular property was coming on to that
market.
I found this
an attractive argument in terms of both logic and what I learnt from the
experts to be commercial practice.
The other
central element in Mr Roberts’ evidence was that where, as in this case, one
agent introduced to another, it is common to accept half a global fee. In the
present case such a calculation would have resulted in the plaintiffs receiving
0.25%, being half of the conventional fee payable by the defendants to Nelson Bakewell
in such a case. Such a figure would have resulted in the fee which Mr Roberts
robustly described as ‘bang on’ for a reasonable fee in the present case. He
derided the idea of an acquisition fee of £ 1/4m. Nobody, he asserted, would
ever pay that for an introduction simpliciter.
A striking
corollary to his evidence was the fact that 0.25% was exactly what, unknown to
him and unknown to Reilly (for I accept Reilly’s evidence on this point), the
plaintiffs were in fact in their very first letter asking Nelson Bakewell to
pay. Further, he made the point that for their conventional 0.5% Nelson
Bakewell would have the task, a heavy one, of evaluating these proposed
acquisitions.
Narrowing the
issues, I discount Mr Kendrick’s submissions that the plaintiffs were entitled
to no more than £17,500, or £35,000, as being figures calculated on the basis
of Nelson Bakewell’s actual remuneration, for the reasons I have already
adumbrated. At the other end of the scale, I accept Mr Roberts’ evidence and
reject that of Mr Owen by holding that a fee of 1%, twice that of the main
agent, is inappropriate in a case of one-off introduction such as the present.
This effectively reduces my range of choice to a figure of 0.25% or 0.5% of the
purchase price, and I am acutely conscious of the fact that in cash terms this
amounts to a difference of no less than £55,000 or thereabouts.
For the
plaintiffs it was argued that Mr Owen provided a number of examples in which
the market rate was demonstrated significantly to exceed 0.25%. But, in my
view, the individual features of these examples fail to produce a coherent
picture. I give full weight to Mr Onslow’s reliance on the fact that the Woolf
portfolio deal produced a net payment of £194,000 in all for the plaintiffs on
a £14.5m deal. Against this it must be said in the last analysis that the
plaintiffs’ acquisition fee in the Woolf case was a mere £10,000.
However, as
between these two figures I found the submission of Mr Kendrick the more
convincing. This was not an exclusive introduction. In my opinion, this factor
mitigates against a high fee and I accept what Mr Tatt and, more particularly,
Mr Roberts say on the point. No negotiations of price were involved, a simple
but important factor that is not to be overlooked.
The most compelling
argument, however, in my judgment, derives from the actions of the parties
themselves. When the plaintiffs made the introduction, they proposed, by
implication, a fee of 0.25% — a moiety of Nelson Bakewell’s normal fee. Looked
at from the defendants’ point of view, Nelson Bakewell and the defendants, by
the terms of their memorandum on fees, envisaged a payment of 0.25% to Nelson
Bakewell where they were not entitled to an introducing fee, with the inference
that what they were not earning was the other 0.25% which they would have
earned had they made the introduction.
In summary,
balancing as best I can the many factors involved in reaching such a
conclusion, I hold that the plaintiffs are entitled to succeed on their claim:
first, on the basis that the defendants agreed directly to pay them a
reasonable fee for their services; in the alternative, that the defendants
clothed Nelson Bakewell with ostensible authority to agree such a fee; in the
further alternative, that the defendants ratified the acts of Nelson Bakewell
in agreeing such a fee; and in the yet further alternative, quantum meruit.
Such a reasonable fee in the judgment of this court is 0.25% of the sale price
of the properties involved, namely £55,750 plus 15% VAT, which by my calculation
is £8,360; £64,110 in all. I give judgment for the plaintiffs in that sum.
I would not
wish to part with this case without thanking both counsel, Mr Onslow and Mr
Kendrick, for the moderate, attractive and forceful way in which they have
presented their cases. Their clients have reason to be grateful for their
services.
