Estate agents — Commission — Claims by two firms in respect of one sale — Which of two firms was the effective cause of the sale — Analysis of the phrase ‘introduction of a purchaser’ — Completion of sale transaction by a firm other than the firm which first introduced the purchasers to the property — Appeal by first firm from decision of county court judge who found that the effective cause of the sale was the second firm, which completed the transaction — First firm’s appeal allowed
firm of estate agents, received instructions to sell an hotel at Blackpool —
The respondents were the executors of the vendor, who died before the trial —
Appellants were instructed to offer the hotel for £150,000 exclusive of VAT —
Commission was to be at 1 1/2% of the purchase price — Appellants set about the
usual marketing process and before long received an offer from a couple called
Duxbury — The offer was worth just under £123,000 — It comprised £50,000 in
cash plus the exchange of the couple’s own house, which they valued at £72,950
— That offer was refused and at that time the Duxburys, although remaining
interested in the property, were unwilling or unable to improve their offer —
Meanwhile the vendor decided to instruct another firm of estate agents, Kays of
Blackpool, to sell the hotel; he signed a form expressed to give Kays sole
selling rights for a period of 10 weeks and thereafter until cancelled by 14
days written notice — The commission was to be the same as that agreed with the
appellants — The form of agreement with Kays appears to have been designed to
cover the case where an agent has acted in a sale but has not been the
effective cause of it — The vendor’s instructions to the appellants were not
terminated but continued to operate after the Kays had been given instructions
as well
month Kays reported to the vendor that they had sold the hotel to the Duxburys
and a Mrs Hume (whose name then appeared for the first time) — Contracts were
exchanged, the sale was completed and the vendor paid Kays the agreed
commission on the purchase price, which was £135,000 — The vendor refused to
pay anything to the appellants, who then issued the writ in the present
proceedings claiming the same amount of commission — Judge Sellers, at
Blackpool County Court, dismissed the claim; hence this appeal — The judge
decided that the appellants had not been the effective cause of the sale — In
so deciding, he regarded the addition of Mrs Hume as a decisive factor —
Although the appellants initially introduced the purchasers the latter had not
been able to raise the necessary finance — ‘They then roped in Mrs S Hume and
the purchase was made by the three people’ — The judge took the view that
because the appellants did not find Mrs Hume they could not be held to have
introduced the eventual purchasers
referring to the cases of John D Wood & Co v Dantata and Chesterfield
& Co v Zahid, and accepting that the first introduction is not necessarily
decisive, the court disagreed with the reasoning which had led the judge below
to conclude that the appellants were not the effective cause of the sale — The
fact that the appellants did not actually introduce Mrs Hume was, in the
court’s view, a matter of little importance — She was introduced by the
Duxburys themselves (and therefore indirectly by the appellants), not by Kays —
The judge was also wrong in saying that Kays had ‘negotiated the sale’ — All
that the evidence showed was that, about a month after they were instructed,
they became the channel for the communication to the vendor of the successful
offer — Kays had done nothing to break the chain of causation which led from
the appellants to the sale — The court expressed some sympathy with the
respondents, who would have to pay two lots of commission — This, however, was
due to the terms of the agreement between the vendor and Kays — In spite of the
sympathy felt in that respect the court had no alternative but to allow the
appeal
drawn to the observations of Ward J at the end of his judgment about a common
misapprehension due to a failure to appreciate the difference between a notice
to admit facts (CCR, Ord 20, r2) and a notice to admit or produce documents
(CCR, Ord 20, r3)
The following
cases are referred to in this report.
Chesterfield
& Co Ltd v Zahid [1989] 2 EGLR 24;
[1989] 29 EG 75
John D
Wood & Co v Dantata [1987] 2 EGLR 23;
(1987) 283 EG 314
This was an
appeal by Peter Yates & Co, a firm of estate agents, plaintiffs in the
county court, from the decision of Judge Sellers, at Blackpool County Court,
dismissing their claim for commission against Carl Bullock and Timothy Akers
Jobson, executors of Ernest Bullock. The claim to commission was in respect of
the sale of the Westmorland Hotel, 256 Queens Promenade, Blackpool.
Cecil Q
Henriques (instructed by Ascroft Whiteside, of Blackpool) appeared on behalf of
the appellants; John E Woodward (instructed by Roland Robinsons & Fentons,
of Blackpool) represented the respondents.
Giving
judgment, NOURSE LJ said: This is an appeal, with the leave of
Stuart-Smith LJ as the single judge, from a decision of His Honour Judge
Sellers given on June 30 1989 in the Blackpool County Court in a case about
estate agents’ commission.
The
plaintiffs, Peter Yates & Co, are a firm of estate agents practising in
Blackpool. On February 5 1987 their employee, Mr Peter Garner, received oral
instructions from the late Mr Ernest Bullock to sell on his behalf the
Westmorland Hotel, Queens Promenade, Blackpool. The judge found that the oral
agreement between them was evidenced by a letter from Mr Garner to Mr Bullock
dated February 6 1987, which was in these terms:
Re: The
Westmorland Hotel, 256 Queens Promenade, Bispham.
We thank you
for your favoured instructions to act as agents in offering your property for
sale at the sum of £150,000 O.N.O. As agreed at our valuation, references are 1
1/2% of the purchase price, on completion of the sale.
Please find
enclosed a copy of your property detail sheet, if you think that it needs
amending in any way, please do not hesitate to contact us.
Although
nothing is there said about VAT, the judge accepted the evidence of Mr Garner
that VAT would be extra.
The plaintiffs
then set about marketing the hotel, for which purpose they prepared particulars
of sale and no doubt circulated them to parties who they thought might be
interested. Their records show that they had a dozen or so viewers during the
month of February, one of whom was Mr James Duxbury, who came with his wife,
and perhaps others, on February 21 and then on three further visits on March 13
and 27 and April 3. On April 2 Mr Garner wrote to Mr and Mrs Duxbury sending
them projected trading accounts prepared by Mr Bullock’s accountants for the
two years ended December 31 1988.
It was
admitted on the pleadings that the Duxburys, one supposes at some time during
the period up to the beginning of April, offered to purchase the hotel for
£50,000 in cash, plus an exchange of their own house which they valued at
£72,950, making an offer worth just
went to look at the Duxburys’ house and that he may have advised Mr Bullock
that he could hold out for a bit more. In any event, that offer of the Duxburys
was refused.
From all this
it is, in my view, reasonable to infer that between February and April 1987 the
Duxburys were very interested prospective purchasers, their interest having
been attracted, nourished and perhaps increased by the plaintiffs. At the same
time I infer that they were either unwilling or unable to improve their offer
above that which they had already made.
On April 24
1987 Mr Bullock instructed another firm of Blackpool estate agents, Messrs
Kays, to act for him on the sale of the hotel and on that date he signed a form
expressed to give them sole selling rights for a period of 10 weeks certain,
and thereafter until cancelled by 14 days’ written notice, at commission of 1
1/2% on the sale price agreed exclusive of VAT. The form continued thus:
If during the
currency of this agreement a person enters into or is willing to enter into a
contract to purchase the said property, the said commission shall be payable
without regard to the origin or source of the person or persons who enter into
or who are willing to enter into a contract to purchase the said property.
In their reply
the plaintiffs denied an allegation made in the defence that Mr Bullock had
orally terminated his agreement with them. In his evidence Mr Garner said that
Mr Bullock’s brother and his wife came in about April and said that Mr Bullock
was proceeding with another agent, although he did not say who he was. The
judge having made no finding to the contrary, it must be inferred that Mr
Bullock’s contract with the plaintiffs continued after he had instructed Kays
to act for him as well. That has not been disputed by Mr Woodward on behalf of
the defendants.
I interrupt
the narrative at this stage to say that Mr Bullock died in July 1988 before the
trial took place and the defence of this action has since been carried on by
his executors. I should also state that no oral evidence was given on the
defendants’ side, although they put in a number of documents, most of them
originating from Kays. I will return to that matter later.
On May 28 1987
Kays wrote to Mr Bullock’s solicitors as follows:
Re: Bullock
to Duxbury and Hume, Westmorland Hotel, 256 Queens Promenade, Blackpool
We are writing
to confirm that we have sold, subject to contract, the above freehold licensed
private hotel on behalf of our mutual client Mr E Bullock. The agreed purchase
price is £135,000 for the freehold property, goodwill, furnishings and
equipment, an inventory of which is being prepared, and copies will be
forwarded to you as soon as they are available.
The proposed
purchasers are Mr J and Mrs M Duxbury and Mrs S Hume of 161 St Walburga’s Road,
Blackpool.
On July 8 1987
Mr and Mrs Duxbury and Mrs Hume entered into a contract with Mr Bullock to
purchase the hotel for that sum, the purchase being completed on the same day.
On July 10 Mr Bullock’s solicitors, on his behalf, paid the sum of £2,328.75 to
Kays, being 1 1/2% of the £135,000 plus VAT. He declined to pay any commission
to the plaintiffs, who on August 20 1987 issued the writ in these proceedings
which, by amendment, claims a similar sum. Judge Sellers dismissed the plaintiffs’
action with costs and they have now appealed to this court.
In the
decisive passage in his judgment the learned judge, having referred to Kays’
letter of May 28 and to the fact that the purchasers were Mr and Mrs Duxbury
and Mrs Hume, continued thus:
The sale to
these three people took place on July 8 1987. Messrs [Kays] negotiated the sale
and received commission. Although the plaintiffs initially introduced the
purchasers to the property and they considered the purchase carefully they were
unable to raise the necessary finance. They then roped in Mrs S Hume and the
purchase was made by the three people. There was no evidence that the
plaintiffs knew anything of the existence of Mrs S Hume who seemed vital to the
purchase made through the other agents.
I have been
referred to the judgment of Garland J in Chesterfield & Co v Zahid
(The Times, February 13 1989) but I am quite satisfied that the
plaintiffs were not the effective cause of the sale. There was no evidence as
to the contribution to the purchase of each of the buyers but clearly Mrs Hume
was essential to the purchase. The Plaintiffs did not introduce her to the
property and therefore were not the effective cause of the sale.
From that it
is clear, first, that the learned judge inferred that Mrs Hume was introduced
by Mr and Mrs Duxbury and not by the plaintiffs and, second, that he thought
that that meant that the plaintiffs were not the effective cause of the sale.
It also appears that, although Mrs Hume was not introduced by Kays in any active
way, the judge nevertheless thought that since it was that firm which had, to
use his word, ‘negotiated’ the successful bid from all three purchasers it was
they who had been the effective cause of the sale.
Although the
agreement between Mr Bullock and the plaintiffs as recorded in the letter of
February 6 1987 is expressed in terms which are neither familiar nor very
specific, both sides are agreed that the question of the plaintiffs’
entitlement to commission thereunder depends on whether they were or were not
the effective cause of the sale. A recent authority on that question, which
usually arises only in a case where there are two or more firms acting in the
sale, is the decision of this court in John D Wood & Co v Dantata
[1987] 2 EGLR 23, which was the authority applied by Garland J in Chesterfield
& Co v Zahid.* There the
question was which of two firms of estate agents had ‘introduced’ or ‘produced’
the purchaser, both of which were treated as meaning the same thing. In my
judgment, with which the Vice-Chancellor and Neill LJ agreed, having referred
to a passage in Bowstead on Agency, 15th ed, at p 230, in support of the
view that the question which of two firms introduced a purchaser must be
answered by answering the further question which of them was the effective
cause of the transaction, I said this at p 25:
The
difficulties in clarifying the mind on this question are, I think, caused by
the familiar meaning of the word ‘introduction’ as the bringing together of two
people who have not previously met. Thus it is natural, when looking at the
word in its present context, to attach significance to the first bringing
together of the property and the person who ultimately purchases it. But the
full phrase is ‘the introduction of a purchaser’ and I think that that can only
mean the introduction of the person who ultimately purchases, not to the
property, but to the purchase or, if you look at it from the vendor’s angle, to
the sale; in either case to the transaction which ultimately takes place. And
if you then apply the primary dictionary meaning of ‘introduction’, you find
that what you are looking for is the leading or bringing in of the purchaser to
that transaction. That makes it clear that first acquaintance is not paramount
and it explains why the test is expressed by reference to the effective cause
of the transaction.
*Editor’s
note: Reported at [1989] 2 EGLR 24.
Mr Woodward
has relied on that passage, contending that the admitted introduction of the
Duxburys to the property by the plaintiffs is not paramount or decisive, and
that since they never played any part in the introduction of Mrs Hume, and
appear to have played no effective part at all after April 24 1987, the learned
judge was right in concluding, as it must be assumed that he did, that it was
Kays who introduced those who actually purchased to the transaction and were
thus the effective cause of the sale.
While I
certainly accept that the introduction of the Duxburys to the property by the
plaintiffs is not decisive, I am unable, on the evidence which was before him,
to uphold the conclusion of the learned judge. I think that the fact that the
plaintiffs did not actually introduce Mrs Hume is a matter of little
importance. What is more important is that she was not introduced by Kays in
any active way. She was introduced by the Duxburys themselves (a fact which I
think that the judge was entitled to infer from such evidence as was before
him) and thus indirectly by the plaintiffs. As between the two firms of agents
she was introduced by the plaintiffs and not by Kays.
So far as the
learned judge’s judgment is concerned, the only other matter on which he relied
was his view that it was Kays who had ‘negotiated’ the sale. On the evidence, I
do not think that that fact is made out. There might have been evidence, either
from the Duxburys or Kays themselves, although sadly not from Mr Bullock, to
the effect that after April 24 Kays had played an important and decisive role
in getting the purchasers to come up to £135,000. But there was no evidence of
that, unless it was a letter of August 13 1987 on which Mr Woodward also
relies. That was a letter written by the sales partner of Kays to Mr Bullock’s
solicitors at a time when the dispute between the plaintiffs and Mr Bullock had
arisen. The material part reads as follows:
We are
pleased to inform you that we received sole selling rights instructions on the
24th April. We have been in constant touch with Mr & Mrs Duxbury from
February, and details of the Westmorland Hotel were given to them on the 29th
April. After various toing and froing, an agreement was reached on the 26th May
to proceed with the purchase, after which time we obviously carried out the
inventory, etc.
Mr Woodward
has referred us to correspondence between the solicitors which he says shows
that there was an agreement that the letter of August 13 1987 should be
admitted as evidence of its contents. I am very doubtful whether the terms of
that correspondence go any further than an agreement that the letter, as
opposed to its contents, should be agreed. However, I would not wish to exclude
the letter unless I was certain about the agreement which
evidence of its contents.
Where, then,
does that letter lead us? Mr Woodward
submits that the reference to various toing and froing between April 29 and May
26 meant that Kays were taking an active part in negotiations with the
purchasers, in particular so as to get them to come up to a price of £135,000.
In the absence of any other evidence I do not think that the letter can be so
viewed. For all we know, as the learned judge inferred (although without any
evidence to that effect), the position was simply that the Duxburys were having
difficulty in finding the money and it was not until Mrs Hume came into the
transaction that they were able to find it. Nothing at all is known about Mrs
Hume. It is not even known whether she in fact provided any money. It certainly
is not known whether there were difficulties in obtaining the £135,000 and,
even without Mrs Hume’s presence in the matter, that would have been a possible
explanation of the toing and froing. Mr Henriques, for the plaintiffs, has objected
to this inference of the learned judge. But I do not think that it really harms
the plaintiffs. All that we know definitely about Kays is that they were
instructed on April 24 1987 and that on May 28 they became the channel for the
communication to Mr Bullock of the successful offer.
What, then, is
a correct view of the facts of this case as admitted or proved? It is agreed on both sides that each case
depends on its own facts. Any number of different combinations of facts might
be available to show which of two firms was or was not the effective cause of a
sale. I think that Mr Henriques posed a very valid question when he asked what
would have been the position if Kays had never come into it. Suppose that
nothing further had happened so far as the plaintiffs were concerned after the
beginning of April; that no further firm of agents had been instructed; and
that on May 28 Mr and Mrs Duxbury and Mrs Hume had gone to Mr Bullock
personally and said ‘we are now willing and able to put up a price of £135,000’.
In that state of affairs it would be clear that the plaintiffs, who had (as Mr
Woodward very properly accepts) done a lot of spadework in the matter, would
have been entitled to their commission from Mr Bullock. They would have been
the effective cause of the sale. The question we must then ask ourselves is:
Did the appearance of Kays on the scene and what they did in regard to the
eventual purchase break that chain of causation? On the evidence as it stands, I am unable to
come to the conclusion that the chain of causation was broken. There is not
sufficient evidence of any effective part played by Kays beyond their being the
channel for what proved to be the successful offer.
I have some
sympathy with the defendants because this is a case where they will now have to
pay two lots of commission. But the reason for that, as I see it, is the terms
of the agreement into which Mr Bullock entered with Kays. That agreement was in
a form which appears to have been designed to cover the case where an agent has
acted in a sale but has not been the effective cause of it. That question not
being before us, we do not have to decide whether the terms of the agreement
would have achieved that purpose. In any event, as I have said, Mr Bullock
settled with Kays two days after the completion of the sale.
In spite of
the sympathy which I feel for the defendants in that respect, I believe that
this court has no alternative but to allow the appeal and give judgment for the
plaintiffs in the sum which, by amendment, they now claim.
Agreeing, WARD
J said: Out of respect to the learned county court judge and because of
some sympathy I feel for the defendants I would add these few words.
Where two
estate agents are or become involved in the sale of some property each may
claim his commission, as indeed has happened here. Kays have been paid and the
case for the plaintiffs has been argued both here and below on the basis that
the plaintiffs cannot succeed to their commission unless they show that they
were the effective cause of the sale. I agree that that is the correct
approach. In my judgment, it is important to stress that the effective cause in
this connection is the effective cause in producing a result and the result is,
from the point of the vendor’s interest, a concluded sale, and from the
purchasers’ perspective the acquisition of the property. So the focus is on the
successful conclusion of the transaction and the identity of the actual
purchasers is but one element of that transaction. To establish which of two
firms is the effective cause of obtaining that result, one must necessarily
establish what part each firm played in the events which led to the result —
that is to say to the conclusion of the sale. The evidence of the plaintiffs’
role seems to me to be this: (1) They introduced Mr and Mrs Duxbury both to the
actual property and to the vendor; (2) they took them on a visit to the
property on, I think, February 21 1987; (3) as appears from the pleadings, in
February they induced an offer from the Duxburys of £50,000 in cash and their
home in exchange, that being valued at £72,950; (4) by inference they must have
assisted the late Mr Bullock to visit the home of Mr and Mrs Duxbury, as
appears from the notes of evidence; (5) at some time they would have dealt with
the rejection of that offer and, I again read from the notes of evidence, ‘. .
. may have advised [the vendor] to hold out for a bit more’; (6) at some stage,
though whether before or after the rejection of that offer, they took the
Duxburys, on one occasion with Mr Duxbury’s brother and his wife, to visit the
hotel on March 13, March 27 and April 3 1987; and finally (7) on April 2 they
sent the accounts of the business to the Duxburys.
For the
defendants Mr Woodward submits, first, that the plaintiffs did no more after
April 3 (that last visit) and there is indeed no evidence to suggest that they
did any more after that date. Second, he submits that it may be inferred from
the plaintiffs’ failure to submit an account before completion of the sale that
they were indeed even unaware that the sale had taken place, which further
supports his submission that they had effectively dropped out of the
negotiations early in April and that their role had been spent. I am less happy
about his second submission because none of that appears to have been
investigated in the cross-examination of the plaintiffs’ witnesses. But even if
one assumes that, the second part of the court’s task is to weigh the evidence
and to consider the role played by Kays. For the moment I am prepared to take
the facts set out in Kays’ letter to the defendants’ solicitors dated August 13
1987 as facts properly before the court. It therefore appears from that and
other evidence that Kays were instructed on April 28; they were in touch with
Mr and Mrs Duxbury both before and after they actually received their retainer,
and there was ‘various toing and froing’.
That seems to
be the evidence before the court and the learned judge found, first, that Kays
negotiated the sale and, to the extent that they were the conduit through which
the final offer was put, one accepts that finding; second, that the plaintiffs
effected no introduction of Mrs Hume, the third party, to the eventual sale,
again a finding one cannot challenge; third, that she was vital to the purchase;
and, fourth, because she was vital and because she had not been introduced
therefore the plaintiffs were not the effective cause of the sale; and, fifth,
by inference Kays were and that Kays supplied the vital ingredients which led
to the sale.
With great
respect to the learned judge, there appear to me to be some flaws in that
approach. First, there is no evidence that Kays introduced Mrs Hume at all.
Indeed the learned judge’s finding is: ‘They’ — meaning Mr and Mrs Duxbury —
‘then roped in Mrs Hume and the purchase was made by [these] three
people.’ There is no evidence to suggest
that Kays put a wholly independent third party, Mrs Hume, in touch with
otherwise interested parties, Mr and Mrs Duxbury, and thereby provided that
missing ingredient to the sale going forward. Second, I am troubled, as Nourse
LJ is, with the finding that Mrs Hume was necessarily vital to this
transaction. We know nothing of her contribution to the venture. There was
simply no evidence one way or the other to justify that inference, even if one
draws the conclusion from the rejection of the Duxbury’s offer that they were,
at least at that stage, unwilling or unable to put up more than £123,000 in
cash and kind towards a purchase eventually concluded at £135,000.
But third, in
my judgment, ‘toing and froing’ is quite insufficient to indicate that what
Kays were doing was providing that essential contribution which turned the
Duxburys’ dead interest into a live interest and which therefore clinched this
sale. In my judgment, the limited evidence placed before the court supported no
more than that Kays were a channel through which the eventual offer was
communicated. It might have been quite different if the defendants had called
evidence to explain Kays’ role.
In weighing up
the evidence it does not appear to me that the efforts of Kays outweighed in
their causative effect the acts of introduction and the other acts of the
plaintiffs which I have set out above, and in my judgment the evidence before
the court justified only one conclusion and that was that the plaintiffs were
the effective cause of the sale. I come to that conclusion with sympathy for
the defendants. Indeed I make the confession that at first I analysed the
matter in these terms, ‘The contract is to find a purchaser; the actual
purchaser found was Mr and Mrs Duxbury and the third party Mrs Hume; but the
plaintiffs did not find Mrs Hume; therefore the plaintiffs did not perform
their contract to find the eventual purchaser’. Thus I had sympathy with the
logic of the learned judge’s approach. But so soon as I directed myself that
one should be looking for the effective cause of producing the result, namely,
the concluded transaction, it seemed to me that the early contribution made by
the plaintiffs was, in the absence of any other evidence, sufficient to justify
their claim to have been effective in stimulating an enduring interest which
led to the sale. Accordingly, in my judgment, they are entitled to their
commission.
I have assumed
certain facts in the defendants’ favour, but I would add this in conclusion to
my judgment. There is, unhappily, a common misapprehension that when a bundle
of documents is agreed, all the matters of fact set out in those documents are
also agreed between the parties. There is a regular failure to appreciate the
difference between a notice to admit facts as provided for in Ord 20, r2, of
the County Court Practice, and a notice to admit or produce documents
provided for in Ord 20, r3. It was this misunderstanding which probably led to
the defendants calling no evidence. This is a common mistake and that it is a
mistake should be more widely known.
For those
reasons I would allow the appeal.
The appeal
was allowed; judgment for £2,328.75 in favour of appellants; appellants to have
costs below on Scale II and costs of the appeal. Application for leave to
appeal to the House of Lords was refused.
