Winding up — Property developer wishing to pre-let property — Engagement of estate agents to find purchaser — Dispute about commission payable — Motion to restrain presentation of winding-up petition when company failed to pay full amount of commission claimed — Whether client fully informed of amount of commission payable before entering into contract — Whether agents in breach of duty under section 18 of Estate Agents Act 1979 — Agents not in breach of section and entitled to present petition
The company was in the business of property development. In March 1989 it proposed to develop a property belonging to it at 199-201 Seven Sisters Road, London N4. The company wished to pre-let that property and engaged estate agents to place it on the market for letting on a long lease. The commission agreed with the agency was originally £10,000 pa plus VAT on the basis that the overall rent of £126,000 was reached. The estate agents wrote a letter to the company to that effect and stating specifically that under the Estate Agents Act 1979, they were confirming their terms in writing. The company alleged that that figure was later reduced to £7,000 at a meeting where a brief note was made on the back of a business card. A lease was completed at a reduced rent and the agency submitted its account in the sum of £13,432.50, ie 10% of the first year’s rent of £114,432 including 17.5% VAT. The company argued that the correct amount was a set fee of £7,000 plus VAT and sent a cheque for £8,225 in full and final settlement. Since the agency was not prepared to concede that its fee was the sum of £8,225, it returned the cheque. The agency then served on the company a statutory demand under the Insolvency Act 1986 in the sum of £13,432. Following unsuccessful negotiations to resolve the matter, the agency indicated its intention to present a petition to wind up the company, which brought a motion to restrain the presentation of that petition. The company argued, inter alia, that the sum of £8,225 was not due because the agency had been in breach of section 18 of the Estate Agents Act 1979. By that section, before a client entered into a contract with the estate agent to work on his behalf, full particulars of all aspects of the contract, including remuneration payable to the agent for carrying out the work, had to be supplied to the client. Failure to provide that information would result in the contract’s becoming unenforceable except pursuant to a court order. By section 18(3) if, after entering into the contract, the parties agreed that its terms should be varied, the agent had to give details of any changes to the client.
Held The relief sought was refused and the agency was entitled to present a petition to wind up the company.
1. The fact that part of a sum demanded in a statutory demand was bona fide disputed did not mean that a petition to wind up could not be presented, in reliance on neglect to pay the undisputed balance: see Insolvency Act 1986, sections 112(1) (f) and 123(1) (a); In re A Debtor (No 10 of 1988) [1989] 1 WLR 405; and Cardiff Preserved Coal & Coke Co v Norton (1867) LR 2 Ch App 405.
2. The question remained whether the balance of £8,225 was to be treated as a disputed debt. There seemed to be a bona fide dispute whether, where the original contract of agency was entered into, the terms were properly made plain by the agency in compliance with section 18. However, both parties agreed that there had been an attempt to vary the terms of the agency agreement.
3. Section 18 did not contain a requirement that the provisions of any agreement as to the payment of commission should be in writing. On the company’s own case, it understood from a meeting with the agency, at which the terms were said to have been varied, what the terms as to payment of commission should be. Indeed, based on that understanding, the company forwarded a cheque for £7,000 plus VAT when payment was required for commission. Therefore, on the company’s own case, there had been a compliance with section 18.
4. It followed that the company could not say to the court that there had been a failure to comply with the provisions of the Estate Agents Act so making the debt, as to the sum of £8,225, irrecoverable from them, save with the leave of the court referred to in section 18.
5. Accordingly, there had been neglect to pay that part of the statutory demand and the agency was entitled to present a petition to wind up the company. In those circumstances the relief sought in the motion had to be refused.
Shane Dougall (instructed by Nicos & Co) appeared for the company; and Martin Jones (instructed by Whatley Lane Georgallis & Co) appeared for the agency.
